0000078814 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2019-04-01 2019-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2017~~2019

o☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number: ~~1-3579~~1-03579

PITNEY BOWES ~~INC.~~INC.

(Exact name of registrant as specified in its charter)



State of incorporation:	Delaware		~~06-0495050~~
~~(State or other jurisdiction of incorporation or organization)~~		(I.R.S. Employer Identification No.)

~~3001 Summer Street, Stamford, Connecticut~~		~~06926~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~06-0495050

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $1 par value per share	PBI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting ~~company”~~company,” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act.



Large accelerated filerþ	þ	Accelerated filero	o	Non-accelerated filer	o
Smaller reporting companyo	☐	Emerging growth companyo	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section ~~7(a)(2)(B)~~13(a) of the ~~Securities~~Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o ☐No þ

As of ~~October 26, 2017~~July 29, 2019, ~~186,728,127~~170,900,031 shares of common stock, par value $1 per share, of the registrant were outstanding.

PITNEY BOWES INC.

INDEX



		Page Number

Part I - Financial Information:

Item 1:	Financial Statements ~~(Unaudited)~~

	Condensed Consolidated Statements of Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018	3

	Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018	4

	Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018	5

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2733

Item 3:	Quantitative and Qualitative Disclosures about Market Risk	3942

Item 4:	Controls and Procedures	3942


Part II - Other Information:

Item 1:	Legal Proceedings	3943

Item 1A:	Risk Factors	3943

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	3943

Item 6:	Exhibits	4044


Signatures		4145

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; in thousands, except per share amounts)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue:
Equipment sales	$	85,551		$	93,811		$	175,338		$	200,519
Supplies	46,490			55,457			97,443			115,450
Software	72,206			91,703			145,524			167,997
Rentals	18,445			19,454			40,602			44,419
Financing	92,419			97,129			189,462			197,478
Support services	127,683			138,598			256,304			279,248
Business services	417,985			369,088			824,508			756,712
Total revenue	860,779			865,240			1,729,181			1,761,823
Costs and expenses:
Cost of equipment sales	58,570			58,948			122,235			121,417
Cost of supplies	11,758			15,738			25,308			32,685
Cost of software	23,419			26,957			46,802			51,086
Cost of rentals	8,418			8,464			18,133			21,212
Financing interest expense	11,043			11,194			22,407			22,258
Cost of support services	40,448			42,306			82,227			88,371
Cost of business services	337,918			290,567			664,964			584,946
Selling, general and administrative	278,545			289,427			579,527			592,237
Research and development	22,630			23,574			44,404			48,069
Restructuring charges and asset impairments, net	7,279			11,503			10,877			12,407
Interest expense, net	28,019			30,775			55,621			62,789
Other components of net pension and postretirement cost	(1,618		)	(2,499		)	(2,256		)	(4,218		)
Other (income) expense	(27		)	—			17,683			—
Total costs and expenses	826,402			806,954			1,687,932			1,633,259
Income from continuing operations before taxes	34,377			58,286			41,249			128,564
Provision for income taxes	4,099			7,899			12,400			26,694
Income from continuing operations	30,278			50,387			28,849			101,870
(Loss) income from discontinued operations, net of tax	(6,581		)	1,208			(7,811		)	9,695
Net income	$	23,697		$	51,595		$	21,038		$	111,565
Basic earnings (loss) per share ⁽¹⁾:
Continuing operations	$	0.17		$	0.27		$	0.16		$	0.54
Discontinued operations	(0.04		)	0.01			(0.04		)	0.05
Net income	$	0.13		$	0.28		$	0.12		$	0.60
Diluted earnings (loss) per share ⁽¹⁾:
Continuing operations	$	0.17		$	0.27		$	0.16		$	0.54
Discontinued operations	(0.04		)	0.01			(0.04		)	0.05
Net income	$	0.13		$	0.27		$	0.12		$	0.59

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Revenue:

Equipment sales $ 157,649
$ 173,143
$ 479,248
$ 485,145
Supplies 58,296
61,306
188,342
198,631
Software 99,600
89,087
264,131
257,760
Rentals 95,901
102,747
291,770
309,706
Financing 81,184
87,883
250,582
276,915
Support services 120,479
123,954
354,625
383,632
Business services 229,711
200,911
672,133
607,717
Total revenue 842,820
839,031
2,500,831
2,519,506
Costs and expenses:

Cost of equipment sales 85,647
86,147
232,398
235,741
Cost of supplies 18,827
20,348
60,207
60,662
Cost of software 25,713
25,698
75,816
79,496
Cost of rentals 20,818
16,041
63,056
54,951
Financing interest expense 12,629
12,965
38,446
41,375
Cost of support services 70,688
74,799
217,232
224,790
Cost of business services 166,984
140,989
470,890
417,357
Selling, general and administrative 304,398
300,983
908,169
916,981
Research and development 32,057
28,680
96,871
89,761
Restructuring charges and asset impairments, net 1,493
16,494
30,502
49,503
Interest expense, net 28,601
22,294
81,877
62,394
Total costs and expenses 767,855
745,438
2,275,464
2,233,011
Income before income taxes 74,965
93,593
225,367
286,495
Provision for income taxes 17,607
23,197
53,975
93,615
Income from continuing operations 57,358
70,396
171,392
192,880
Loss from discontinued operations, net of tax —
(291 ) —
(1,951 )
Net income 57,358
70,105
171,392
190,929
Less: Preferred stock dividends attributable to noncontrolling interests —
4,593
—
13,781
Net income attributable to Pitney Bowes Inc. $ 57,358
$ 65,512
$ 171,392
$ 177,148
Amounts attributable to common stockholders:

Net income from continuing operations $ 57,358
$ 65,803
$ 171,392
$ 179,099
Loss from discontinued operations, net of tax —
(291 ) —
(1,951 )
Net income attributable to Pitney Bowes Inc. $ 57,358
$ 65,512
$ 171,392
$ 177,148
Basic earnings per share attributable to common stockholders ⁽¹⁾:

Continuing operations $ 0.31
$ 0.35
$ 0.92
$ 0.95
Discontinued operations —
—
—
(0.01 )
Net income attributable to Pitney Bowes Inc. $ 0.31
$ 0.35
$ 0.92
$ 0.94
Diluted earnings per share attributable to common stockholders ⁽¹⁾:

Continuing operations $ 0.31
$ 0.35
$ 0.92
$ 0.94
Discontinued operations —
—
—
(0.01 )
Net income attributable to Pitney Bowes Inc. $ 0.31
$ 0.35
$ 0.92
$ 0.93
Dividends declared per share of common stock $ 0.1875
$ 0.1875
$ 0.5625
$ 0.5625

⁽¹⁾The sum of the earnings per share amounts may not equal the totals due to rounding.

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited; in thousands)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net income $ 57,358
$ 70,105
$ 171,392
$ 190,929
Less: Preferred stock dividends attributable to noncontrolling interests —
4,593
—
13,781
Net income attributable to Pitney Bowes Inc. 57,358
65,512
171,392
177,148
Other comprehensive income, net of tax:
Foreign currency translations 33,517
6,938
100,223
37,263
Net unrealized gain (loss) on cash flow hedges, net of tax of $122, $(40), $361 and $224, respectively 195
(64 ) 579
358
Net unrealized gain on investment securities, net of tax of $220, $956, $1,322 and $4,399, respectively 375
1,628
2,251
7,491
Adjustments to pension and postretirement plans, net of tax of $(304) and $(777) for the nine months ended September 30, 2017 and 2016, respectively. —
—
(1,482 ) (1,230 )
Amortization of pension and postretirement costs, net of tax of $3,484, $3,243, $10,440 and $10,362, respectively 6,744
5,963
20,078
18,791
Other comprehensive income, net of tax 40,831
14,465
121,649
62,673
Comprehensive income attributable to Pitney Bowes Inc. $ 98,189
$ 79,977
$ 293,041
$ 239,821



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income	$	23,697		$	51,595		$	21,038		$	111,565
Other comprehensive income (loss), net of tax:
Foreign currency translation, net of tax of $(1,347) and $(423) in 2019, respectively	104			(42,942		)	21,378			(27,859		)
Net unrealized (loss) gain on cash flow hedges, net of tax of $(80), $(78), $(24) and $154, respectively	(234		)	(235		)	(71		)	251
Net unrealized gain (loss) on investment securities, net of tax of $1,100, $(447), $2,064 and $(1,813), respectively	3,213			(1,305		)	6,029			(5,296		)
Amortization of pension and postretirement costs, net of tax benefits of $2,124, $2,564, $4,773 and $5,368, respectively	7,311			7,868			13,947			16,040
Other comprehensive income (loss), net of tax	10,394			(36,614		)	41,283			(16,864		)
Comprehensive income	$	34,091		$	14,981		$	62,321		$	94,701

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in thousands, except share and per share amounts)

September 30, 2017 December 31, 2016
ASSETS

Current assets:

Cash and cash equivalents $ 1,696,903
$ 764,522
Short-term investments 45,508
38,448
Accounts receivable (net of allowance of $15,610 and $14,372, respectively) 408,886
455,527
Short-term finance receivables (net of allowance of $11,921 and $13,323, respectively) 826,122
893,950
Inventories 118,282
92,726
Current income taxes 42,605
11,373
Other current assets and prepayments 82,251
68,637
Total current assets 3,220,557
2,325,183
Property, plant and equipment, net 338,340
314,603
Rental property and equipment, net 185,866
188,054
Long-term finance receivables (net of allowance of $5,999 and $7,177, respectively) 650,793
673,207
Goodwill 1,616,968
1,571,335
Intangible assets, net 145,376
165,172
Noncurrent income taxes 77,188
74,806
Other assets 546,319
524,773
Total assets $ 6,781,407
$ 5,837,133

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:

Accounts payable and accrued liabilities $ 1,348,395
$ 1,378,822
Current income taxes 13,542
34,434
Current portion of long-term debt 620,256
614,485
Advance billings 282,537
299,878
Total current liabilities 2,264,730
2,327,619
Deferred taxes on income 257,987
204,289
Tax uncertainties and other income tax liabilities 39,671
61,276
Long-term debt 3,562,672
2,750,405
Other noncurrent liabilities 555,514
597,204
Total liabilities 6,680,574
5,940,793

Commitments and contingencies (See Note 12)

Stockholders’ equity (deficit):
Cumulative preferred stock, $50 par value, 4% convertible 1
1
Cumulative preference stock, no par value, $2.12 convertible 457
483
Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued) 323,338
323,338
Additional paid-in capital 133,394
148,125
Retained earnings 5,174,602
5,107,734
Accumulated other comprehensive loss (818,484 ) (940,133 )
Treasury stock, at cost (136,777,086 and 137,669,194 shares, respectively) (4,712,475 ) (4,743,208 )
Total Pitney Bowes Inc. stockholders’ equity (deficit) 100,833
(103,660 )
Total liabilities and stockholders’ equity (deficit) $ 6,781,407
$ 5,837,133



	June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	771,042		$	867,262
Short-term investments	59,516			59,391
Accounts and other receivables (net of allowance of $19,804 and $17,617, respectively)	419,776			456,138
Short-term finance receivables (net of allowance of $12,537 and $12,454, respectively)	682,828			752,773
Inventories	73,347			62,279
Current income taxes	22,474			5,947
Other current assets and prepayments	132,878			100,625
Assets of discontinued operations	—			4,854
Total current assets	2,161,861			2,309,269
Property, plant and equipment, net	416,512			410,114
Rental property and equipment, net	36,917			46,228
Long-term finance receivables (net of allowance of $8,180 and $7,768 respectively)	554,075			536,369
Goodwill	1,754,610			1,766,511
Intangible assets, net	212,596			227,137
Operating lease assets	180,983			156,788
Noncurrent income taxes	63,013			66,326
Other assets	377,420			419,677
Total assets	$	5,757,987		$	5,938,419

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	1,295,712		$	1,390,362
Current operating lease liabilities	34,612			37,208
Current portion of long-term debt	214,927			199,535
Advance billings	211,061			229,379
Current income taxes	6,011			15,284
Liabilities of discontinued operations	—			3,276
Total current liabilities	1,762,323			1,875,044
Long-term debt	3,029,246			3,066,073
Deferred taxes on income	264,191			254,353
Tax uncertainties and other income tax liabilities	45,586			39,548
Noncurrent operating lease liabilities	154,648			127,237
Other noncurrent liabilities	449,021			474,322
Total liabilities	5,705,015			5,836,577

Commitments and contingencies (See Note 14)

Stockholders’ equity:
Cumulative preferred stock, $50 par value, 4% convertible	—			1
Cumulative preference stock, no par value, $2.12 convertible	—			396
Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued)	323,338			323,338
Additional paid-in capital	105,341			121,475
Retained earnings	5,282,374			5,279,682
Accumulated other comprehensive loss	(907,678		)	(948,961		)
Treasury stock, at cost (152,393,129 and 135,662,830 shares, respectively)	(4,750,403		)	(4,674,089		)
Total stockholders’ equity	52,972			101,842
Total liabilities and stockholders’ equity	$	5,757,987		$	5,938,419

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)


	Nine Months Ended September 30,						Six Months Ended June 30,
	2017			2016			2019			2018
Cash flows from operating activities:
Net income	$	171,392		$	190,929		$	21,038		$	111,565
Loss (income) from discontinued operations, net of tax							7,811			(9,695		)
Restructuring payments	(29,976		)	(51,161		)	(14,283		)	(27,528		)
Special pension plan contributions	—			(36,731		)
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on sale of assets	—			3,938
Gain on sale of technology	(6,085		)	—
Depreciation and amortization	131,989			140,225			82,813			80,335
Gain on debt forgiveness	—			(10,000		)
Stock-based compensation	18,312			16,014			9,165			9,153
Restructuring charges and asset impairments, net	30,502			49,503			10,877			12,407
Loss on disposition of businesses							17,683			—
Changes in operating assets and liabilities, net of acquisitions/divestitures:
Decrease in accounts receivable	55,913			51,853			51,721			9,907
Decrease in finance receivables	126,599			113,180			41,744			43,249
Increase in inventories	(22,814		)	(20,489		)	(10,881		)	(3,441		)
(Increase) decrease in other current assets and prepayments	(11,781		)	3,312
Increase in other current assets and prepayments							(35,325		)	(23,657		)
Decrease in accounts payable and accrued liabilities	(46,034		)	(119,818		)	(74,868		)	(54,616		)
(Decrease) increase in current and noncurrent income taxes	(31,377		)	1,543
Increase in current and non-current income taxes							733			8,539
Decrease in advance billings	(32,702		)	(47,183		)	(12,711		)	(18,598		)
Other, net	(23,361		)	11,244			(1,854		)	(24,899		)
Net cash provided by operating activities - continuing operations							93,663			112,721
Net cash (used in) provided by operating activities - discontinued operations							(6,881		)	41,772
Net cash provided by operating activities	330,577			296,359			86,782			154,493
Cash flows from investing activities:
Purchases of available-for-sale securities	(108,571		)	(163,134		)	(6,391		)	(48,303		)
Proceeds from sales/maturities of available-for-sale securities	89,940			167,424			54,964			36,157
Net change in short-term and other investments	(8,083		)	65,325
Net activity from short-term and other investments							(1,608		)	10,959
Capital expenditures	(119,562		)	(115,532		)	(61,327		)	(79,481		)
Proceeds from sale of assets	5,458			17,671
Acquisition of businesses, net of cash acquired	(7,889		)	(37,942		)
Acquisitions, net of cash acquired							(4,882		)	(2,407		)
Change in reserve account deposits	(2,508		)	1,813			(8,316		)	5,959
Other investing activities	(4,500		)	(7,420		)	(8,591		)	(2,500		)
Net cash used in investing activities - continuing operations							(36,151		)	(79,616		)
Net cash used in investing activities - discontinued operations							—			(1,169		)
Net cash used in investing activities	(155,715		)	(71,795		)	(36,151		)	(80,785		)
Cash flows from financing activities:
Proceeds from the issuance of long-term debt	1,437,659			894,744
Principal payments of long-term debt	(614,449		)	(371,007		)	(25,087		)	(260,099		)
Net change in short-term borrowings	—			(90,000		)
Dividends paid to stockholders	(104,524		)	(105,791		)	(18,346		)	(70,113		)
Common stock repurchases	—			(197,267		)	(100,000		)	—
Dividends paid to noncontrolling interests	—			(9,188		)
Other financing activities	(3,624		)	(5,430		)	(3,337		)	(49,606		)
Net cash provided by financing activities	715,062			116,061
Net cash used in financing activities							(146,770		)	(379,818		)
Effect of exchange rate changes on cash and cash equivalents	42,457			3,933			(81		)	(13,041		)
Increase in cash and cash equivalents	932,381			344,558
Change in cash and cash equivalents							(96,220		)	(319,151		)
Cash and cash equivalents at beginning of period	764,522			640,190			867,262			1,009,021
Cash and cash equivalents at end of period	$	1,696,903		$	984,748		$	771,042		$	689,870
Cash interest paid	$	131,927		$	132,359		$	78,280		$	89,339
Cash income tax payments, net of refunds	$	88,021		$	95,487		$	17,348		$	19,244

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

1. Description of Business and Basis of Presentation

Description of Business

Pitney Bowes Inc. (we, us, our, or the company)~~, was incorporated in the state of Delaware in 1920. We are~~ is a global technology company ~~offering~~providing innovative products and commerce solutions that power billions of transactions and help our clients navigate the complex world of commerce. We ~~provide innovative~~offer shipping, mailing, fulfillment, returns and cross-border ecommerce products and solutions ~~for mailing, shipping and cross border ecommerce~~ that enable the sending of parcels and packages ~~globally~~across the globe and ~~products and solutions for~~ customer information management, location intelligence and customer engagement products and solutions to help our clients market to their customers. Clients around the world rely on our products, solutions and services. Pitney Bowes Inc. was incorporated in the state of Delaware in 1920. For more information about us, our products, services and solutions, visit www.pb.com.

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In addition, the December 31, ~~2016~~2018 Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In management's opinion, all adjustments, consisting only of normal recurring adjustments, considered necessary to fairly state our financial position, results of operations and cash flows for the periods presented have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, ~~2017~~2019. These statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report to Stockholders on Form 10-K for the year ended December 31, ~~2016 (2016~~2018 (2018 Annual Report).

~~In the fourth quarter of 2016,~~Based on their nature, we determined that certain ~~investments were~~costs previously classified as ~~cash~~research and ~~cash equivalents.~~development and cost of business services should be classified in other line items within costs and expenses. Accordingly, the ~~Condensed Consolidated Statement of Cash Flows~~income statement for the ~~period~~three months ended ~~September~~June 30, ~~2016~~2018 has been revised to correct the classification of these costs by reducing research and development expense and cost of business services by $7 million and $3 million, respectively, and increasing selling, general and administrative expense and cost of equipment sales by $7 million and $3 million, respectively. The income statement for the six months ended June 30, 2018 has been revised to correct the classification of these costs by reducing research and development expense and cost of business services by $13 million and $5 million, respectively, and increasing selling, general and administrative expense and cost of equipment sales by $13 million and $5 million, respectively.

The classification of certain costs of revenue recognized in the prior year have been revised to correct and conform to the current year presentation. As a result, in the income statement for the three months ended June 30, 2018, we reduced cost of equipment sales by $1 million and cost of rentals by $1 million, and increased cost of support services by $2 million. In the income statement for the six months ended June 30, 2018, we reduced cost of equipment sales by $3 million and cost of rentals by $2 million, and increased cost of support services by $5 million.

In January 2019, we sold the direct operations and moved to a dealer model in six smaller markets within the International Mailing segment (Market Exits) and recognized a pre-tax loss of $18 million in other (income) expense.

The December 31, 2018 balance sheet has been revised to reduce ~~beginning cash~~short-term finance receivables and ~~cash equivalents~~advance billings by ~~$10 million and ending cash and cash equivalents by $7 million with a corresponding adjustment to net change in short-term~~$6 million.

Accounts and other ~~investing activities.~~receivables includes other receivables of $101 million at June 30, 2019 and $76 million at December 31, 2018.

New Accounting Pronouncements -

Accounting Pronouncements Adopted on January 1, 2019

On January 1, 2019, we adopted Accounting Standards ~~Adopted in 2017~~

~~In January 2017,~~Codification (ASC) 842, Leases (ASC 842), using the ~~Financial Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350), Simplifying~~modified retrospective transition approach of applying the ~~Test for Goodwill Impairment, which eliminates Step 2~~standard at the beginning of the ~~current two-step goodwill impairment test~~earliest comparative period presented in the financial statements. Accordingly, prior period financial statements have been recast and ~~requires only~~required disclosures have been provided. We also recorded a ~~one-step quantitative impairment test, whereby a goodwill impairment loss will be measured~~cumulative effect adjustment as ~~the excess~~ of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). The ASU is effective for interim and annual periods beginning after December 15, 2019, and is required to be applied prospectively. We elected to early adopt this standard effective January 1, ~~2017. The adoption of this~~2017 to reduce retained earnings by $137 million. See Notes 7 and 15 for more information.

From a lessor perspective, the standard ~~had no impact on our consolidated financial statements or disclosures.~~

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The standard includes multiple provisions intended to simplify various aspects of~~simplifies the accounting for ~~share-based payments.~~lease modifications and aligns accounting of lease contracts with revenue recognition guidance. We ~~retroactively adopted this ASU effective January 1, 2017. Accordingly,~~continue to classify leases as sales-type or operating, with the ~~Condensed Consolidated Statement~~determination affecting both the pattern and classification of ~~Cash Flows for~~income recognition. There have been changes in the ~~nine months ended September 30, 2016 has~~timing and classification of revenue related to contract modifications. There also have been ~~recast~~changes related to ~~increase both net cash provided by operating activities and net cash used in financing activities by $5 million.~~

~~In July 2015,~~ the ~~FASB issued ASU 2015-11,~~ ~~Inventory - Simplifying the Measurement~~definition of ~~Inventory~~,a leased asset, which requires ~~inventory~~us to ~~be measured at~~account for two lease components as a single lease component. Under prior guidance, one of the lower of cost and net realizable value (estimated selling price less reasonably predictable costs of completion, disposal and transportation). Inventory measured using the last-in, first-out (LIFO) basis is not impacted by the new guidance. This standard became effective January 1, 2017 and therecomponents was ~~no impact on our consolidated financial statements or disclosures.~~

~~New Accounting Pronouncements - Standards Not Yet Adopted~~

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting~~generally accounted for ~~Hedging Activities.~~ The ASU changes the recognition and presentation requirements of hedge accounting and reduces the cost and complexity of applying hedge accounting by easing the requirements for effectiveness testing and hedge documentation. The standard is effective for interim and annual periods beginning after December 15, 2018 and early adoption is permitted. We are currently assessing the impact this standard will have on our consolidated financial statements.

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Scope of Modification Accounting. The ASU provides guidance about which changes to terms and conditions of~~as a share-based payment award require an entity to apply modification accounting. The standard is effective for interim and annual periods beginning after December 15, 2017 and would be applied prospectively to awards modified on or after the effective date. We do not expect the adoption of this standard will have any impact on our consolidated financial statements.sales-type lease

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

~~In March 2017,~~and the ~~FASB issued ASU~~second as an operating lease. Under ASC 842, the two components are generally accounted for as a sales-type lease. As a result, certain income and costs are now accelerated that were previously recognized over the life of the lease.

From a lessee perspective, the standard requires us to recognize right-of-use assets and lease liabilities for our real estate and equipment operating leases and to provide new disclosures about our leasing activities. We elected the short-term lease recognition exemption and did not recognize right-of-use assets or lease liabilities for leases with a term less than 12 months. We also elected the practical expedient to not separate lease and non-lease components for our lessee portfolio.

Updates to significant accounting policies disclosed in our 2018 Annual Report due to the adoption of ASC 842 are discussed below.

Equipment sales: We sell and lease equipment directly to our customers and to distributors (re-sellers) throughout the world. The amount of revenue allocated to the equipment is based on a range of observable selling prices in standalone transactions. We recognize revenue from the sale of equipment under sales-type leases as equipment sales revenue when control of the equipment transfers to the customer, which is upon shipment for self-installed products and upon installation or customer acceptance for other products. We do not typically offer any rights of return.

Rentals: Rentals revenue includes revenue from mailing equipment that does not meet the criteria to be accounted for as a sales-type lease. We may invoice in advance for rentals according to the terms of the agreement. We initially defer these advanced billings and recognize rentals revenue on a straight-line basis over the rental period. Revenue generated from financing clients for the continued use of equipment subsequent to the expiration of the original lease are recognized as rentals revenue.

Financing: We provide lease financing for our products primarily through sales-type leases. We also provide revolving lines of credit for the purchase of postage and supplies. We believe that our sales-type lease portfolio contains only normal collection risk. We record financing income over the lease term using the effective interest method. Financing also includes amounts related to sales-type leases that customers have extended or renewed for an additional term. Revenue for those contracts will be recognized over the term of the modified lease as financing income using the interest method.

Equipment residual values are determined at the inception of the lease using estimates of fair value at the end of the lease term. Fair value estimates are based primarily on historical experience. We also consider forecasted supply and demand for products, product retirement and launch plans, client behavior, regulatory changes, remanufacturing strategies, used equipment markets, competition and technological changes. We evaluate residual values on an annual basis or sooner if circumstances warrant. Declines in estimated residual values considered "other-than-temporary" are recognized immediately. Estimated increases in future residual values are not recognized until the equipment is remarketed.

Support services: Support services revenue includes revenue from equipment service contracts, subscriptions and meter services. Revenue is allocated to these services using selling prices charged in standalone replacement and renewal transactions. Since we have a stand-ready obligation to provide these services over the entire contract term, revenue related to these agreements is recognized on a straight-line basis over the term of the agreement.

Business services: Business services revenue includes revenue from mail processing services and ecommerce solutions. These services represent a series of distinct services that are similar in nature, and revenue is recognized as the services are provided. We review third party relationships and record revenue on a gross basis when we act as a principal in a transaction or net basis when we act as an agent between a client and vendor. We consider several factors in determining whether we are acting as principal or agent, such as whether we are the primary obligor to the client, have control over the pricing or have inventory risk.

On January 1, 2019, we also adopted Accounting Standards Update (ASU) 2017-08, ~~Receivables-Nonrefundable~~ Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities~~. The ASU~~, which shortens the amortization period for certain callable debt securities held at a premium, requiring the premium to be amortized to the earliest call date. The adoption of this standard ~~will be applied~~did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-15, Intangibles - Goodwill and Other-Internal-Use Software. The ASU aligns the requirements for capitalizing implementation costs incurred in a ~~modified retrospective basis through~~hosting arrangement that is a ~~cumulative-effect adjustment directly~~service contract with the requirements for capitalizing implementation costs incurred to ~~retained earnings as of the beginning of the period of adoption.~~develop or obtain internal-use software. The standard is effective ~~for interim and annual periods~~ beginning ~~after December 15, 2018 and~~January 1, 2020, with early adoption is permitted. We are currently assessing the impact this standard will have on our consolidated financial statements.

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Benefit Cost.~~ ~~The ASU requires the service cost component of net periodic benefit cost to be presented~~

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in the same income statement line item as other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit cost are to be presented separately, in an appropriately titled line item outside of any subtotal of operating income or disclosed in the footnotes. The standard also limits the amount eligible for capitalization to the service cost component. The standard is effective for interim and annual periods beginning after December 15, 2017 and we are currently assessing the impact this standard will have on our consolidated financial statements.thousands unless otherwise noted, except per share amounts)

~~In January 2017, the FASB issued ASU 2017-06 –~~ ~~Plan Accounting: Defined Benefit Pension Plans (Topic 960); Defined Contribution Pension Plans (Topic 962); Health and Welfare Benefit Plans (Topic 965): Employee Benefit Plan Master Trust Reporting~~. The ASU requires separate disclosure in the statement of net assets available for benefits and the statement of changes in net assets available for benefits of changes in any interests held in a Master Trust and other enhanced disclosures. The standard is effective for interim and annual periods beginning after December 15, 2018 and we are currently evaluating the impact of this standard on our consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Clarifying the Definition of a Business,~~which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard is effective for interim and annual periods beginning after December 15, 2017. The impact on our consolidated financial statements will depend on the facts and circumstances of any specific future transactions.

~~In October 2016, the FASB issued ASU No. 2016-16,~~ ~~Income Taxes: Inter-entity Transfers of Assets other than Inventory,~~ which requires tax expense to be recognized from the sale of intra-entity assets, other than inventory, when the transfer occurs, even though the effects of the transaction are eliminated in consolidation. Under current guidance, the tax effects of transfers are deferred until the transferred asset is sold or otherwise recovered through use. The standard is effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted, including adoption during an interim period. We are currently assessing the impact this standard will have on our consolidated financial statements.

~~In August, 2016, the FASB issued ASU No. 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments~~ (a consensus of the Emerging Issues Task Force). The ASU is intended to reduce diversity in practice in the presentation and classification of certain cash receipts and cash payments by providing guidance on eight specific cash flow issues. The ASU is effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted, including adoption during an interim period. We are currently assessing the impact this standard will have on our consolidated statement of cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses. The ASU sets forth a ~~“current~~current expected credit ~~loss” (CECL)~~loss model, which requires companies to measure ~~all~~ expected credit losses for all financial instruments held at the reporting date based on historical experience, current conditions and ~~reasonable~~reasonably supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This standard is effective ~~for interim~~beginning January 1, 2020. We have completed the scoping of financial assets that will be impacted by the standard and ~~annual periods beginning after December 15, 2019.~~are in the process of developing models to measure expected credit losses. We are ~~currently assessing~~continuing to assess the impact this standard will have on our consolidated financial ~~statements~~statements.

2. Revenue

Disaggregated Revenue

The following tables disaggregate our revenue by major source and ~~disclosures.~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases.~~ This standard, among other things, will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability and result in enhanced disclosures. The standard is effective for interim and annual periods beginning after December 15, 2018 and early adoption is permitted. We are currently assessing the impact this standard will have on our consolidated financial statements and disclosures.

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments–Overall: Recognition and Measurement~~timing of ~~Financial Assets and Financial Liabilities~~. This standard primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. The standard is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. We are currently assessing the impact this standard will have on our consolidated financial statements and disclosures.

recognition:



	Three Months Ended June 30, 2019
	Global Ecommerce		Presort Services			North America Mailing		International Mailing		Software Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines
Equipment sales	$	—	$	—		$	7,882	$	11,502	$	—	$	19,384	$	66,167	$	85,551
Supplies	—		—			32,461		14,029		—		46,490		—		46,490
Software	—		—			—		—		72,206		72,206		—		72,206
Rentals	—		—			—		—		—		—		18,445		18,445
Financing	—		—			—		—		—		—		92,419		92,419
Support services	—		(22		)	108,851		18,854		—		127,683		—		127,683
Business services	282,319		128,160			6,517		989		—		417,985		—		417,985
Subtotal	282,319		128,138			155,711		45,374		72,206		683,748		$	177,031	$	860,779

Revenue from leasing transactions and financing
Equipment sales	—		—			54,191		11,976		—		66,167
Rentals	—		—			13,540		4,905		—		18,445
Financing	—		—			79,975		12,444		—		92,419
Total revenue	$	282,319	$	128,138		$	303,417	$	74,699	$	72,206	$	860,779

Timing of revenue recognition from products and services
Products/services transferred at a point in time	$	—	$	—		$	40,343	$	25,531	$	20,470	$	86,344
Products/services transferred over time	282,319		128,138			115,368		19,843		51,736		597,404
Total	$	282,319	$	128,138		$	155,711	$	45,374	$	72,206	$	683,748

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

~~In May 2014,~~



	Three Months Ended June 30, 2018
	Global Ecommerce		Presort Services		North America Mailing		International Mailing		Software Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines
Equipment sales	$	—	$	—	$	10,566	$	11,278	$	—	$	21,844	$	71,967	$	93,811
Supplies	—		—		36,271		19,186		—		55,457		—		55,457
Software	—		—		—		—		91,703		91,703		—		91,703
Rentals	—		—		—		—		—		—		19,454		19,454
Financing	—		—		—		—		—		—		97,129		97,129
Support services	—		—		113,977		24,621		—		138,598		—		138,598
Business services	239,100		122,730		5,664		1,594		—		369,088		—		369,088
Subtotal	239,100		122,730		166,478		56,679		91,703		676,690		$	188,550	$	865,240

Revenue from leasing transactions and financing
Equipment sales	—		—		55,957		16,010		—		71,967
Rentals	—		—		14,339		5,115		—		19,454
Financing	—		—		82,127		15,002		—		97,129
Total revenue	$	239,100	$	122,730	$	318,901	$	92,806	$	91,703	$	865,240

Timing of revenue recognition from products and services
Products/services transferred at a point in time	$	—	$	—	$	46,837	$	30,464	$	40,020	$	117,321
Products/services transferred over time	239,100		122,730		119,641		26,215		51,683		559,369
Total	$	239,100	$	122,730	$	166,478	$	56,679	$	91,703	$	676,690

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)



	Six Months Ended June 30, 2019
	Global Ecommerce		Presort Services		North America Mailing		International Mailing		Software Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines
Equipment sales	$	—	$	—	$	17,097	$	23,580	$	—	$	40,677	$	134,661	$	175,338
Supplies	—		—		67,563		29,880		—		97,443		—		97,443
Software	—		—		—		—		145,524		145,524		—		145,524
Rentals	—		—		—		—		—		—		40,602		40,602
Financing	—		—		—		—		—		—		189,462		189,462
Support services	—		—		216,562		39,742		—		256,304		—		256,304
Business services	548,573		262,985		11,035		1,915		—		824,508		—		824,508
Subtotal	548,573		262,985		312,257		95,117		145,524		1,364,456		$	364,725	$	1,729,181

Revenue from leasing transactions and financing
Equipment sales	—		—		112,086		22,575		—		134,661
Rentals	—		—		30,819		9,783		—		40,602
Financing	—		—		163,729		25,733		—		189,462
Total revenue	$	548,573	$	262,985	$	618,891	$	153,208	$	145,524	$	1,729,181

Timing of revenue recognition from products and services
Products/services transferred at a point in time	$	—	$	—	$	84,660	$	53,460	$	41,442	$	179,562
Products/services transferred over time	548,573		262,985		227,597		41,657		104,082		1,184,894
Total	$	548,573	$	262,985	$	312,257	$	95,117	$	145,524	$	1,364,456

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)



	Six Months Ended June 30, 2018
	Global Ecommerce		Presort Services		North America Mailing		International Mailing		Software Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines
Equipment sales	$	—	$	—	$	20,981	$	23,074	$	—	$	44,055	$	156,464	$	200,519
Supplies	—		—		75,223		40,227		—		115,450		—		115,450
Software	—		—		—		—		167,997		167,997		—		167,997
Rentals	—		—		—		—		—		—		44,419		44,419
Financing	—		—		—		—		—		—		197,478		197,478
Support services	—		—		227,690		51,558		—		279,248		—		279,248
Business services	485,690		257,188		10,553		3,281		—		756,712		—		756,712
Subtotal	485,690		257,188		334,447		118,140		167,997		1,363,462		$	398,361	$	1,761,823

Revenue from leasing transactions and financing
Equipment sales	—		—		124,429		32,035		—		156,464
Rentals	—		—		33,851		10,568		—		44,419
Financing	—		—		166,985		30,493		—		197,478
Total revenue	$	485,690	$	257,188	$	659,712	$	191,236	$	167,997	$	1,761,823

Timing of revenue recognition from products and services
Products/services transferred at a point in time	$	—	$	—	$	96,204	$	63,301	$	65,021	$	224,526
Products/services transferred over time	485,690		257,188		238,243		54,839		102,976		1,138,936
Total	$	485,690	$	257,188	$	334,447	$	118,140	$	167,997	$	1,363,462

Our performance obligations are as follows:

Equipment sales and supplies: Our performance obligations generally include the ~~FASB issued ASU 2014-09,~~ sale of mailing equipment, excluding sales-type leases, and supplies. We recognize revenue upon delivery for self-install equipment and supplies and upon acceptance or installation for other equipment. We provide a warranty that our equipment is free of defects and meets stated specifications. The warranty is not considered a separate performance obligation.

Software: Our performance obligations include the sale of software licenses, maintenance, data products and professional services. Revenue for licenses is generally recognized upon delivery or over time for those licenses that require critical updates over the term of the contract.

Rentals: Our performance obligations include the fees associated with the rental of mailing equipment under an operating lease contract.

Support services: Performance obligations include providing maintenance, professional services, and subscription and meter services for our mailing equipment. Contract terms range from one year to five years, depending on the term of the lease contract for the related equipment. Revenue for maintenance, subscription and meter services is recognized ratably over the contract period and revenue for professional services is recognized when services are provided.

Business services: Our performance obligations include providing mail processing services and ecommerce solutions. Revenue is recognized over time as the services are provided. The contract terms for these services vary, with the initial contracts in the range of one to five years, followed by annual renewal periods.

Revenue from leasing transactions and financing includes revenue from equipment accounted for as sales-type leases, finance income and late fees.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Contract Assets and Advance Billings from Contracts with Customers~~, which requires companies~~



	Balance sheet location	June 30, 2019		December 31, 2018		Increase (Decrease)
Contracts assets, current	Other current assets and prepayments	$	17,050	$	16,115	$	935
Contracts assets, noncurrent	Other assets	$	10,050	$	13,092	$	(3,042	)
Advance billings, current	Advance billings	$	200,224	$	215,790	$	(15,566	)
Advance billings, noncurrent	Other noncurrent liabilities	$	12,832	$	12,778	$	54

Contract Assets

We record contract assets when performance obligations are satisfied in advance of invoicing the customer when the right to ~~recognize~~consideration is conditional on the satisfaction of another performance obligation within a contract. Contract assets decreased in the period as the invoicing of performance obligations previously satisfied exceeded the contract assets recognized during the period.

Advance Billings from Contracts with Customers

Advance billings are recorded when cash payments are due in advance of our performance. Items in advance billings primarily relate to support services on equipment and software licenses, subscription services and certain software data products. Revenue is recognized ratably over the contract term.

The net decrease in advance billings at June 30, 2019 is due to revenue ~~for~~recognized during the ~~transfer~~period in excess of ~~goods and services to customers in amounts that reflect~~advance billings. Revenue recognized during the ~~consideration the company expects to receive in exchange for those goods and services. In addition, the standard requires enhanced disclosures about the nature, amount, timing and uncertainty~~period includes $109 million of revenue. There were several amendments to the standard during 2016. The standard is effective beginning January 1, 2018 and can be adopted either retrospectively to each reporting period presented or on a modified retrospective basis with a cumulative effect adjustmentadvance billings at the ~~date~~beginning of the ~~initial application. We plan to adopt~~period, partially offset by advance billings in the ~~standard on the modified retrospective basis with a cumulative effect adjustment.~~ quarter.

~~We have substantially completed our assessment of all potential impacts of the standard and do not expect a change in revenue recognition for the majority of our product and service offerings.~~ Future Performance Obligations

The ~~standard will have the most impact on timing of certain revenues in our Software Solutions segment. Specifically, we have concluded that for certain data subscription offerings, the portion of the~~ transaction ~~price~~prices allocated to ~~the initial data set~~future performance obligations will be recognized as ~~revenue at the time of initial delivery rather than over the~~follows:



	Remainder of 2019		2020		2021-2024		Total
North America Mailing⁽¹⁾	$	133,984	$	231,394	$	338,435	$	703,813
International Mailing⁽¹⁾	15,799		21,938		27,583		65,320
Software Solutions⁽²⁾	34,805		57,111		33,295		125,211
Total	$	184,588	$	310,443	$	399,313	$	894,344

⁽¹⁾Revenue streams bundled with our leasing contracts, primarily maintenance, meter services and other subscription ~~period. We also concluded that for~~services.

⁽²⁾Multiple-year software maintenance contracts, certain software and data licenses and data updates.

The table above does not include revenue ~~will be recognized ratably over the specific contract~~related to performance obligations for contracts with terms rather than predominately at the time of billing and delivery. Also, we concluded that certain marketing costs associated with the acquisition of new customers will be expensed as incurred rather than recognized over their expected revenue stream of eight years. We have also determined that certain sales commission plans will qualify for capitalization under the new standard. We plan to use the practical expedient that allows companies to expense costs to obtain a contract when the estimated amortization period is less than ~~one year. We expect~~12 months and expected consideration for those performance obligations where revenue is recognized based on the amount billable to ~~complete our quantitative assessment of these key changes and~~ the ~~impact on our consolidated financial statements during the fourth quarter of 2017.~~

We continue to develop our internal controls, accounting policies and new disclosure requirements. We are enhancing our current systems and business processes to facilitate the preparation of financial information that will be required under the new standard. We expect to finalize these activities by the end of the year.customer.

2.3. Segment Information

Effective January 1, 2017, we revised our segment reporting to reflect a change in how we manage and report office shipping solutions, which we previously reported within the Global Ecommerce segment. The needs of retail and ecommerce clients differ from those of office shipping clients. Accordingly, we now report the results for office shipping solutions within Small & Medium Business Solutions and the retail and ecommerce shipping solutions remain in Global Ecommerce. We have recast prior period results to conform to our current segment presentation. The principal products and services of each ~~of our~~ reportable ~~segments~~segment are as follows:

Commerce Services:

Global Ecommerce: Includes the revenue and related expenses from global cross-border ecommerce transactions and domestic retail and ecommerce shipping solutions, including fulfillment and returns.

Presort Services: Includes revenue and related expenses from sortation services to qualify large volumes of First Class Mail, Marketing Mail and Bound and Packet Mail (Marketing Mail Flats and Bound Printed Matter) for postal worksharing discounts.

Small & Medium Business (SMB) Solutions:

North America Mailing: Includes the revenue and related expenses from mailing and ~~office~~ shipping solutions, financing, services, supplies and ~~supplies~~other applications for small and medium businesses to ~~efficiently create physical and digital mail, evidence postage and~~ help simplify and save on the sending, tracking and receiving of letters, parcels and flats in the U.S. and Canada.

International Mailing: Includes the revenue and related expenses from mailing and ~~office~~ shipping solutions, financing, services and supplies for small and medium businesses to ~~efficiently create physical and digital mail, evidence postage and~~ help simplify and save on the sending, tracking and receiving of letters, parcels and flats in areas outside the U.S. and Canada.

~~Enterprise Business~~PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Software Solutions:

~~Production Mail:~~ Includes the ~~worldwide~~ revenue and related expenses from the sale of production mail inserting and sortation equipment, high-speed production print systems, supplies and related support services to large enterprise clients to process inbound and outbound mail.

~~Presort Services: Includes revenue and related expenses from presort mail and parcel services for our large enterprise clients to qualify large mail and parcel volumes for postal worksharing discounts.~~

~~Digital Commerce Solutions:~~

~~Software Solutions:~~ ~~Includes the worldwide revenue and related expenses from the licensing of~~ customer engagement, customer information, ~~and~~ location intelligence software ~~solutions~~ and ~~related support services.~~data.

~~Global Ecommerce:~~ ~~Includes the worldwide revenue and related expenses from cross-border ecommerce transactions and domestic retail and ecommerce shipping solutions.~~

~~We determine~~Management uses segment earnings before interest and taxes (EBIT) to measure profitability and performance at the segment level and believes that it provides investors a useful measure of operating performance and underlying trends of the business. We determine segment EBIT by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses, restructuring charges and other items ~~that are~~ not allocated to a particular business segment. ~~Management uses~~Segment EBIT may not be indicative of our overall consolidated performance and therefore, should be read in conjunction with our consolidated results of operations. The following tables provide information about our reportable segments and reconciliation of segment EBIT to ~~measure profitability~~net income.

Revenue and ~~performance at the~~EBIT by business segment is presented below:



	Revenue
	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Global Ecommerce	$	282,319	$	239,100	$	548,573	$	485,690
Presort Services	128,138		122,730		262,985		257,188
Commerce Services	410,457		361,830		811,558		742,878
North America Mailing	303,417		318,901		618,891		659,712
International Mailing	74,699		92,806		153,208		191,236
SMB Solutions	378,116		411,707		772,099		850,948
Software Solutions	72,206		91,703		145,524		167,997
Total revenue	$	860,779	$	865,240	$	1,729,181	$	1,761,823



	EBIT
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Global Ecommerce	$	(15,576	)	$	(5,993	)	$	(30,176	)	$	(13,704	)
Presort Services	15,462			12,565			30,528			39,591
Commerce Services	(114		)	6,572			352			25,887
North America Mailing	112,804			120,139			223,417			248,707
International Mailing	11,934			13,091			23,724			29,113
SMB Solutions	124,738			133,230			247,141			277,820
Software Solutions	2,002			18,433			3,694			20,925
Total segment EBIT	126,626			158,235			251,187			324,632
Reconciliation of Segment EBIT to net income:
Unallocated corporate expenses	(43,785		)	(46,477		)	(99,474		)	(97,559		)
Restructuring charges and asset impairments, net	(7,279		)	(11,503		)	(10,877		)	(12,407		)
Interest, net	(39,062		)	(41,969		)	(78,028		)	(85,047		)
Other income (expense)	27			—			(17,683		)	—
Transaction costs	(2,150		)	—			(3,876		)	(1,055		)
Provision for income taxes	(4,099		)	(7,899		)	(12,400		)	(26,694		)
Income from continuing operations	30,278			50,387			28,849			101,870
(Loss) income from discontinued operations, net of tax	(6,581		)	1,208			(7,811		)	9,695
Net income	$	23,697		$	51,595		$	21,038		$	111,565

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

~~segment level~~4. Discontinued Operations

Discontinued operations includes our Document Messaging Technology production mail business and ~~believes~~supporting software that ~~it provides a useful measure of operating performance and underlying trends of the businesses. Segment EBIT may not be indicative of our overall consolidated performance and therefore, should be read~~was sold in ~~conjunction with our consolidated results of operations.~~

~~Revenue and EBIT by business segment~~July 2018. Selected financial information is ~~presented below:~~as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue	$	—		$	89,201		$	—		$	191,435

Earnings (loss) from discontinued operations	$	—		$	8,278		$	(663	)	$	21,620
Loss on sale	(8,589		)	(7,238		)	(9,257		)	(8,777		)
(Loss) income from discontinued operations before taxes	(8,589		)	1,040			(9,920		)	12,843
Tax (benefit) provision	(2,008		)	(168		)	(2,109		)	3,148
(Loss) income from discontinued operations, net of tax	$	(6,581	)	$	1,208		$	(7,811	)	$	9,695

Revenue
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
North America Mailing $ 319,966
$ 349,785
$ 1,016,640
$ 1,064,456
International Mailing 93,770
96,730
282,150
309,297
Small & Medium Business Solutions 413,736
446,515
1,298,790
1,373,753
Production Mail 104,387
106,350
278,912
289,649
Presort Services 119,074
114,053
370,203
357,214
Enterprise Business Solutions 223,461
220,403
649,115
646,863
Software Solutions 99,442
89,031
264,087
257,417
Global Ecommerce 106,181
83,082
288,839
241,473
Digital Commerce Solutions 205,623
172,113
552,926
498,890
Total revenue $ 842,820
$ 839,031
$ 2,500,831
$ 2,519,506

5. Earnings per Share (EPS)



	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Numerator:
Income from continuing operations	$	30,278		$	50,387	$	28,849		$	101,870
(Loss) income from discontinued operations, net of tax	(6,581		)	1,208		(7,811		)	9,695
Net income (numerator for diluted EPS)	23,697			51,595		21,038			111,565
Less: Preference stock dividend	—			8		8			16
Income attributable to common stockholders (numerator for basic EPS)	$	23,697		$	51,587	$	21,030		$	111,549
Denominator:
Weighted-average shares used in basic EPS	177,192			187,180		181,446			187,004
Dilutive effect of common stock equivalents	1,089			934		1,192			1,053
Weighted-average shares used in diluted EPS	178,281			188,114		182,638			188,057
Basic earnings (loss) per share ⁽¹⁾:
Continuing operations	$	0.17		$	0.27	$	0.16		$	0.54
Discontinued operations	(0.04		)	0.01		(0.04		)	0.05
Net income	$	0.13		$	0.28	$	0.12		$	0.60
Diluted earnings (loss) per share ⁽¹⁾:
Continuing operations	$	0.17		$	0.27	$	0.16		$	0.54
Discontinued operations	(0.04		)	0.01		(0.04		)	0.05
Net income	$	0.13		$	0.27	$	0.12		$	0.59

Anti-dilutive options excluded from diluted earnings per share:	16,297			12,453		16,077			11,959


⁽¹⁾	The sum of the earnings per share amounts may not equal the totals due to rounding.

EBIT
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
North America Mailing $ 107,777
$ 141,968
$ 369,662
$ 449,696
International Mailing 8,729
9,198
35,967
32,842
Small & Medium Business Solutions 116,506
151,166
405,629
482,538
Production Mail 14,920
15,696
31,515
35,434
Presort Services 19,474
19,181
69,461
69,305
Enterprise Business Solutions 34,394
34,877
100,976
104,739
Software Solutions 20,912
10,329
31,216
17,908
Global Ecommerce (9,594 ) 1,544
(17,894 ) (2,608 )
Digital Commerce Solutions 11,318
11,873
13,322
15,300
Total segment EBIT 162,218
197,916
519,927
602,577
Reconciling items:

Interest, net (41,230 ) (35,259 ) (120,323 ) (103,769 )
Unallocated corporate expenses (38,848 ) (51,992 ) (144,138 ) (158,536 )
Restructuring charges and asset impairments, net (1,493 ) (16,494 ) (30,502 ) (49,503 )
Gain from the sale of technology —
—
6,085
—
Acquisition and disposition-related expenses (5,682 ) (578 ) (5,682 ) (4,274 )
Income before income taxes 74,965
93,593
225,367
286,495
Provision for income taxes 17,607
23,197
53,975
93,615
Loss from discontinued operations, net of tax —
(291 ) —
(1,951 )
Net income $ 57,358
$ 70,105
$ 171,392
$ 190,929

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

~~3. Earnings per Share~~

~~The calculations of basic and diluted earnings per share are presented below.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Numerator:

Amounts attributable to common stockholders:

Net income from continuing operations $ 57,358
$ 65,803
$ 171,392
$ 179,099
Loss from discontinued operations, net of tax —
(291 ) —
(1,951 )
Net income attributable to Pitney Bowes Inc. (numerator for diluted EPS) 57,358
65,512
171,392
177,148
Less: Preference stock dividend 9
10
28
29
Income attributable to common stockholders (numerator for basic EPS) $ 57,349
$ 65,502
$ 171,364
$ 177,119
Denominator:

Weighted-average shares used in basic EPS 186,497
185,603
186,257
188,634
Effect of dilutive shares:

Conversion of Preferred stock and Preference stock 281
299
287
301
Employee stock plans 979
781
656
657
Weighted-average shares used in diluted EPS 187,757
186,683
187,200
189,592
Basic earnings per share:

Continuing operations $ 0.31
$ 0.35
$ 0.92
$ 0.95
Discontinued operations —
—
—
(0.01 )
Net Income $ 0.31
$ 0.35
$ 0.92
$ 0.94
Diluted earnings per share:

Continuing operations $ 0.31
$ 0.35
$ 0.92
$ 0.94
Discontinued operations —
—
—
(0.01 )
Net Income $ 0.31
$ 0.35
$ 0.92
$ 0.93
Anti-dilutive shares not used in calculating diluted weighted-average shares 9,927
8,036
10,211
8,148

4.6. Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on the last-in, first-out (LIFO) basis for most U.S. inventories and the first-in, first-out (FIFO) basis for most non-U.S. inventories. Inventories at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 consisted of the following:



	June 30, 2019			December 31, 2018
Raw materials	$	13,740		$	8,231
Supplies and service parts	23,701			21,841
Finished products	40,389			36,690
Inventory at FIFO cost	77,830			66,762
Excess of FIFO cost over LIFO cost	(4,483		)	(4,483		)
Total inventory, net	$	73,347		$	62,279

September 30,
2017 December 31,
2016
Raw materials $ 39,287
$ 28,541
Work in process 6,620
6,498
Supplies and service parts 51,854
45,152
Finished products 32,664
24,678
Inventory at FIFO cost 130,425
104,869
Excess of FIFO cost over LIFO cost (12,143 ) (12,143 )
Total inventory, net $ 118,282
$ 92,726

~~PITNEY BOWES INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)~~

5.7. Finance Assets and Lessor Operating Leases

Finance ~~Receivables~~Assets

Finance receivables are comprised of sales-type lease receivables and unsecured revolving loan receivables. Sales-type lease receivables are generally due in monthly, quarterly or semi-annual installments over periods ranging from three to five years. Loan receivables arise primarily from financing services offered to our ~~customers~~clients for postage and supplies. Loan receivables are generally due each month; however, ~~customers~~clients may rollover outstanding balances. Interest is recognized on loan receivables using the effective interest method and related annual fees are initially deferred and recognized ratably over the annual period covered. ~~Customer~~Client acquisition costs are expensed as incurred.

Finance receivables at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 consisted of the following:



	June 30, 2019									December 31, 2018
	North America			International			Total			North America			International			Total
Sales-type lease receivables
Gross finance receivables	$	1,081,063		$	197,145		$	1,278,208		$	1,110,896		$	242,036		$	1,352,932
Unguaranteed residual values	45,279			11,676			56,955			52,637			12,772			65,409
Unearned income	(349,996		)	(47,367		)	(397,363		)	(383,453		)	(55,113		)	(438,566		)
Allowance for credit losses	(11,322		)	(2,262		)	(13,584		)	(10,252		)	(2,356		)	(12,608		)
Net investment in sales-type lease receivables	765,024			159,192			924,216			769,828			197,339			967,167
Loan receivables
Loan receivables	289,694			30,126			319,820			300,319			29,270			329,589
Allowance for credit losses	(6,374		)	(759		)	(7,133		)	(6,777		)	(837		)	(7,614		)
Net investment in loan receivables	283,320			29,367			312,687			293,542			28,433			321,975
Net investment in finance receivables	$	1,048,344		$	188,559		$	1,236,903		$	1,063,370		$	225,772		$	1,289,142

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

September 30, 2017 December 31, 2016
North America International Total North America International Total
Sales-type lease receivables

Gross finance receivables $ 1,023,206
$ 284,099
$ 1,307,305
$ 1,088,053
$ 273,262
$ 1,361,315
Unguaranteed residual values 75,242
14,301
89,543
90,190
13,655
103,845
Unearned income (213,852 ) (62,343 ) (276,195 ) (223,908 ) (60,458 ) (284,366 )
Allowance for credit losses (7,103 ) (2,768 ) (9,871 ) (8,247 ) (2,647 ) (10,894 )
Net investment in sales-type lease receivables 877,493
233,289
1,110,782
946,088
223,812
1,169,900
Loan receivables

Loan receivables 339,726
34,456
374,182
374,147
32,716
406,863
Allowance for credit losses (6,960 ) (1,089 ) (8,049 ) (8,517 ) (1,089 ) (9,606 )
Net investment in loan receivables 332,766
33,367
366,133
365,630
31,627
397,257
Net investment in finance receivables $ 1,210,259
$ 266,656
$ 1,476,915
$ 1,311,718
$ 255,439
$ 1,567,157

Loans receivable are due within one year. Maturities of gross sales-type lease finance receivables at June 30, 2019 were as follows:



	Sales-type Lease Receivables
	North America		International		Total
Remaining for year ending December 31, 2019	$	381,156	$	39,908	$	421,064
Year ending December 31, 2020	298,935		56,712		355,647
Year ending December 31, 2021	209,673		44,544		254,217
Year ending December 31, 2022	125,705		29,828		155,533
Year ending December 31, 2023	57,256		16,823		74,079
Thereafter	8,338		9,330		17,668
Total	$	1,081,063	$	197,145	$	1,278,208

Allowance for Credit Losses

We provide an allowance for probable credit losses based on historical loss experience, the nature and volume of our portfolios, adverse situations that may affect a client's ability to pay, prevailing economic conditions and our ability to manage the collateral. We continually evaluate the adequacy of the allowance for credit losses and make adjustments as necessary. The assumptions used in determining an estimate of credit losses are inherently subjective and actual results may differ significantly from estimated reserves.

We establish credit approval limits based on the credit quality of the client and the type of equipment financed. Our policy is to discontinue revenue recognition for lease receivables that are more than 120 days past due and for loan receivables that are more than 90 days past due. We resume revenue recognition when the client's payments reduce the account aging to less than 60 days past due. Finance receivables deemed uncollectible are written off against the allowance after all collection efforts have been exhausted and management deems the account to be uncollectible. WeAs of June 30, 2019, we believe that our finance receivable credit risk is low because of the geographic and industry diversification of our clients and small account balances for most of our clients.

Activity in the allowance for credit losses for the six months ended June 30, 2019 and 2018 was as follows:



	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at January 1, 2019	$	10,252		$	2,356		$	6,777		$	837		$	20,222
Amounts charged to expense	3,660			455			2,329			315			6,759
Write-offs and other	(2,590		)	(549		)	(2,732		)	(393		)	(6,264		)
Balance at June 30, 2019	$	11,322		$	2,262		$	6,374		$	759		$	20,717

	Sales-type Lease Receivables						Loan Receivables
	North America			International			North America			International			Total
Balance at January 1, 2018	$	7,721		$	2,794		$	7,098		$	1,020		$	18,633
Amounts charged to expense	5,946			545			3,506			250			10,247
Write-offs and other	(2,538		)	(933		)	(3,735		)	(330		)	(7,536		)
Balance at June 30, 2018	$	11,129		$	2,406		$	6,869		$	940		$	21,344

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

~~Activity in the allowance for credit losses for the nine months ended September 30, 2017 and 2016 was as follows:~~

Sales-type Lease Receivables Loan Receivables

North
America
International
North
America
International Total
Balance at January 1, 2017 $ 8,247
$ 2,647
$ 8,517
$ 1,089
$ 20,500
Amounts charged to expense 7,807
895
3,892
438
13,032
Write-offs and other (8,951 ) (774 ) (5,449 ) (438 ) (15,612 )
Balance at September 30, 2017 $ 7,103
$ 2,768
$ 6,960
$ 1,089
$ 17,920

Sales-type Lease Receivables Loan Receivables

North
America
International
North
America
International Total
Balance at January 1, 2016 $ 6,606
$ 3,542
$ 10,024
$ 1,518
$ 21,690
Amounts charged to expense 2,881
464
4,217
688
8,250
Write-offs and other (3,433 ) (1,419 ) (5,953 ) (1,010 ) (11,815 )
Balance at September 30, 2016 $ 6,054
$ 2,587
$ 8,288
$ 1,196
$ 18,125

Aging of Receivables

The aging of gross finance receivables at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 was as follows:

September 30, 2017
Sales-type Lease Receivables Loan Receivables

North
America
International
North
America
International Total
1 - 90 days $ 970,891
$ 279,517
$ 331,233
$ 34,224
$ 1,615,865
> 90 days 52,315
4,582
8,493
232
65,622
Total $ 1,023,206
$ 284,099
$ 339,726
$ 34,456
$ 1,681,487
Past due amounts > 90 days

Still accruing interest $ 6,726
$ 1,781
$ —
$ —
$ 8,507
Not accruing interest 45,589
2,801
8,493
232
57,115
Total $ 52,315
$ 4,582
$ 8,493
$ 232
$ 65,622

As of September 30, 2017, we had North America sales-type lease receivables aged greater than 90 days with a contract value of $52 million. As of October 31, 2017, we received payments with a contract value of approximately $23 million related to these receivables.



	June 30, 2019
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
1 - 90 days	$	1,051,352	$	192,135	$	283,809	$	29,866	$	1,557,162
> 90 days	29,711		5,010		5,885		260		40,866
Total	$	1,081,063	$	197,145	$	289,694	$	30,126	$	1,598,028
Past due amounts > 90 days
Still accruing interest	$	6,467	$	1,410	$	1,932	$	116	$	9,925
Not accruing interest	23,244		3,600		3,953		144		30,941
Total	$	29,711	$	5,010	$	5,885	$	260	$	40,866



	December 31, 2018
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
1 - 90 days	$	1,069,288	$	238,114	$	294,126	$	29,079	$	1,630,607
> 90 days	41,608		3,922		6,193		191		51,914
Total	$	1,110,896	$	242,036	$	300,319	$	29,270	$	1,682,521
Past due amounts > 90 days
Still accruing interest	$	7,917	$	1,111	$	1,769	$	72	$	10,869
Not accruing interest	33,691		2,811		4,424		119		41,045
Total	$	41,608	$	3,922	$	6,193	$	191	$	51,914

December 31, 2016
Sales-type Lease Receivables Loan Receivables

North
America
International
North
America
International Total
1 - 90 days $ 1,025,313
$ 269,247
$ 366,726
$ 32,420
$ 1,693,706
> 90 days 62,740
4,015
7,421
296
74,472
Total $ 1,088,053
$ 273,262
$ 374,147
$ 32,716
$ 1,768,178
Past due amounts > 90 days

Still accruing interest $ 8,831
$ 972
$ —
$ —
$ 9,803
Not accruing interest 53,909
3,043
7,421
296
64,669
Total $ 62,740
$ 4,015
$ 7,421
$ 296
$ 74,472

~~PITNEY BOWES INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)~~

Credit Quality

The extension of credit and management of credit lines to new and existing clients uses a combination of an automated credit score, where available, and a detailed manual review of the client's financial condition and, when applicable, payment history. Once credit is granted, the payment performance of the client is managed through automated collections processes and is supplemented with direct follow up should an account become delinquent. We have robust automated collections and extensive portfolio management processes. The portfolio management processes ~~ensure~~are in place to track that our global strategy is executed, collection resources are allocated appropriately and enhanced tools and processes are implemented as needed.

We use a third party to score the majority of the North America portfolio on a quarterly basis using a commercial credit score. We do not use a third party to score our International portfolio because the cost to do so is prohibitive, given that it is a localized process, and there is no single credit score model that covers all countries.

The table below shows the North America portfolio at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 by relative risk class based on the relative scores of the accounts within each class. The relative scores are determined based on a number of factors, including the company type, ownership structure, payment history and financial information. A fourth class is shown for accounts that are not scored. Absence of a score is not indicative of the credit quality of the account. The degree of risk (low, medium, high), as defined by the third party, refers to the relative risk that an account may become delinquent in the next 12 ~~month period may become delinquent.~~months.

Low risk accounts are companies with very good credit scores and are considered to approximate the top 30% of all commercial borrowers.

Medium risk accounts are companies with average to good credit scores and are considered to approximate the middle 40% of all commercial borrowers.

High risk accounts are companies with poor credit scores, are delinquent or are at risk of becoming delinquent and are considered to approximate the bottom 30% of all commercial borrowers.

September 30,
2017 December 31,
2016
Sales-type lease receivables

Low $ 817,332
$ 879,823
Medium 136,995
135,953
High 21,528
22,600
Not Scored 47,351
49,677
Total $ 1,023,206
$ 1,088,053
Loan receivables

Low $ 263,537
$ 296,598
Medium 52,630
53,647
High 6,897
7,216
Not Scored 16,662
16,686
Total $ 339,726
$ 374,147

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

~~6. Acquisition, Intangible Assets~~



	June 30, 2019		December 31, 2018
Sales-type lease receivables
Low	$	893,068	$	922,414
Medium	131,312		131,650
High	20,930		22,110
Not Scored	35,753		34,722
Total	$	1,081,063	$	1,110,896
Loan receivables
Low	$	229,888	$	238,620
Medium	42,731		43,952
High	5,703		5,947
Not Scored	11,372		11,800
Total	$	289,694	$	300,319

Lease Income

Lease income from sales-type leases for the three and ~~Goodwill~~

~~Acquisition~~

~~On October 2, 2017, we acquired Newgistics, a provider of parcel delivery, returns, fulfillment~~six months ended June 30, 2019 and ~~digital commerce solutions for retailers and ecommerce brands, for $475 million. Newgistics will be included in the Global Ecommerce segment.~~

~~Intangible Assets~~

~~Intangible assets at September 30, 2017 and December 31, 2016 consisted of the following:~~2018 was as follows:

September 30, 2017 December 31, 2016

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount
Customer relationships $ 455,275
$ (327,947 ) $ 127,328
$ 445,039
$ (300,906 ) $ 144,133
Software & technology 154,571
(142,604 ) 11,967
150,037
(136,508 ) 13,529
Trademarks & other 37,326
(31,245 ) 6,081
36,212
(28,702 ) 7,510
Total intangible assets $ 647,172
$ (501,796 ) $ 145,376
$ 631,288
$ (466,116 ) $ 165,172



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Profit recognized at commencement ⁽¹⁾	$	34,320	$	39,642	$	70,678	$	86,929
Interest income	58,045		60,855		117,523		122,687
Total lease income from sales-type leases	$	92,365	$	100,497	$	188,201	$	209,616

⁽¹⁾ Lease contracts do not include variable lease payments.

~~Amortization expense was~~ ~~$8 million~~ ~~and~~ ~~$10 million~~ ~~for the~~ ~~three months ended September 30, 2017 and 2016, respectively and $24 million and $32 million for the nine months ended September 30, 2017 and 2016, respectively.~~

~~Future amortization expense as~~Lessor Operating Leases

We also lease mailing equipment under operating leases with terms of ~~September 30, 2017~~ ~~was~~one to five years. Maturities of these operating leases are as follows:



Remaining for year ending December 31, 2019	$	18,383
Year ending December 31, 2020	27,684
Year ending December 31, 2021	12,394
Year ending December 31, 2022	6,348
Year ending December 31, 2023	2,886
Thereafter	182
Total	$	67,877

Remaining for year ending December 31, 2017 $ 7,727
Year ending December 31, 2018 27,356
Year ending December 31, 2019 23,977
Year ending December 31, 2020 18,389
Year ending December 31, 2021 15,365
Thereafter 52,562
Total $ 145,376

~~Actual amortization expense may differ from the amounts above due to, among other things, fluctuations in foreign currency exchange rates, impairments, acquisitions and accelerated amortization.~~

~~Goodwill~~

~~Changes in the carrying value of goodwill, by reporting segment, for the~~ ~~nine months ended September 30, 2017~~ ~~are shown in the table below. Prior year amounts have been recast for the change in reportable segments.~~

December 31, 2016 Acquisitions Foreign currency translation September 30,
2017
North America Mailing $ 354,000
$ —
$ 13,208
$ 367,208
International Mailing 145,566
—
12,074
157,640
Small & Medium Business Solutions 499,566
—
25,282
524,848
Production Mail 101,099
—
5,734
106,833
Presort Services 196,890
6,229
—
203,119
Enterprise Business Solutions 297,989
6,229
5,734
309,952
Software Solutions 501,591
—
8,388
509,979
Global Ecommerce 272,189
—
—
272,189
Digital Commerce Solutions 773,780
—
8,388
782,168
Total goodwill $ 1,571,335
$ 6,229
$ 39,404
$ 1,616,968

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

7.8. Intangible Assets and Goodwill

Intangible Assets

Intangible assets at June 30, 2019 and December 31, 2018 consisted of the following:



	June 30, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	484,597	$	(294,244	)	$	190,353	$	480,837	$	(281,190	)	$	199,647
Software & technology	164,849		(147,130		)	17,719		165,088		(143,877		)	21,211
Trademarks & other	40,105		(35,581		)	4,524		40,170		(33,891		)	6,279
Total intangible assets	$	689,551	$	(476,955	)	$	212,596	$	686,095	$	(458,958	)	$	227,137

Amortization expense was $10 million and $11 million for the three months ended June 30, 2019 and 2018, respectively, and $21 million and $22 million for the six months ended June 30, 2019 and 2018, respectively.

Future amortization expense as of June 30, 2019 is shown in the table below. Actual amortization expense may differ due to, among other things, fluctuations in foreign currency exchange rates, impairments, acquisitions and accelerated amortization.



Remaining for year ending December 31, 2019	$	19,898
Year ending December 31, 2020	35,551
Year ending December 31, 2021	31,033
Year ending December 31, 2022	29,801
Year ending December 31, 2023	26,726
Thereafter	69,587
Total	$	212,596

Goodwill

Changes in the carrying value of goodwill, by reporting segment, for the six months ended June 30, 2019 are shown in the table below.



	December 31, 2018		Divestiture			Currency impact			June 30, 2019
Global Ecommerce	$	609,431	$	—		$	—		$	609,431
Presort Services	207,465		—			—			207,465
Commerce Services	816,896		—			—			816,896
North America Mailing	368,248		—			326			368,574
International Mailing	147,207		(10,490		)	(1,537		)	135,180
SMB Solutions	515,455		(10,490		)	(1,211		)	503,754
Software Solutions	434,160		—			(200		)	433,960
Total goodwill	$	1,766,511	$	(10,490	)	$	(1,411	)	$	1,754,610

In January 2019, we wrote off $10 million of goodwill associated with Market Exits.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

9. Fair Value Measurements and Derivative Instruments

We measure certain financial assets and liabilities at fair value on a recurring basis. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. An entity is required to classify certain assets and liabilities measured at fair value based on the following fair value hierarchy that prioritizes the inputs used to measure fair value:


Level 1 –	Unadjusted quoted prices in active markets for identical assets and liabilities.


Level 2 –	Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.


Level 3 –	Unobservable inputs that are supported by little or no market activity, may be derived from internally developed methodologies based on management’s best estimate of fair value and that are significant to the fair value of the asset or liability.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect its placement within the fair value hierarchy. The following tables show, by level within the fair value hierarchy, our financial assets and liabilities that are accounted for at fair value on a recurring basis at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016.~~2018.


	September 30, 2017										June 30, 2019
	Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total
Assets:
Investment securities
Money market funds / commercial paper	$	348,659	$	726,283		$	—	$	1,074,942		$	237,848	$	321,863		$	—	$	559,711
Equity securities	—		25,242			—		25,242			—		22,372			—		22,372
Commingled fixed income securities	1,571		22,296			—		23,867			1,632		21,212			—		22,844
Debt securities - U.S. and foreign governments, agencies and municipalities	118,439		18,140			—		136,579
Debt securities - corporate	—		77,761			—		77,761
Government and related securities											78,842		7,550			—		86,392
Corporate debt securities											—		50,774			—		50,774
Mortgage-backed / asset-backed securities	—		161,461			—		161,461			—		85,415			—		85,415
Derivatives
Interest rate swap	—		1,680			—		1,680
Foreign exchange contracts	—		62			—		62			—		345			—		345
Total assets	$	468,669	$	1,032,925		$	—	$	1,501,594		$	318,322	$	509,531		$	—	$	827,853
Liabilities:
Derivatives
Foreign exchange contracts	$	—	$	(389	)	$	—	$	(389	)	$	—	$	(297	)	$	—	$	(297	)
Total liabilities	$	—	$	(389	)	$	—	$	(389	)	$	—	$	(297	)	$	—	$	(297	)

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)



	December 31, 2018
	Level 1		Level 2			Level 3		Total
Assets:
Investment securities
Money market funds / commercial paper	$	220,756	$	391,891		$	—	$	612,647
Equity securities	—		19,133			—		19,133
Commingled fixed income securities	1,570		20,141			—		21,711
Government and related securities	98,790		9,787			—		108,577
Corporate debt securities	—		56,938			—		56,938
Mortgage-backed / asset-backed securities	—		98,334			—		98,334
Derivatives
Foreign exchange contracts	—		2,031			—		2,031
Total assets	$	321,116	$	598,255		$	—	$	919,371
Liabilities:
Derivatives
Foreign exchange contracts	$	—	$	(735	)	$	—	$	(735	)
Total liabilities	$	—	$	(735	)	$	—	$	(735	)

December 31, 2016
Level 1 Level 2 Level 3 Total
Assets:

Investment securities

Money market funds / commercial paper $ 114,471
$ 217,175
$ —
$ 331,646
Equity securities —
24,571
—
24,571
Commingled fixed income securities 1,536
22,132
—
23,668
Debt securities - U.S. and foreign governments, agencies and municipalities 116,822
19,358
—
136,180
Debt securities - corporate —
69,891
—
69,891
Mortgage-backed / asset-backed securities —
158,996
—
158,996
Derivatives

Interest rate swap —
1,588
—
1,588
Foreign exchange contracts —
637
—
637
Total assets $ 232,829
$ 514,348
$ —
$ 747,177
Liabilities:

Derivatives

Foreign exchange contracts $ —
$ (3,717 ) $ —
$ (3,717 )
Total liabilities $ —
$ (3,717 ) $ —
$ (3,717 )

Investment Securities

The valuation of investment securities is based on the market approach using inputs that are observable, or can be corroborated by observable data, in an active marketplace. The following information relates to our classification into the fair value hierarchy:

•

Money Market Funds / Commercial Paper: Money market funds typically invest in government securities, certificates of deposit, commercial paper and other highly liquid, low risk securities. Money market funds are principally used for overnight deposits and are classified as Level 1 when unadjusted quoted prices in active markets are available and as Level 2 when they are not actively traded on an exchange. Direct investments in commercial paper are not listed on an exchange in an active market and are classified as Level 2.


•	Equity Securities: Equity securities are comprised of mutual funds investing in U.S. and foreign stocks. These mutual funds are classified as Level 2.

•

Commingled Fixed Income Securities: Commingled fixed income securities are comprised of mutual funds that invest in a variety of fixed income securities, including securities of the U.S. government and its agencies, corporate debt, mortgage-backed securities and asset-backed securities. Fair value is based on the value of the underlying investments owned by each fund, minus its liabilities, divided by the number of shares outstanding, as reported by the fund manager. These mutual funds are classified as Level 1 when unadjusted quoted prices in active markets are available and as Level 2 when they are not actively traded on an exchange.

•

Government and Related Securities: Debt securities are classified as Level 1 where active, high volume trades for identical securities exist. Valuation adjustments are not applied to these securities. Debt securities are classified as Level 2 where fair value is determined using quoted market prices for similar securities or benchmarking model derived prices to quoted market prices and trade data for identical or comparable securities.


•	Corporate Debt Securities: Corporate debt securities are valued using recently executed comparable transactions, market price quotations or bond spreads for the same maturity as the security. These securities are classified as Level 2.


•	Mortgage-Backed Securities / Asset-Backed Securities: These securities are valued based on external pricing indices or external price/spread data. These securities are classified as Level 2.

~~Money Market Funds / Commercial Paper:~~ Money market funds typically invest in government securities, certificates of deposit, commercial paper and other highly liquid, low risk securities. Money market funds are principally used for overnight deposits and are classified as Level 1 when unadjusted quoted prices in active markets are available and as Level 2 when they are not actively traded on an exchange. Direct investments in commercial paper are not listed on an exchange in an active market and are classified as Level 2.

~~Equity Securities:~~ ~~Equity securities are comprised of mutual funds investing in U.S. and foreign common stock. These mutual funds are classified as Level 2 as they are not separately listed on an exchange.~~

Available-For-Sale Securities

~~Commingled Fixed Income Securities:~~ Mutual funds that invest in a variety of fixed-income securities including securities of the U.S. government and its agencies, corporate debt, mortgage-backed securities and asset-backed securities. The value of the funds is based on the market value of the underlying investments owned by each fund, minus its liabilities, divided by the number of shares outstanding, as reported by the fund manager. These commingled funds are not listed on an exchange in an active market and are classified as Level 2.

~~Debt Securities – U.S. and Foreign Governments, Agencies and Municipalities:~~ ~~Debt~~Investment securities are classified as ~~Level 1 where active, high volume trades for identical securities exist. Valuation adjustments~~available-for-sale and recorded at fair value. Unrealized holding gains and losses, net of tax, are not applied to these securities. Debt securities valued using quoted market prices for similar securities or benchmarking model derived prices to quoted market prices and trade data for identical or comparablerecorded in accumulated other comprehensive income (AOCI). Available-for-sale investment securities are ~~classified as Level 2.~~

~~Debt Securities – Corporate:~~ ~~Corporate debt securities are valued using recently executed transactions, market price quotations where observable, or bond spreads. The spread data used are for~~predominantly held at the ~~same maturity as the security. These securities are classified as Level 2.~~

~~Mortgage-Backed Securities / Asset-Backed Securities:~~ These securities are valued based on external pricing indices. When external index pricing is not observable, these securities are valued based on external price/spread data. These securities are classified as Level 2.

~~Investment securities include investments held by The~~ Pitney Bowes Bank, ~~(the Bank),~~ whose primary business is to provide financing solutions to clients that rent postage meters and purchase supplies. ~~The Bank's assets and liabilities consist primarily of cash, finance receivables, short and long-term investments and deposit accounts.~~

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

~~Available-For-Sale Securities~~

Certain investment securities are classified as available-for-sale and recorded at fair value in the Condensed Consolidated Balance Sheets as cash and cash equivalents, short-term investments and other assets depending on the type of investment and maturity. Unrealized holding gains and losses are recorded, net of tax, in accumulated other comprehensive income (AOCI).

Available-for-sale securities at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 consisted of the following:


	September 30, 2017									June 30, 2019
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
U.S. and foreign governments, agencies and municipalities	$	134,134	$	2,024	$	(850	)	$	135,308
Corporate notes and bonds	76,105		1,888		(232		)	77,761
Government and related securities										$	85,292	$	1,063	$	(47	)	$	86,308
Corporate debt securities										49,507		1,320		(53		)	50,774
Commingled fixed income securities	1,792		—		(22		)	1,770		1,656		—		(24		)	1,632
Mortgage-backed / asset-backed securities	160,948		1,742		(1,229		)	161,461		85,058		905		(548		)	85,415
Total	$	372,979	$	5,654	$	(2,333	)	$	376,300	$	221,513	$	3,288	$	(672	)	$	224,129



	December 31, 2018
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Estimated fair value
Government and related securities	$	109,776	$	47	$	(1,336	)	$	108,487
Corporate debt securities	58,714		4		(1,780		)	56,938
Commingled fixed income securities	1,637		—		(67		)	1,570
Mortgage-backed / asset-backed securities	100,186		167		(2,019		)	98,334
Total	$	270,313	$	218	$	(5,202	)	$	265,329

December 31, 2016
Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value
U.S. and foreign governments, agencies and municipalities $ 136,316
$ 1,571
$ (1,707 ) $ 136,180
Corporate notes and bonds 69,376
1,180
(665 ) 69,891
Commingled fixed income securities 1,568
—
(32 ) 1,536
Mortgage-backed / asset-backed securities 159,312
1,566
(1,882 ) 158,996
Total $ 366,572
$ 4,317
$ (4,286 ) $ 366,603

~~At September 30, 2017, investment securities that were in a loss position for 12 or more continuous months had~~The aggregate unrealized holding losses of ~~$1 million and an estimated fair value of $90 million, and~~ investment securities ~~that were~~ in a loss position ~~for less than 12 continuous months had aggregate unrealized holding losses of $1 million~~at June 30, 2019 and ~~an estimated fair value of $76 million.~~

At December 31, ~~2016, investment securities that~~2018 were in a loss position for 12 or more continuous months had aggregate unrealized holding losses of less than $1 million and an estimated fair value of $12 million, and investment securities that were in a loss position for less than 12 continuous months had aggregate unrealized holding losses of $4 million and an estimated fair value of $171 million.as follows:



	June 30, 2019				December 31, 2018
	Fair Value		Gross unrealized losses		Fair Value		Gross unrealized losses
Less than 12 continuous months	$	502	$	2	$	48,318	$	847
Greater than 12 continuous months	56,970		670		177,331		4,355
Total	$	57,472	$	672	$	225,649	$	5,202

We have not recognized an other-than-temporary impairment on any of the investment securities in an unrealized loss position because we have the ability and intent to hold these securities until recovery of the unrealized losses and we expect to receive the ~~contractual~~stated principal and interest ~~on these investment securities~~ at maturity.

Scheduled maturities of available-for-sale securities at ~~September~~June 30, ~~2017~~2019 were as follows:



	Amortized cost		Estimated fair value
Within 1 year	$	47,535	$	47,589
After 1 year through 5 years	68,901		69,407
After 5 years through 10 years	34,951		36,121
After 10 years	70,126		71,012
Total	$	221,513	$	224,129

Amortized cost Estimated fair value
Within 1 year $ 42,982
$ 42,865
After 1 year through 5 years 109,866
110,445
After 5 years through 10 years 61,744
62,673
After 10 years 158,387
160,317
Total $ 372,979
$ 376,300

The ~~expected payments on~~scheduled maturities of mortgage-backed and asset-backed securities may not coincide with ~~their contractual maturities~~the actual payment, as borrowers have the right to prepay ~~obligations with or without prepayment penalties.~~

~~PITNEY BOWES INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)~~

obligations.

We have not experienced any significant write-offs in our investment portfolio. The majority of our mortgage-backed securities are either guaranteed or supported by the U.S. Government. We have no investments in inactive markets that would warrant a possible change in our pricing methods or classification within the fair value hierarchy.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Derivative Instruments

In the normal course of business, we are exposed to the impact of changes in foreign currency exchange rates and interest rates. We ~~limit~~mitigate these ~~risks~~exposures by following established risk management policies and procedures, including the use of derivatives. We use derivative instruments to limit the effects of exchange rate fluctuations on financial results and manage the ~~related~~ cost of debt. We do not use derivatives for trading or speculative purposes. We record derivative instruments at fair value and the accounting for changes in the fair value depends on the intended use of the derivative, the resulting designation and the effectiveness of the instrument in offsetting the risk exposure it is designed to hedge.

Foreign Exchange Contracts

We enter into foreign exchange contracts to mitigate the currency risk associated with the anticipated purchase of inventory between affiliates and from third parties. These contracts are designated as cash flow hedges. The effective portion of the gain or loss on cash flow hedges is included in AOCI in the period that the change in fair value occurs and is reclassified to earnings in the period that the hedged item is recorded in earnings. At ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016,~~2018, we had outstanding contracts associated with these anticipated transactions with notional amounts of ~~$12~~$9 million and ~~$13~~$8 million, respectively.

The valuation of foreign exchange derivatives is based on the market approach using observable market inputs, such as foreign currency spot and forward rates and yield curves. We have not seen a material change in the creditworthiness of those banks acting as derivative ~~counterparties.~~

counterparties in the three months ended June 30, 2019.

Interest Rate Swap

We ~~entered into~~had an interest rate swap with a notional amount of $300 million to mitigate the interest rate risk associated with ~~our~~ $300 million of variable-rate term loans. ~~The~~This swap ismatured in September 2018. While outstanding, the swap was designated as a cash flow ~~hedge. The~~hedge and the effective portion of the gain or loss on the cash flow hedge iswas included in AOCI in the period that the change in fair value ~~occurs~~occurred and is reclassified to earnings in the period that the hedged item iswas recorded in earnings. ~~Under the terms~~

The fair value of derivative instruments at June 30, 2019 and December 31, 2018 was as follows:



Designation of Derivatives	Balance Sheet Location	June 30, 2019			December 31, 2018
Derivatives designated as hedging instruments
Foreign exchange contracts	Other current assets and prepayments	$	51		$	61
	Accounts payable and accrued liabilities	(190		)	(104		)

Derivatives not designated as hedging instruments
Foreign exchange contracts	Other current assets and prepayments	294			1,970
	Accounts payable and accrued liabilities	(107		)	(631		)

	Total derivative assets	$	345		$	2,031
	Total derivative liabilities	(297		)	(735		)
	Total net derivative asset	$	48		$	1,296

The majority of the ~~swap agreement, we pay fixed-rate interest~~amounts included in AOCI at June 30, 2019 will be recognized in earnings within the next 12 months. No amount of ~~0.8826% and receive variable-rate interest based on 1-month LIBOR. The variable interest rate resets monthly.~~ineffectiveness was recorded in earnings for these designated cash flow hedges.

~~The valuation of our interest rate swap is based on the income approach using a model with inputs that are observable or that can be derived from or corroborated by observable market data.~~

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

~~The fair value of derivative instruments at~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~was as follows:~~

Designation of Derivatives Balance Sheet Location September 30,
2017 December 31,
2016
Derivatives designated as
hedging instruments

Foreign exchange contracts Other current assets and prepayments $ 3
$ 487
Accounts payable and accrued liabilities (309 ) (136 )

Interest rate swap Other assets 1,680
1,588

Derivatives not designated as
hedging instruments

Foreign exchange contracts Other current assets and prepayments 59
150
Accounts payable and accrued liabilities (80 ) (3,581 )

Total derivative assets $ 1,742
$ 2,225
Total derivative liabilities (389 ) (3,717 )
Total net derivative asset (liabilities) $ 1,353
$ (1,492 )

The majority of the amounts included in AOCI at September 30, 2017 will be recognized in earnings within the next 12 months. No amount of ineffectiveness was recorded in earnings for these designated cash flow hedges.

The following represents the results of cash flow hedging relationships for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~:2018:



	Three Months Ended June 30,
	Derivative Gain (Loss) Recognized in AOCI (Effective Portion)						Location of Gain (Loss) (Effective Portion)	Gain (Loss) Reclassified from AOCI to Earnings (Effective Portion)
Derivative Instrument	2019			2018			Location of Gain (Loss) (Effective Portion)	2019			2018
Foreign exchange contracts	$	(320	)	$	119		Revenue	$	(36	)	$	79
							Cost of sales	29			(1		)
Interest rate swap	—			(771		)	Interest Expense	—			—
	$	(320	)	$	(652	)		$	(7	)	$	78

	Six Months Ended June 30,
	Derivative Gain (Loss) Recognized in AOCI (Effective Portion)						Location of Gain (Loss) (Effective Portion)	Gain (Loss) Reclassified from AOCI to Earnings (Effective Portion)
Derivative Instrument	2019			2018			Location of Gain (Loss) (Effective Portion)	2019			2018
Foreign exchange contracts	$	25		$	154		Revenue	$	75		$	76
							Cost of sales	45			(85		)
Interest rate swap	—			(952		)	Interest Expense	—			—
	$	25		$	(798	)		$	120		$	(9	)

Three Months Ended September 30,

Derivative Gain (Loss)
Recognized in AOCI
(Effective Portion)

Location of Gain (Loss)
(Effective Portion)

Gain (Loss) Reclassified
from AOCI to Earnings
(Effective Portion)
Derivative Instrument 2017 2016 2017 2016
Foreign exchange contracts $ (152 ) $ (158 ) Revenue $ (139 ) $ (443 )

Cost of sales (59 ) 301
Interest rate swap (229 ) (591 ) Interest Expense —
—
$ (381 ) $ (749 ) $ (198 ) $ (142 )

Nine Months Ended September 30,

Derivative Gain (Loss)
Recognized in AOCL
(Effective Portion)

Location of Gain (Loss)
(Effective Portion)

Gain (Loss) Reclassified
from AOCL to Earnings
(Effective Portion)
Derivative Instrument 2017 2016 2017 2016
Foreign exchange contracts $ (701 ) $ (114 ) Revenue $ (133 ) $ 290

Cost of sales 89
(69 )
Interest rate swap 92
(591 ) Interest Expense —
—
$ (609 ) $ (705 ) $ (44 ) $ 221

We ~~also~~ enter into foreign exchange contracts to minimize the impact of exchange rate fluctuations on short-term intercompany loans and related interest that are denominated in a foreign currency. The revaluation of ~~the~~ intercompany loans and interest and the corresponding mark-to-market adjustment on ~~the~~ derivatives are ~~both~~ recorded in earnings. ~~All outstanding contracts at~~ ~~September 30, 2017~~ ~~mature within 12 months.~~

~~PITNEY BOWES INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited;~~The table ~~amounts in thousands unless otherwise noted, except per share amounts)~~

~~The following~~below represents the ~~results~~mark-to-market adjustments of ~~our~~ non-designated derivative instruments for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~:2018. All outstanding contracts at June 30, 2019 mature within 12 months.



		Three Months Ended June 30,
		Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument	Location of Derivative Gain (Loss)	2019			2018
Foreign exchange contracts	Selling, general and administrative expense	$	(65	)	$	(14,828	)

		Six Months Ended June 30,
		Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument	Location of Derivative Gain (Loss)	2019			2018
Foreign exchange contracts	Selling, general and administrative expense	$	5,205		$	(18,396	)

Three Months Ended September 30,
Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument Location of Derivative Gain (Loss) 2017 2016
Foreign exchange contracts Selling, general and administrative expense $ (655 ) $ 1,719

Nine Months Ended September 30,
Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument Location of Derivative Gain (Loss) 2017 2016
Foreign exchange contracts Selling, general and administrative expense $ (1,716 ) $ 322

Credit-Risk-Related Contingent Features

Certain derivative instruments contain credit-risk-related contingent features that ~~would~~ require us to post collateral based on a combination of our long-term senior unsecured debt ratings and the net fair value of our derivatives. At ~~September~~June 30, ~~2017~~,2019, we ~~did not post any~~had no cash collateral ~~and the maximum amount of collateral that we would be required to post had the credit-risk-related contingent features been triggered was not significant.~~posted.

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, investment securities, accounts receivable, loan receivables, derivative instruments, accounts payable and debt. The carrying value for cash and cash equivalents, accounts receivable, loans receivable and accounts payable approximate fair value because of the short maturity of these instruments.

The fair value of our debt is estimated based on recently executed transactions and market price quotations. The inputs used to determine the fair value of our debt were classified as Level 2 in the fair value hierarchy. The carrying value and estimated fair value of our debt at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 were as follows:



	June 30, 2019		December 31, 2018
Carrying value	$	3,244,173	$	3,265,608
Fair value	$	3,101,477	$	3,003,678

September 30, 2017 December 31, 2016
Carrying value $ 4,182,928
$ 3,364,890
Fair value $ 4,185,628
$ 3,412,581

~~8. Restructuring Charges and Asset Impairments~~

~~Restructuring Charges~~

~~Activity in our restructuring reserves for the nine months ended September 30, 2017 and 2016 was as follows:~~

Severance and benefits costs
Other exit
costs
Total
Balance at January 1, 2017 $ 28,376
$ 281
$ 28,657
Expenses, net 25,225
1,712
26,937
Cash payments (29,259 ) (717 ) (29,976 )
Balance at September 30, 2017 $ 24,342
$ 1,276
$ 25,618

Balance at January 1, 2016 $ 43,700
$ 3,722
$ 47,422
Expenses, net 36,791
1,660
38,451
Cash payments (47,241 ) (3,920 ) (51,161 )
Balance at September 30, 2016 $ 33,250
$ 1,462
$ 34,712

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

10. Restructuring Charges and Asset Impairments

Restructuring Charges

Activity in our restructuring reserves for the six months ended June 30, 2019 and 2018 was as follows:



	Severance and benefits costs			Other exit costs			Total
Balance at January 1, 2019	$	13,641		$	1,808		$	15,449
Expenses, net	8,379			707			9,086
Cash payments	(12,064		)	(2,219		)	(14,283		)
Balance at June 30, 2019	$	9,956		$	296		$	10,252

Balance at January 1, 2018	$	42,151		$	1,569		$	43,720
Expenses, net	7,990			4,417			12,407
Cash payments	(26,942		)	(586		)	(27,528		)
Balance at June 30, 2018	$	23,199		$	5,400		$	28,599

The majority of the remaining restructuring reserves are expected to be paid over the next 12 to 24 ~~months; however, due to certain international labor laws and long-term lease agreements, some payments will extend beyond 24~~ months. ~~We expect to fund these payments from cash flows from operations.~~

Asset Impairments

~~During~~Asset impairment charges were $1 million for the ~~nine~~three and six months ended ~~September~~June 30, 2017, we recorded asset impairment charges of $4 million. For the nine months ended September 30, 2016, asset impairment charges totaled $9 million and consisted primarily of a loss of $5 million on the sale of a facility and an impairment charge of $3 million relating to a building.2019.

9.11. Debt

Total debt at ~~September~~June 30, ~~2017~~2019 and December 31, ~~2016~~2018 consisted of the following:



	Interest rate	June 30, 2019		December 31, 2018
Notes due September 2020	3.875%	$	300,000	$	300,000
Notes due October 2021	3.875%	600,000		600,000
Notes due May 2022	4.625%	400,000		400,000
Notes due April 2023	4.95%	400,000		400,000
Notes due March 2024	4.625%	500,000		500,000
Notes due January 2037	5.25%	35,841		35,841
Notes due March 2043	6.7%	425,000		425,000
Term loans	Variable	605,000		630,000
Other debt		5,210		5,297
Principal amount		3,271,051		3,296,138
Less: unamortized costs, net		26,878		30,530
Total debt		3,244,173		3,265,608
Less: current portion long-term debt		214,927		199,535
Long-term debt		$	3,029,246	$	3,066,073

Interest rate September 30, 2017 December 31, 2016
Notes due September 2017 5.75% $ —
$ 385,109
Notes due March 2018 5.6% 250,000
250,000
Notes due May 2018 4.75% 350,000
350,000
Notes due March 2019 6.25% 300,000
300,000
Notes due September 2020 3.625% 300,000
—
Notes due October 2021 3.375% 600,000
600,000
Notes due May 2022 3.875% 400,000
—
Notes due April 2023 4.7% 400,000
—
Notes due March 2024 4.625% 500,000
500,000
Notes due January 2037 5.25% 35,841
115,041
Notes due March 2043 6.7% 425,000
425,000
Term loans Variable 650,000
450,000
Other debt 5,586
5,677
Principal amount 4,216,427
3,380,827
Less: unamortized debt discount and issuance costs 38,911
28,796
Plus: unamortized interest rate swap proceeds 5,412
12,859
Total debt 4,182,928
3,364,890
Less: current portion long-term debt 620,256
614,485
Long-term debt $ 3,562,672
$ 2,750,405

In September 2017, we issued $700 million of fixed rate notes and borrowed an additional $350 million under new term loan agreements. The fixed rate notes consisted of $300 million of 3.625% Notes due September 2020 and $400 million of 4.7% Notes due April 2023. Interest is payable semi-annually and is subject to adjustment from time to time based on changes in our credit ratings. Both of these notes may be redeemed, at our option, in whole or in part, at any time at par plus accrued, unpaid interest and a make-whole amount, if any.

The new term loans consist of a $200 million term loan that bears interest at the applicable Eurodollar Rate plus 1.5% and matures in September 2020 and a $150 million term loan that bears interest at the applicable Eurodollar Rate plus 1.125% and matures in August 2018, but includes an option to extend the maturity by one year. For the third quarter of 2017, the effective interest rate for the $200 million term loan was 3.1% and the effective interest rate for the $150 million term loan was 2.4%. The interest rates on ~~these term loans~~certain notes are ~~subject to adjustment from time to time based on changes in our credit ratings.~~

~~In May 2017, we issued $400 million of 3.875% Notes. Interest is payable semi-annually and is~~ subject to adjustment based on changes in our credit ratings. ~~The notes mature in~~In April 2019, Moody's lowered our corporate credit rating from Ba1 to Ba2. As a result, the interest rate on the May 2022 ~~but may be redeemed, at~~notes increased 0.25% in the quarter and the interest rates on the September 2020 notes, October 2021 notes and April 2023 notes will increase 0.25% effective after the next interest payment date.

During the first half of 2019, we repaid $25 million of principal related to our ~~option, in whole or in part, at any time at par plus accrued, unpaid interest and a make-whole amount, if any.~~term loans.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

The net proceeds from these borrowings were used to repay a $150 million term loan in June 2017 and $385 million of 5.75% Notes in September 2017. Additionally, in October 2017, we redeemed $350 million of 4.75% Notes that were due in May 2018 and funded the Newgistics acquisition (see Note 6).

~~In January 2017, bondholders of the 5.25% Notes due 2037 caused us to redeem $79 million of the debt outstanding.~~

~~10.~~12. Pensions and Other Benefit Programs

The components of net periodic benefit (income) cost ~~(income)~~ were as follows:



	Defined Benefit Pension Plans												Nonpension Postretirement Benefit Plans
	United States						Foreign
	Three Months Ended						Three Months Ended						Three Months Ended
	June 30,						June 30,						June 30,
	2019			2018			2019			2018			2019		2018
Service cost	$	21		$	9		$	388		$	575		$	228	$	405
Interest cost	15,708			15,108			4,308			4,591			1,637		1,607
Expected return on plan assets	(23,184		)	(25,119		)	(8,505		)	(9,118		)	—		—
Amortization of transition credit	—			—			(1		)	(2		)	—		—
Amortization of prior service (credit) cost	(15		)	(15		)	60			(18		)	81		88
Amortization of net actuarial loss	6,037			7,628			1,572			1,870			503		881
Settlement ⁽¹⁾	801			—			397			—			—		—
Net periodic benefit (income) cost	$	(632	)	$	(2,389	)	$	(1,781	)	$	(2,102	)	$	2,449	$	2,981
Contributions to benefit plans	$	2,423		$	1,906		$	878		$	769		$	4,457	$	4,316

	Defined Benefit Pension Plans												Nonpension Postretirement Benefit Plans
	United States						Foreign
	Six Months Ended						Six Months Ended						Six Months Ended
	June 30,						June 30,						June 30,
	2019			2018			2019			2018			2019		2018
Service cost	$	42		$	46		$	772		$	1,164		$	483	$	811
Interest cost	31,586			30,724			8,796			9,287			3,291		3,210
Expected return on plan assets	(46,363		)	(50,543		)	(17,269		)	(18,304		)	—		—
Amortization of transition credit	—			—			(3		)	(3		)	—		—
Amortization of prior service (credit) cost	(30		)	(30		)	123			(37		)	161		176
Amortization of net actuarial loss	13,073			15,704			3,184			3,783			1,014		1,815
Settlement ⁽¹⁾	801			—			397			—			—		—
Net periodic benefit (income) cost	$	(891	)	$	(4,099	)	$	(4,000	)	$	(4,110	)	$	4,949	$	6,012
Contributions to benefit plans	$	4,051		$	3,194		$	9,088		$	9,979		$	9,213	$	9,111

Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans
United States Foreign
Three Months Ended Three Months Ended Three Months Ended
September 30, September 30, September 30,
2017 2016 2017 2016 2017 2016
Service cost $ 34
$ 26
$ 587
$ 549
$ 438
$ 512
Interest cost 17,122
18,452
4,809
5,366
1,780
1,994
Expected return on plan assets (24,369 ) (25,480 ) (8,214 ) (7,976 ) —
—
Amortization of transition credit —
—
(2 ) (2 ) —
—
Amortization of prior service (credit) cost (15 ) (15 ) (18 ) (19 ) 74
74
Amortization of net actuarial loss 7,229
6,779
2,055
1,302
905
904
Settlement ⁽¹⁾
—
183
—
—
—
—
Net periodic benefit cost (income) $ 1
$ (55 ) $ (783 ) $ (780 ) $ 3,197
$ 3,484

Defined Benefit Pension Plans Nonpension Postretirement Benefit Plans
United States Foreign
Nine Months Ended Nine Months Ended Nine Months Ended
September 30, September 30, September 30,
2017 2016 2017 2016 2017 2016
Service cost $ 98
$ 80
$ 1,688
$ 1,622
$ 1,290
$ 1,534
Interest cost 51,488
55,354
13,993
16,773
5,321
5,977
Expected return on plan assets (73,287 ) (76,439 ) (23,956 ) (25,029 ) —
—
Amortization of transition credit —
—
(6 ) (6 ) —
—
Amortization of prior service (credit) cost (45 ) (45 ) (53 ) (54 ) 223
222
Amortization of net actuarial loss 21,725
20,336
5,981
4,018
2,693
2,711
Settlement ⁽¹⁾
—
1,971
—
—
—
—
Net periodic benefit cost (income) $ (21 ) $ 1,257
$ (2,353 ) $ (2,676 ) $ 9,527
$ 10,444

^{(1) Included}Approximately $0.7 million and $0.3 million of total settlement charges were recorded in restructuring charges and ~~asset impairments, net in~~discontinued operations, respectively, for the ~~Condensed Consolidated Statements~~three and six months ended June 30, 2019.

13. Income Taxes

The effective tax rate for the three months ended June 30, 2019 and 2018 was 11.9% and 13.6%, respectively. These rates include benefits from the resolution of ~~Income.~~

~~Through September 30, 2017 and 2016, contributions to our U.S. pension plans were $5~~certain tax examinations of $4 million and $8$3 million, ~~respectively,~~respectively.

The effective tax rate for the six months ended June 30, 2019 and ~~contributions~~2018 was 30.1% and 20.8%, respectively. The effective tax rate for the six months ended June 30, 2019 includes a $2 million tax on the $18 million book loss from Market Exits, primarily due to ~~our foreign plans were $11~~nondeductible basis differences. The effective tax rate for each of the six months ended June 30, 2019 and 2018 includes a benefit of $6 million from the resolution of certain tax examinations and ~~$41~~a charge of $2 million ~~respectively. Nonpension postretirement benefit plan contributions were $13~~from the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock.

At December 31, 2018, we had a deferred tax asset valuation allowance of $142 million. It is reasonably possible that within the next 12 months, there may be sufficient positive evidence to release approximately $20 million ~~and $14 million through September 30, 2017 and September 30, 2016, respectively.~~of the valuation allowance. The release of this allowance would result in a decrease to income tax expense.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

~~11. Income Taxes~~

The effective tax rate for the three months ended September 30, 2017 and 2016 was 23.5% and 24.8%, respectively, and the effective tax rate for the nine months ended September 30, 2017 and 2016 was 23.9% and 32.7%, respectively. The effective tax rate for the nine months ended September 30, 2017 and 2016 includes a $4 million and $3 million charge, respectively, from the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock. The effective tax rate for the three and nine months ended September 30, 2017 also includes a $6 million and $20 million benefit, respectively, from the resolution of certain tax examinations. Additionally, the effective tax rate for both the three and nine months ended September 30, 2016 include a $15 million benefit from the resolution of certain tax examinations and a $5 million charge from the establishment of a valuation allowance on tax attribute carryovers.

As is the case with other large corporations, our tax returns are examined ~~each year~~ by tax authorities in the U.S. and other global taxing jurisdictions in which we have operations. As a result, it is reasonably possible that the amount of ~~our~~ unrecognized tax benefits will decrease in the next 12 months, and ~~we expect~~ this ~~change~~decrease could be up to ~~15%~~30% of our unrecognized tax benefits.

The ~~IRS~~Internal Revenue Service (IRS) examinations of our consolidated U.S. income tax returns for tax years prior to ~~2012~~2017 are closed to audit; however, various ~~post-2006~~post-2011 U.S. state and local tax returns are still subject to examination. In Canada, the examination of our tax filings prior to ~~2012~~2014 are closed to ~~audit, except for the pending application of legal principles to specific issues arising in earlier years.~~audit. Other significant jurisdictions include France ~~which is closed to audit~~(closed through ~~the end of 2012,~~2014), Germany ~~which is closed to audit~~(closed through ~~the end of 2011~~2016) and the ~~UK, which, except~~U.K. (except for an item under appeal, is closed ~~to audit~~ through ~~the end of 2011.~~2016). We also have other less significant tax filings currently subject to examination.

~~12.~~14. Commitments and Contingencies

In the ordinary course of business, we are routinely defendants in, or party to, a number of pending and threatened legal actions. These may involve litigation by or against us relating to, among other things, contractual rights under vendor, insurance or other contracts; intellectual property or patent rights; equipment, service, payment or other disputes with clients; or disputes with employees. Some of these actions may be brought as a purported class action on behalf of a purported class of employees, customers or others. In management's opinion, the potential liability, if any, that may result from these actions, either individually or collectively, is not reasonably expected to have a material effect on our financial position, results of operations or cash ~~flows.~~flows as of June 30, 2019. However, as litigation is inherently unpredictable, there can be no assurances in this regard.

In August 2018, the Company, certain of its directors, officers and several banks who served as underwriters, were named as defendants in City of Livonia Retiree Health and Disability Benefits Plan v. Pitney Bowes Inc. et al., a putative class action lawsuit filed in Connecticut state court. The complaint asserts claims under the Securities Act of 1933, as amended, on behalf of those who purchased notes issued by the Company in connection with a September 13, 2017 offering, alleging, among other things, that the Company failed to make certain disclosures relating to components of its third quarter 2017 performance at the time of the notes offering. The complaint seeks compensatory damages and other relief. In addition, in December 2018 and then in February 2019, certain of the Company’s officers and directors were named as defendants in two virtually identical derivative actions purportedly brought on behalf of the Company, Clem v. Lautenbach et al. and Devolin v. Lautenbach et al. These two actions, both filed by the same counsel in Connecticut state court, allege, among other things, breaches of fiduciary duty relating to these same disclosures, and seek compensatory damages and other relief derivatively for the benefit of the Company. Although litigation outcomes are inherently unpredictable, we believe these matters are without merit and intend to defend them vigorously. A reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time.

~~13. Stockholders’ Equity (Deficit)~~15. Leased Assets and Liabilities

~~Changes in stockholders’ equity (deficit)~~We lease real estate and equipment under operating and finance lease agreements. Our leases have terms of up to 15 years, some of which may include the option to extend the lease for up to 5 years. At lease commencement, we record a lease liability and corresponding right-of-use asset. Lease liabilities represent the ~~nine months ended September 30, 2017~~present value of our future lease payments over the expected lease term, which includes options to extend or terminate the lease when it is reasonably certain those options will be exercised. Lease payments include fixed payments and ~~2016~~ ~~were~~variable payments that are tied to an index. Variable payments not tied to an index are excluded from the right-of-use asset and lease liability and primarily include common area maintenance charges, property taxes, insurance and mileage. The present value of our lease liability is determined using our incremental borrowing rate at lease inception. Information regarding our operating and financing leases are as follows:



Leases	Balance Sheet Location	June 30, 2019		December 31, 2018
Assets
Operating	Operating lease assets	$	180,983	$	156,788
Finance	Property, plant and equipment, net	11,501		10,683
Total leased assets		$	192,484	$	167,471

Liabilities
Operating	Current operating lease liabilities	$	34,612	$	37,208
	Noncurrent operating lease liabilities	154,648		127,237
Finance	Accounts payable and accrued liabilities	2,809		2,708
	Other noncurrent liabilities	7,739		7,054
Total lease liabilities		$	199,808	$	174,207

Preferred
stock

Preference
stock
Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Total equity (deficit)
Balance at January 1, 2017 $ 1
$ 483
$ 323,338
$ 148,125
$ 5,107,734
$ (940,133 ) $ (4,743,208 ) $ (103,660 )
Net income —
—
—
—
171,392
—
—
171,392
Other comprehensive income —
—
—
—
—
121,649
—
121,649
Dividends paid —
—
—
—
(104,524 ) —
—
(104,524 )
Issuance of common stock —
—
—
(32,538 ) —
—
30,202
(2,336 )
Conversion to common stock —
(26 ) —
(505 ) —
—
531
—
Stock-based compensation expense —
—
—
18,312
—
—
—
18,312
Balance at September 30, 2017 $ 1
$ 457
$ 323,338
$ 133,394
$ 5,174,602
$ (818,484 ) $ (4,712,475 ) $ 100,833

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)



	Three Months Ended June 30,						Six Months Ended June 30,
Lease Cost	2019			2018			2019			2018
Operating lease expense	$	11,695		$	11,145		$	23,786		$	23,422
Finance lease expense
Amortization of leased assets	811			640			1,691			1,242
Interest on lease liabilities	176			125			348			243
Variable lease expense	7,988			7,952			13,852			13,094
Sublease income	(679		)	(203		)	(1,345		)	(452		)
Total expense	$	19,991		$	19,659		$	38,332		$	37,549

Preferred
stock

Preference
stock
Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Total equity
Balance at January 1, 2016 $ 1
$ 505
$ 323,338
$ 161,280
$ 5,155,537
$ (888,635 ) $ (4,573,305 ) $ 178,721
Net income —
—
—
—
177,148
—
—
177,148
Other comprehensive loss —
—
—
—
—
62,673
—
62,673
Dividends paid —
—
—
—
(105,791 ) —
—
(105,791 )
Issuance of common stock —
—
—
(27,251 ) —
—
25,930
(1,321 )
Conversion to common stock —
(16 ) —
(321 ) —
—
337
—
Stock-based compensation expense —
—
—
16,289
—
—
—
16,289
Repurchase of common stock —
�� —
—
—
—
—
(197,267 ) (197,267 )
Balance at September 30, 2016 $ 1
$ 489
$ 323,338
$ 149,997
$ 5,226,894
$ (825,962 ) $ (4,744,305 ) $ 130,452

Operating lease expense includes immaterial amounts related to leases with terms of 12 months or less.



Future Lease Payments	Operating Leases		Finance Leases		Total
Remaining for year ending December 31, 2019	$	22,257	$	1,803	$	24,060
Year ending December 31, 2020	42,878		3,105		45,983
Year ending December 31, 2021	35,937		2,712		38,649
Year ending December 31, 2022	27,637		2,162		29,799
Year ending December 31, 2023	21,032		1,518		22,550
Thereafter	89,177		813		89,990
Total	238,918		12,113		251,031
Less: present value discount	49,658		1,565		51,223
Lease liability	$	189,260	$	10,548	$	199,808

Operating leases exclude $28 million of minimum lease payments for leases signed but not yet commenced at June 30, 2019.



Lease Term and Discount Rate	June 30, 2019	December 31, 2018
Weighted-average remaining lease term
Operating leases	7.5 years	5.9 years
Finance leases	4.1 years	3.8 years
Weighted-average discount rate
Operating leases	5.8%	4.7%
Finance leases	6.6%	6.2%



	Three Months Ended June 30,				Six Months Ended June 30,
Cash Flow Information	2019		2018		2019		2018
Operating cash outflows - operating leases	$	11,073	$	10,987	$	22,870	$	22,738
Operating cash outflows - finance leases	$	176	$	125	$	348	$	243
Financing cash outflows - finance leases	$	775	$	592	$	1,520	$	1,156

Leased assets obtained in exchange for new lease obligations
Operating leases	$	40,907	$	3,998	$	49,060	$	6,994
Finance leases	$	430	$	88	$	2,103	$	1,160

~~14. Accumulated Other Comprehensive Income~~

~~Reclassifications out of AOCI for the three and nine months ended September 30, 2017 and 2016 were as follows:~~

Amount Reclassified from AOCI (a)
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Gains (losses) on cash flow hedges
Revenue $ (139 ) $ 443
$ (133 ) $ (290 )
Cost of sales (59 ) (301 ) 89
69
Interest expense, net (507 ) (507 ) (1,521 ) (1,521 )
Total before tax (705 ) (365 ) (1,565 ) (1,742 )
Benefit for income tax (274 ) (144 ) (610 ) (679 )
Net of tax $ (431 ) $ (221 ) $ (955 ) $ (1,063 )

Gains (losses) on available for sale securities
Interest expense, net $ (298 ) $ (1,125 ) $ (524 ) $ (1,126 )
Benefit provision for income tax (110 ) (433 ) (194 ) (433 )
Net of tax $ (188 ) $ (692 ) $ (330 ) $ (693 )

Pension and Postretirement Benefit Plans (b)
Transition credit $ 2
$ 2
$ 6
$ 6
Prior service costs (41 ) (40 ) (125 ) (123 )
Actuarial losses (10,189 ) (9,168 ) (30,399 ) (29,036 )
Total before tax (10,228 ) (9,206 ) (30,518 ) (29,153 )
Benefit from income tax (3,484 ) (3,243 ) (10,440 ) (10,362 )
Net of tax $ (6,744 ) $ (5,963 ) $ (20,078 ) $ (18,791 )

~~(a) Amounts in parentheses indicate reductions to income and increases to other comprehensive income (loss).~~


~~(b)~~	Reclassified from accumulated other comprehensive loss into selling, general and administrative expenses. These amounts are included in the computation of net periodic costs (see Note 10 for additional details).

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

16. Stockholders’ Equity

Changes in stockholders’ equity for the three months ended June 30, 2019 and 2018 were as follows:



	Preferred stock			Preference stock			Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Treasury stock			Total equity
Balance at April 1, 2019	$	1		$	388		$	323,338	$	109,166		$	5,267,615		$	(918,072	)	$	(4,696,080	)	$	86,356
Net income	—			—			—		—			23,697			—			—			23,697
Other comprehensive income	—			—			—		—			—			10,394			—			10,394
Dividends paid ($0.05 per common share)	—			—			—		—			(8,938		)	—			—			(8,938		)
Issuance of common stock	—			—			—		(3,807		)	—			—			4,024			217
Conversion to common stock	—			(122		)	—		(2,389		)	—			—			2,511			—
Redemption of preferred/preference stock	(1		)	(266		)	—		(10		)	—			—			—			(277		)
Stock-based compensation expense	—			—			—		2,381			—			—			—			2,381
Repurchase of common stock	—			—			—		—			—			—			(60,858		)	(60,858		)
Balance at June 30, 2019	$	—		$	—		$	323,338	$	105,341		$	5,282,374		$	(907,678	)	$	(4,750,403	)	$	52,972



	Preferred stock		Preference stock			Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Treasury stock			Total equity
Balance at April 1, 2018	$	1	$	422		$	323,338	$	119,647		$	5,087,090		$	(775,190	)	$	(4,692,394	)	$	62,914
Net income	—		—			—		—			51,595			—			—			51,595
Other comprehensive loss	—		—			—		—			—			(36,614		)	—			(36,614		)
Dividends paid ($0.1875 per common share)	—		—			—		—			(35,097		)	—			—			(35,097		)
Issuance of common stock	—		—			—		(2,660		)	—			—			2,943			283
Conversion to common stock	—		(7		)	—		(135		)	—			—			142			—
Stock-based compensation expense	—		—			—		5,880			—			—			—			5,880
Balance at June 30, 2018	$	1	$	415		$	323,338	$	122,732		$	5,103,588		$	(811,804	)	$	(4,689,309	)	$	48,961

Changes in stockholders’ equity for the six months ended June 30, 2019 and 2018 were as follows:



	Preferred stock			Preference stock			Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Treasury stock			Total equity
Balance at January 1, 2019	$	1		$	396		$	323,338	$	121,475		$	5,279,682		$	(948,961	)	$	(4,674,089	)	$	101,842
Net income	—			—			—		—			21,038			—			—			21,038
Other comprehensive income	—			—			—		—			—			41,283			—			41,283
Dividends paid ($0.10 per common share)	—			—			—		—			(18,346		)	—			—			(18,346		)
Issuance of common stock	—			—			—		(22,731		)	—			—			20,998			(1,733		)
Conversion to common stock	—			(130		)	—		(2,558		)	—			—			2,688			—
Redemption of preferred/preference stock	(1		)	(266		)	—		(10		)	—			—			—			(277		)
Stock-based compensation expense	—			—			—		9,165			—			—			—			9,165
Repurchase of common stock	—			—			—		—			—			—			(100,000		)	(100,000		)
Balance at June 30, 2019	$	—		$	—		$	323,338	$	105,341		$	5,282,374		$	(907,678	)	$	(4,750,403	)	$	52,972

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)



	Preferred stock		Preference stock			Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Treasury stock			Total equity
Balance at January 1, 2018	$	1	$	441		$	323,338	$	138,367		$	5,074,343		$	(794,940	)	$	(4,710,997	)	$	30,553
Cumulative effect of accounting change	—		—			—		—			(12,207		)	—			—			(12,207		)
Net income	—		—			—		—			111,565			—			—			111,565
Other comprehensive loss	—		—			—		—			—			(16,864		)	—			(16,864		)
Dividends paid ($0.375 per common share)	—		—			—		—			(70,113		)	—			—			(70,113		)
Issuance of common stock	—		—			—		(24,267		)	—			—			21,141			(3,126		)
Conversion to common stock	—		(26		)	—		(521		)	—			—			547			—
Stock-based compensation expense	—		—			—		9,153			—			—			—			9,153
Balance at June 30, 2018	$	1	$	415		$	323,338	$	122,732		$	5,103,588		$	(811,804	)	$	(4,689,309	)	$	48,961

17. Accumulated Other Comprehensive Income

Reclassifications out of AOCI for the three and six months ended June 30, 2019 and 2018 were as follows:



	Amount Reclassified from AOCI⁽¹⁾
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(Losses) gains on cash flow hedges
Revenue	$	(36	)	$	79		$	75		$	76
Cost of sales	29			(1		)	45			(85		)
Interest expense, net	—			(507		)	—			(1,014		)
Total before tax	(7		)	(429		)	120			(1,023		)
Income tax benefit (provision)	1			110			(31		)	261
Net of tax	$	(6	)	$	(319	)	$	89		$	(762	)

(Losses) gains on available for sale securities
Interest expense, net	$	(81	)	$	214		$	(104	)	$	190
Income tax benefit (provision)	21			(54		)	27			(48		)
Net of tax	$	(60	)	$	160		$	(77	)	$	142

Pension and Postretirement Benefit Plans ⁽²⁾
Transition credit	$	1		$	2		$	3		$	3
Prior service costs	(126		)	(55		)	(254		)	(109		)
Actuarial losses	(8,112		)	(10,379		)	(17,271		)	(21,302		)
Settlements	(1,198		)	—			(1,198		)	—
Total before tax	(9,435		)	(10,432		)	(18,720		)	(21,408		)
Income tax benefit	2,124			2,564			4,773			5,368
Net of tax	$	(7,311	)	$	(7,868	)	$	(13,947	)	$	(16,040	)


⁽¹⁾	Amounts in parentheses indicate reductions to income and increases to other comprehensive income.


⁽²⁾	Reclassified from AOCI into other components of net pension and postretirement cost (see Note 12 for additional details).

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Changes in AOCI for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 were as follows:

Cash flow hedges Available for sale securities Pension and postretirement benefit plans Foreign currency adjustments Total
Balance at January 1, 2017 $ (1,485 ) $ 120
$ (787,813 ) $ (150,955 ) $ (940,133 )
Other comprehensive income (loss) before reclassifications (a) (376 ) 1,921
(1,482 ) 100,223
100,286
Reclassifications into earnings (a), (b) 955
330
20,078
—
21,363
Net other comprehensive income 579
2,251
18,596
100,223
121,649
Balance at September 30, 2017 $ (906 ) $ 2,371
$ (769,217 ) $ (50,732 ) $ (818,484 )



	Cash flow hedges			Available for sale securities			Pension and postretirement benefit plans			Foreign currency adjustments			Total
Balance at January 1, 2019	$	191		$	(3,061	)	$	(846,461	)	$	(99,630	)	$	(948,961	)
Other comprehensive income before reclassifications ⁽¹⁾	18			5,952			—			21,378			27,348
Reclassifications into earnings ^{(1), (2)}	(89		)	77			13,947			—			13,935
Net other comprehensive income	(71		)	6,029			13,947			21,378			41,283
Balance at June 30, 2019	$	120		$	2,968		$	(832,514	)	$	(78,252	)	$	(907,678	)

Cash flow hedges Available for sale securities Pension and postretirement benefit plans Foreign currency adjustments Total
Balance at January 1, 2016 $ (3,912 ) $ 536
$ (738,768 ) $ (146,491 ) $ (888,635 )
Other comprehensive (loss) income before reclassifications (a) (705 ) 6,798
(1,230 ) 37,263
42,126
Reclassifications into earnings (a), (b) 1,063
693
18,791
—
20,547
Net other comprehensive income 358
7,491
17,561
37,263
62,673
Balance at September 30, 2016 $ (3,554 ) $ 8,027
$ (721,207 ) $ (109,228 ) $ (825,962 )



	Cash flow hedges			Available for sale securities			Pension and postretirement benefit plans			Foreign currency adjustments			Total
Balance at January 1, 2018	$	(406	)	$	1,597		$	(748,800	)	$	(47,331	)	$	(794,940	)
Other comprehensive income (loss) before reclassifications ⁽¹⁾	(511		)	(5,154		)	—			(27,859		)	(33,524		)
Reclassifications into earnings ^{(1), (2)}	762			(142		)	16,040			—			16,660
Net other comprehensive income (loss)	251			(5,296		)	16,040			(27,859		)	(16,864		)
Balance at June 30, 2018	$	(155	)	$	(3,699	)	$	(732,760	)	$	(75,190	)	$	(811,804	)

~~(a)~~⁽¹⁾ Amounts are net of tax. Amounts in parentheses indicate debits to AOCI.

~~(b)~~⁽²⁾ See table above for additional details of these reclassifications.

Item 2: Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

Forward-Looking Statements

This ~~Management’s~~Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains statements that are forward-looking. We want to caution readers that any forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (Securities Act) and Section 21E of the Securities Exchange Act of 1934 (Exchange Act) may change based on various factors. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, and actual results could differ materially. Words such as "estimate," "target," "project," "plan," "believe," "expect," "anticipate," "intend" and similar expressions may identify such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or ~~otherwise.~~otherwise, except as required by law. Forward-looking statements in this Form 10-Q speak only as of the date hereof, and forward-looking statements in documents attached that are incorporated by reference speak only as of the date of those documents.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission. Factors which could cause future financial performance to differ materially from the expectations as expressed in any forward-looking statement made by or on our behalf include, without limitation:

the announcement that the Board of Directors of the Company is conducting a review of strategic alternatives and the potential impact of such announcement on the Company's current or potential customers, partners and personnel

the cost of the review process with respect to strategic alternatives and the disruption the process may have on the Company's operations, including the diversion of the attention of the Company's management and employees

declining physical mail volumes

changes in, or loss of, our contractual relationships with the U.S. Postal Service (USPS) or posts in other major markets

changes in postal regulations

competitive factors, including pricing ~~pressures;~~pressures, technological ~~developments;~~developments and the introduction of new products and services by competitors ~~and fuel prices~~

the United Kingdom's potential exit from the European Union (Brexit)

our success in developing and marketing new products and services ~~including digital-based products~~ and ~~services,~~ obtaining regulatory ~~approval~~approvals, if required

changes in banking regulations or the loss of our Industrial Bank charter

changes in labor conditions and transportation costs

macroeconomic factors, including global and regional business conditions that adversely impact customer demand, foreign currency exchange rates and interest rates

changes in global political conditions and international trade policies, including the ~~market’s acceptance~~imposition or expansion of ~~these new products and services~~

our ability to fully utilize the enterprise business platform in North America, implemented in 2016, and successfully deploy it in major international markets without significant disruption to existing operationstrade tariffs

the continued availability and security of key information technology systems and the cost to comply with information security requirements and privacy laws

a breach of security, including a ~~cyberattack~~cyber-attack or other comparable event

third-party suppliers' ability to provide products and services required by our clients

our success at managing the relationships with outsource providers, including the costs of outsourcing functions and operations

capital market disruptions or credit rating downgrades that adversely impact our ability to access capital markets at reasonable costs

~~changes in postal or banking regulations~~our success at managing customer credit risk

integrating newly acquired businesses, including operations and product and service offerings

our ability to continue to grow volumes to gain additional economies of scale

the loss of some of our larger 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~~

~~third-party suppliers' ability to provide product components, assemblies or inventories~~

our ~~success at managing the relationships with our outsource providers, including the costs of outsourcing functions and operations not central to our business~~Commerce Services group

intellectual property infringement claims

~~our success at managing customer credit risk~~

~~significant changes in pension, health care and retiree medical costs~~


•	significant changes in pension, health care and retiree medical costs

income tax adjustments or other regulatory levies ~~for prior audit years~~from tax audits and changes in tax laws, rulings or regulations

~~a disruption of our businesses due to changes in international or national political conditions, including~~ the use of the ~~mail~~postal system for transmitting harmful biological agents, illegal substances or other terrorist attacks

acts of nature

Overview

Effective January 1, 2019, we adopted Accounting Standards Codification 842, Leases, using the modified retrospective transition approach of applying the standard at the beginning of the earliest comparative period presented in the financial statements. Accordingly, prior period financial results have been recast (see Note 1).

We ~~made progress against~~continue our ~~strategic initiatives~~transformation to ~~stabilize~~higher growth markets that align with our focus on reducing the complexity of mailing and ~~reinvent our mail business, drive operational excellence~~shipping. Commerce Services was the largest contributor of revenue and ~~grow our business through digital commerce. We invested in new product development~~accounted for 48% of revenue for the current quarter compared to ~~increase our digital and web-enabled capabilities, bring our digital capabilities to market and better serve our clients.~~42% from the prior year period.

In ~~Small~~January 2019, we sold the direct operations and ~~Medium Business (SMB) Solutions, late~~moved to a dealer model in six smaller markets within the ~~third quarter~~International Mailing segment (Market Exits). We recorded a pre-tax loss on the sale of ~~2017, we introduced~~$18 million, primarily due to the SendPro C-series in the U.S. This product leverages the latest cloud technology to securely deliver a digital multi-carrier shipping platform, as well as mailing functionality. The SendPro C-series enables officeswrite-off of all sizes to select the best sending option for parcels, letters and flats, delivering potential savings across carriers, and providing full package tracking capabilities. The introduction of the SendPro C-series was a significant step in our plan to stabilize and reinvent our mail business.

~~In Enterprise Business Solutions (EBS), we made investments to expand our Presort Services parcel sortation services and our network.~~

In Digital Commerce Solutions (DCS), we invested in our products and capabilities to bring innovation to our customers. Within Software Solutions, we saw growth in our indirect channel, both in the number of partners in the channel and the revenue generated by these partners. Within Global Ecommerce, we invested in our cross-border solutions, domestic shipping and carrier services capabilities. Our domestic shipping solutions include end-to-end carrier services enabled by our shipping APIs. Shipping APIs allow our clients to integrate shipping functionality into their website or business system. During the third quarter, we added new shipping API features; however, we experienced some stability issues which delayed client adoption.cumulative translation adjustments.

Financial Results Summary - Three Months Ended ~~September~~June 30:

2017 2016 Change
Revenue $ 842,820
$ 839,031
— %
Income from continuing operations $ 57,358
$ 70,396
(19 )%
Loss from discontinued operations, net of tax $ —
$ (291 ) 100 %
Net income $ 57,358
$ 70,105
(18 )%
Earnings per share from continuing operations - diluted $ 0.31
$ 0.35
(11 )%



	2019		2018		Change
Revenue	$	860,779	$	865,240	(1)%
Segment earnings before interest and taxes (EBIT)	$	126,626	$	158,235	(20)%
Income from continuing operations	$	30,278	$	50,387	(40)%
Diluted earnings per share - continuing operations	$	0.17	$	0.27	(37)%

~~Revenue~~

Revenue ~~was flat.~~

~~The results reflect~~decreased 1% from the prior year period; however, this included a 2% unfavorable impact from Market Exits and an additional 1% unfavorable impact from foreign currency. Software revenue declined 21% in the quarter due to a lower level of license renewals. Supplies revenue declined 16% due to a worldwide decline in our mailing business. Business services revenue increased 13% due to growth in ~~business services~~Commerce Services, partially offsetting these declines.

Commerce Services revenue grew 13%, driven by growth of 18% in Global Ecommerce and ~~software revenue~~4% in Presort Services. Small and ~~declines in equipment sales, financing, support services, supplies and rentals revenues.~~

~~SMB~~Medium Business (SMB) Solutions revenue declined ~~7% as reported and~~ 8% ~~on a constant currency basis.~~, with North America Mailing declining 5% and International Mailing declining 20%. Market Exits and currency adversely impacted International Mailing revenue by 12% and 5%, respectively. Software Solutions revenue declined 9%21%.

Segment EBIT declined 20% from the prior year period as Software Solutions EBIT declined 89%, primarily due to a lower level of license renewals. Within Commerce Services, Global Ecommerce reported an EBIT loss of $16 million compared to a loss of $6 million in the prior year, driven by a shift in the mix of business to faster growing, lower margin services and investments in market growth opportunities. Presort EBIT increased 23%, primarily due to higher volumes and revenue per piece improvement. SMB EBIT declined 6% due to the decline in ~~equipment sales~~revenue and ~~declines in recurring revenue streams. International Mailing revenue~~impact of Market Exits.

Income from continuing operations declined ~~3% as reported and 5% on a constant currency basis due to lower recurring revenue streams.~~

EBS revenue increased 1%. Presort Services revenue grew 4% driven by higher standard mail and parcel volumes processed and higher revenue per piece. Production Mail revenue declined 2% as reported and 3% on a constant currency basis driven by declines in equipment sales and supplies revenue.

DCS revenue grew 19%. Global Ecommerce revenue grew 28% driven by growth in domestic shipping and the UK outbound marketplace. Software Solutions revenue increased 12% as reported and 11% on a constant currency basis due to increased licensing revenue in North America, driven in part, by a large Location Intelligence deal in the ~~quarter.~~

~~Net Income~~

~~Net income declined 18% driven largely by~~quarter, primarily due to a decline in gross margins ~~particularly in SMB Solutions, additional investments in Global Ecommerce~~ and ~~higher interest expense~~revenue. This decline was partially offset by lower ~~restructuring charges and benefits from productivity initiatives.~~

~~Debt activity~~

In September 2017, we issued $1,050 million of new debt consisting of $700 million of fixed rate notes and $350 million of variable rate term loans. We used the proceeds from these borrowings, along with existing cash, to repay $385 million of fixed rate notes that were due in September 2017, and in October 2017, to redeem $350 million of fixed rate notes that were originally due in May 2018 and to fund the Newgistics acquisition for $475 million.

~~Financial Results Summary - Nine Months Ended September 30:~~

2017 2016 Change
Revenue $ 2,500,831
$ 2,519,506
(1 )%
Income from continuing operations $ 171,392
$ 192,880
(11 )%
Loss from discontinued operations, net of tax $ —
$ (1,951 ) 100 %
Net income $ 171,392
$ 190,929
(10 )%
Earnings per share from continuing operations - diluted $ 0.92
$ 0.94
(2 )%
Net Cash Provided by Operations $ 330,577
$ 296,359
12 %

~~Revenue~~

~~Revenue declined 1% as reported and was flat on a constant currency basis.~~

~~The results reflect growth in business services revenue and software revenue and declines in equipment sales, financing, support services, supplies and rentals revenues.~~

SMB revenue declined 5%. North America Mailing revenue declined 4% as reported and 5% on a constant currency basis driven by declines in recurring revenue streams. International Mailing revenue declined 9% as reported and 6% on a constant currency basis primarily due to lower equipment sales and recurring revenue streams.

EBS revenue was flat as reported and declined 1% on a constant currency basis. Presort Services revenue grew 4% driven by higher standard mail and parcel volumes processed and higher revenue per piece. Production Mail revenue declined 4% as reported and 3% on a constant currency basis primarily driven by lower support services revenues and equipment sales.

DCS revenue grew 11% as reported and 12% on a constant currency basis. Global Ecommerce revenue grew 20% as reported and 21% on a constant currency basis driven by growth in domestic shipping and the UK outbound marketplace. Software Solutions revenue increased 3% as reported and 4% on a constant currency basis, primarily due to an increase in licensing revenue.

~~Net Income~~

Net income declined 10% driven largely by a decline in gross margins, continued investment in our Global Ecommerce business, higher bad debt and credit losses provisions and higher interest expense, partially offset by lower restructuring chargesoperating expenses and a lower effective tax rate. ~~Additionally,~~

Financial Results Summary - Six Months Ended June 30:



	2019		2018		Change
Revenue	$	1,729,181	$	1,761,823	(2)%
Segment earnings before interest and taxes (EBIT)	$	251,187	$	324,632	(23)%
Income from continuing operations	$	28,849	$	101,870	(72)%
Diluted earnings per share - continuing operations	$	0.16	$	0.54	(70)%
Net cash provided by operations	$	86,782	$	154,493	(44)%

For the ~~first nine months of 2016 included $15 million of benefits~~year-to-date period, revenue decreased 2% from the ~~forgiveness~~prior year period, primarily due to unfavorable impacts of ~~a loan~~1% from each of currency and ~~a favorable state sales tax adjustment.~~Market Exits. Business services revenue increased 9% due to growth in Commerce Services; however, this increase was more than offset by declines in all other revenue lines due to declines in our mailing business and lower software license revenue.

Commerce Services revenue grew 9%, driven by growth of 13% in Global Ecommerce and 2% in Presort Services. SMB Solutions revenue declined 9%, with North America Mailing declining 6% and International Mailing declining 20%. Market Exits and currency adversely impacted International Mailing revenue by 10% and 5%, respectively. Software Solutions revenue declined 13%.

~~Cash Flows~~

~~Net cash provided by operations was $331~~Segment EBIT declined 23% from the prior year period. Within Commerce Services, Global Ecommerce reported an EBIT loss of $30 million compared to ~~$296~~a loss of $14 million in the prior ~~year.~~year, and Presort Services EBIT declined 23%. The ~~timing~~decline in Global Ecommerce was driven by a shift in the mix of ~~vendor payments~~business to faster growing, lower margin services, investments in market growth opportunities and higher labor, transportation and postal costs. The decline in Presort Services was primarily due to higher labor and transportation costs and lower ~~variable compensation payments~~revenue per piece. SMB EBIT declined 11% due to the decline in ~~2017 primarily drove~~revenue, increased tariff costs and a charge related to a SendPro C tablet replacement program to address an underlying battery longevity issue. Software Solutions EBIT declined 82% due to the ~~increase. During~~decline in revenue.

Income from continuing operations for the first ~~nine~~six months of ~~2017, we used cash to:~~2019 declined compared to the prior year period, primarily due to lower margins and revenue and a pre-tax loss of $18 million from Market Exits.

~~increase investments by $27 million;~~

~~pay dividends of $105 million to our common stockholders; and~~

~~invest $120 million in capital expenditures.~~

Outlook

We are taking actions that we expect will set the foundation to drive long-term value, including new client value offerings and spend optimization. We expect revenue to continue to ~~see~~grow as we transform our portfolio to growth markets.

Within Global Ecommerce, we expect continued revenue growth from our investments in the expansion of our domestic parcel business and domestic shipping solutions. We anticipate higher shipping volumes during the second half of 2019 as we enter the holiday season. We expect revenue and EBIT growth in Presort Services due to higher volumes, improving margins and operational efficiencies.

In SMB Solutions, we expect continued declines in revenue due to lower mail volumes, lower lease opportunities and a ~~shift~~declining meter population. However, we expect the magnitude of the decline to be mitigated by the introduction of new services and products, the continued success of our SendPro C product in North America, planned launches in several international markets and by identifying opportunities through natural adjacencies in the business. EBIT and equipment sales margins have been impacted by trade tariffs, and we expect these tariffs to continue to adversely impact the SMB business in the second half of the year.

We are now offering expanded third-party equipment financing alternatives, primarily to our existing SMB clients in the United States, to finance or lease other manufacturers' equipment to meet their business needs. We expect that cash flows will be negatively impacted during the year as we invest in the origination of third-party equipment leases and build a finance receivable portfolio.

Within Software Solutions, we expect continued benefits from our partner channel. We expect revenue growth will be driven by a combination of sales opportunities from customer information, location intelligence, data and customer engagement.

We expect continued progress in our ~~overall portfolio~~efforts to ~~higher growth, digital~~improve productivity and shipping solutions. However, these opportunities have different margin structures than our legacy businesses and are impacting our financial performance. We also expect the normalization of variable compensation, higher marketing and increased spending on innovation will affect full year earnings in 2017.reduce spend. Over the last five years, we have ~~developed~~transformed to a ~~simpler and~~ more digital operating model and have reduced our cost ~~structure by $300 million and~~structure. In 2017, we ~~now see an opportunity~~announced our intention to reduce ~~our overall cost structure~~gross spend by ~~an additional~~ $200 million over a 24-month period. We achieved over $150 million of this target in 2018 and expect to recognize the ~~next 24 months. These~~remainder in 2019. A large portion of these gross savings ~~will come from across the organization, including people~~has been, and ~~programs.~~

Within SMB Solutions, we expect trends in recurring revenue streams to stabilize with the introduction of the next generation of our SendPro family of products in the U.S. and a refresh of our asset base with new products that combine our mailing offerings with new shipping and parcel capabilities.

~~Within EBS, we anticipate additional network and parcel services expansion in Presort Services. Production Mail revenue growth is expected to~~will continue to be, ~~challenged by consolidation and outsourcing, the timing of deals and pricing pressures on services revenue.~~

Within DCS, we expect to continue to make investments to grow our indirect channel within Software Solutions and build relationships with additional go-to-market partners. We anticipate continued financial investmentsreinvested in Global Ecommerce that will contribute to future growth from expansion of our marketplace sites (sites where multiple sellers provide their offerings), individual retail clients, new client acquisition and expanded service offerings. We will also continue to expand and globalize our cross-border ecommerce offerings by adding new retail clients in multiple outbound markets, which diversifies the business, ~~and helps to mitigate foreign currency risk.~~

~~We closed our acquisition of Newgistics~~particularly in October 2017. Newgistics provides parcel delivery, returns, fulfillment and digital commerce solutions for retailers and ecommerce brands. This acquisition provides for expansion into the domestic market for our Global Ecommerce segment while complementing our cross-border offerings. It also aligns with our Presort Services network and builds on strengths of both Global Ecommerce and Presort Services. We plan to leverage Newgistics' existing network and volumes to drive scale across our parcel platform and provide integration of Global Ecommerce and Presort Services. We expect to achieve significant synergies in this transaction and further anticipate cross-sell opportunities across the clients of Newgistics, PresortCommerce Services and ~~Global Ecommerce.~~our third-party equipment financing initiative.

The Company's Board of Directors, together with management, announced on November 1, 2017 that it is conducting a process to explore and evaluate strategic alternatives to further enhance shareholder value. The Board of Directors has not set a timetable for the process nor has it made any decisions related to any strategic alternatives at this time. There can be no assurance that the exploration of strategic alternatives will result in any particular outcome.

RESULTS OF OPERATIONS

Revenue by source and the related cost of revenue are shown in the following tables:


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended June 30,								Six Months Ended June 30,
	2017		2016		Actual % change		Constant Currency % change		2017		2016		Actual % change		Constant Currency % change		2019		2018		Actual % change		Constant Currency % change		2019		2018		Actual % change		Constant currency % change
Equipment sales	$	157,649	$	173,143	(9	)%	(10	)%	$	479,248	$	485,145	(1	)%	(1	)%	$	85,551	$	93,811	(9	)%	(7	)%	$	175,338	$	200,519	(13	)%	(11	)%
Supplies	58,296		61,306		(5	)%	(6	)%	188,342		198,631		(5	)%	(4	)%	46,490		55,457		(16	)%	(15	)%	97,443		115,450		(16	)%	(14	)%
Software	99,600		89,087		12	%	11	%	264,131		257,760		2	%	4	%	72,206		91,703		(21	)%	(20	)%	145,524		167,997		(13	)%	(11	)%
Rentals	95,901		102,747		(7	)%	(7	)%	291,770		309,706		(6	)%	(6	)%	18,445		19,454		(5	)%	(4	)%	40,602		44,419		(9	)%	(7	)%
Financing	81,184		87,883		(8	)%	(8	)%	250,582		276,915		(10	)%	(9	)%	92,419		97,129		(5	)%	(4	)%	189,462		197,478		(4	)%	(3	)%
Support services	120,479		123,954		(3	)%	(4	)%	354,625		383,632		(8	)%	(7	)%	127,683		138,598		(8	)%	(7	)%	256,304		279,248		(8	)%	(7	)%
Business services	229,711		200,911		14	%	14	%	672,133		607,717		11	%	11	%	417,985		369,088		13	%	14	%	824,508		756,712		9	%	9	%
Total revenue	$	842,820	$	839,031	—	%	—	%	$	2,500,831	$	2,519,506	(1	)%	—	%	$	860,779	$	865,240	(1	)%	—	%	$	1,729,181	$	1,761,823	(2	)%	(1	)%


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended June 30,								Six Months Ended June 30,
					Percentage of Revenue								Percentage of Revenue								Percentage of Revenue								Percentage of Revenue
	2017		2016		2017		2016		2017		2016		2017		2016		2019		2018		2019		2018		2019		2018		2019		2018
Cost of equipment sales	$	85,647	$	86,147	54.3	%	49.8	%	$	232,398	$	235,741	48.5	%	48.6	%	$	58,570	$	58,948	68.5	%	62.8	%	$	122,235	$	121,417	69.7	%	60.6	%
Cost of supplies	18,827		20,348		32.3	%	33.2	%	60,207		60,662		32.0	%	30.5	%	11,758		15,738		25.3	%	28.4	%	25,308		32,685		26.0	%	28.3	%
Cost of software	25,713		25,698		25.8	%	28.8	%	75,816		79,496		28.7	%	30.8	%	23,419		26,957		32.4	%	29.4	%	46,802		51,086		32.2	%	30.4	%
Cost of rentals	20,818		16,041		21.7	%	15.6	%	63,056		54,951		21.6	%	17.7	%	8,418		8,464		45.6	%	43.5	%	18,133		21,212		44.7	%	47.8	%
Financing interest expense	12,629		12,965		15.6	%	14.8	%	38,446		41,375		15.3	%	14.9	%	11,043		11,194		11.9	%	11.5	%	22,407		22,258		11.8	%	11.3	%
Cost of support services	70,688		74,799		58.7	%	60.3	%	217,232		224,790		61.3	%	58.6	%	40,448		42,306		31.7	%	30.5	%	82,227		88,371		32.1	%	31.6	%
Cost of business services	166,984		140,989		72.7	%	70.2	%	470,890		417,357		70.1	%	68.7	%	337,918		290,567		80.8	%	78.7	%	664,964		584,946		80.6	%	77.3	%
Total cost of revenue	$	401,306	$	376,987	47.6	%	44.9	%	$	1,158,045	$	1,114,372	46.3	%	44.2	%	$	491,574	$	454,174	57.1	%	52.5	%	$	982,076	$	921,975	56.8	%	52.3	%

Revenue - 2019 compared to 2018

~~The~~In this revenue discussion, ~~below refers~~we may refer to ~~the change in~~ revenue growth on a constant currency ~~basis to~~basis. Constant currency measures exclude the impact of changes in ~~foreign~~ currency exchange rates onsince the ~~change in revenue.~~prior period under comparison. We believe that excluding the ~~use~~impacts of ~~a constant~~ currency ~~revenue measure~~exchange rates provides a better understanding of the underlying revenue performance. Constant currency change is calculated by converting ~~our~~the current period ~~reported~~non-U.S. dollar denominated revenue atusing the prior ~~year's~~year’s exchange ~~rates.~~

~~Revenue~~rate. Where constant currency measures are not provided, the actual change and ~~Cost of Revenues - 2017 compared to 2016~~

~~Equipment sales~~constant currency change are the same.

Equipment sales ~~revenue~~in the quarter decreased 9% ~~in the quarter. On a~~as reported and 7% at constant ~~currency basis, equipment sales decreased 10%, primarily due to:~~

~~8% from lower equipment~~currency. Equipment sales in North America Mailing accounted for 5% of the decrease, primarily due to ~~timing~~lower sales of ~~sales and product mix; and~~

~~1% from lower~~our bottom-of-the-line products. International Mailing equipment sales ~~in Production Mail, primarily from a difficult year-over-year comparison, resulting from a large sorter deal~~accounted for 2% of the decline, mainly due to Market Exits.

Equipment sales in the ~~third quarter~~first half of ~~2016.~~

~~Cost~~2019 decreased 13% as reported and 11% at constant currency. Equipment sales in North America Mailing accounted for 8% of the decrease primarily due to lower sales of our bottom-of-the-line products. International Mailing equipment sales accounted for 3% of the decline mainly due to Market Exits.

Supplies revenue decreased 16% as reported in the quarter and first half of 2019. At constant currency, supplies decreased 15% in the quarter and 14% in the first half of 2019. Market Exits accounted for 5% and 4% of the decline in the quarter and year-to-date periods, respectively, and the remainder of the decline was due to a ~~percentage of equipment sales increased to 54.3%~~worldwide decline in our mailing business.

Software revenue decreased 21% as reported and 20% at constant currency in the quarter, primarily due to lower ~~margins in North America driven~~license revenue partially offset by ~~mix of sales.~~

~~Equipment sales~~higher data updates revenue. Software revenue decreased 1%13% as reported and 11% at constant currency in the first ~~nine months~~half of ~~2017,~~2019, primarily due ~~to:~~

2%to lower license revenue, as the prior year period benefited from ~~lower equipment sales in International Mailing particularly in Italy and Germany;~~

~~1% from lower equipment sales in Production Mail;~~a large Location Intelligence deal, partially offset by higher data updates and SaaS revenue.

2%Rentals revenue declined 5% as reported and 4% at constant currency in the quarter and decreased 9% as reported and 7% at constant currency in the first half of 2019, primarily due to a worldwide decline in our meter population.

Financing revenue decreased 5% as reported and 4% at constant currency in the quarter, and decreased 4% as reported and 3% at constant currency in the first half of 2019, primarily due to a declining portfolio. Market Exits accounted for 1% of the decline in the quarter and year-to-date periods, respectively.

Support services revenue decreased 8% as reported and 7% at constant currency in both the quarter and first half of 2019, primarily due to a worldwide decline in our meter population.

Business services revenue increased 13% as reported and 14% at constant currency in the quarter and increased 9% in the first half of 2019, primarily due to growth in domestic parcel and shipping solutions volumes, partially offset by lower cross border volumes.

Cost of Revenue - 2019 compared to 2018

Cost of revenue as a percent of revenue in the quarter increased to 57.1% from ~~higher equipment sales~~52.5% in ~~North America Mailing, reflecting a favorable comparison to~~the prior year ~~which was impacted by the enterprise business platform implementation in the second quarter of 2016.~~

period. Cost of equipment sales as a ~~percentage~~percent of equipment ~~sales was flat in the first nine months of 2017 compared to the first nine months of 2016.~~

~~Supplies~~

~~Supplies revenue decreased 5% in the quarter. On a constant currency basis, supplies revenue decreased 6% primarily due to:~~

~~3% from lower supplies revenue in North America Mailing primarily due to a decline in installed mailing equipment and postage volumes;~~

~~2% from lower supplies revenue in Production Mail primarily from a difficult year-over-year comparison resulting from a large transaction in the prior year; and~~

~~1% from lower supplies revenue in International Mailing.~~

~~Cost of supplies as a percentage of supplies revenue decreased to 32.3% in the quarter primarily due to mix of products sold.~~

~~Supplies revenue decreased 5% in the first nine months of 2017. On a constant currency basis, supplies revenue decreased 4% primarily due to:~~

~~3% from lower supplies revenue in North America Mailing primarily due to a decline in installed mailing equipment and postage volumes; and~~

~~1% from a decline in International Mailing revenue.~~

~~Cost of supplies as a percentage of supplies~~ revenue increased to ~~32.0% in~~68.5% from 62.8%. During the ~~first nine months of 2017~~quarter, higher tariffs impacted equipment sales margins by 2 percentage points and higher engineering costs impacted equipment sales margins by 1 percentage point. The remaining decline was mainly due to ~~higher mix of lower margin products.~~

~~Software~~

Software revenue increased 12% in the quarter. On a constant currency basis, revenue increased 11% primarily due to higher licensing fees in North America, driven, in part, by improvements in our indirect channel and a large Location Intelligence deal in the quarter.

~~Software revenue increased 2% in first nine months of 2017. On a constant currency basis, revenue increased 4% primarily due to:~~

~~3% from higher licensing revenue; and~~

~~1% from higher data revenue.~~

product mix. Cost of software as a ~~percentage~~percent of software revenue ~~decreased~~increased to ~~25.8% in the quarter and 28.7% in the first nine months of 2017~~32.4% from 29.4%, primarily due to the ~~increase~~decline in ~~high margin licensing revenue and cost reduction initiatives.~~

~~Rentals~~

~~Rentals revenue decreased 7% in the quarter and 6% in the first nine months of 2017 primarily due to a declining meter population.~~license revenue. Cost of rentals as a ~~percentage~~percent of rentals revenue increased to ~~21.7% for~~45.6% from 43.5%, primarily due to the ~~quarter and 21.6%~~decline in revenue.

Cost of revenue as a percent of revenue in the first ~~nine months~~half of ~~2017~~2019 increased to 56.8% from 52.3% in the prior year period. Cost of equipment sales as a percent of equipment revenue increased to 69.7% from 60.6%. In the first quarter, we recorded a charge related to a SendPro C tablet replacement program to address an underlying battery longevity issue. This adversely impacted equipment sales margins by five percentage points. In addition, the impact of tariffs reduced equipment sales margins one percentage point and higher engineering costs adversely impacted equipment sales margins by just under one percentage point. Costs of business services as a percent of business services revenue increased to 80.6% from 77.3%, primarily due to higher ~~scrapping costs associated with retiring aging meters.~~

~~Financing~~

~~Financing revenue decreased 8% in the quarter~~labor, transportation and 10% in the first nine months of 2017. On a constant currency basis, financing revenue decreased 8% in the quarter and 9% in the first nine months of 2017 primarily due to a declining portfolio and lower fees.postal costs.

We allocate a portion of our total cost of borrowing to financing interest expense. In computing financing interest expense, we assume an 8:1 debt to equity leverage ratio and apply our overall effective interest rate to the average outstanding finance receivables. ~~Financing interest expense as a percentage of financing revenue increased to 15.6% for the quarter and 15.3% in the first nine months of 2017 primarily due to a higher effective interest rate.~~

~~Support Services~~

Support services revenue decreased 3% in the quarter. On a constant currency basis, support services revenue decreased 4% primarily due to a decline in installed mailing equipment worldwide. Cost of support services as a percentage of support services revenue decreased to 58.7% for the quarter due to improved margins in North America Mailing and Production Mail.

~~Support services revenue decreased 8% in the first nine months of 2017. On a constant currency basis, support services revenue decreased 7% primarily due to:~~

~~6% from a decline in installed mailing equipment worldwide; and~~

~~1% from lower maintenance revenue on Production Mail equipment as some in-house mailers moved their mail processing to third-party service bureaus who service their own equipment.~~

Cost of support services as a percentage of support services revenue increased to 61.3% in the first nine months of 2017 as support services margins were impacted by lower services revenue without corresponding cost reduction.

~~Business Services~~

~~Business services revenue increased 14% in the quarter primarily due to:~~

~~11% from growth in Global Ecommerce due to higher cross-border and retail volumes across all lines of business; and~~

~~3% from higher volumes of mail processed in Presort Services.~~

~~Business services revenue increased 11% in the first nine months of 2017 primarily due to:~~

~~8% from growth in Global Ecommerce due to higher cross-border and retail volumes; and~~

~~2% from higher volumes of mail processed in Presort Services.~~

Cost of business services as a percentage of business services revenue increased to 72.7% in the quarter and 70.1% in the first nine months of 2017 primarily due to continued investment in our Global Ecommerce business.

Selling, general and administrative (SG&A)

SG&A expense ~~increased 1% to $304~~of $279 million in the quarter decreased 4% compared to the prior period, primarily due to ~~higher expenses in Global Ecommerce~~lower professional fees of $9$8 million and lower bad debt expense of $5 million. SG&A expense of $580 million for ~~investments in growth opportunities and~~ the ~~settlement~~first half of a vendor contract dispute, $5 million of higher bad debt and credit loss provisions, $5 million of acquisition/disposition related expenses, and $4 million of higher residual losses on leased equipment due2019, decreased 2% compared to the ~~timing of trade-up activity, partially offset by approximately $18 million of benefits from productivity initiatives.~~

~~SG&A expense decreased 1% to $908 million in the first nine months of 2017~~prior period, primarily due to ~~approximately $49~~lower employee-related costs of $18 million and lower professional fees of benefits from productivity initiatives and a $6 million pre-tax gain from the sale of technology in the second quarter of 2017, partially offset by $14 million of higher expenses in Global Ecommerce, $11 million of higher marketing expenses and $10 million of higher bad debt and credit loss provisions. Additionally, the first nine months of 2016 included a $10 million benefit from the forgiveness of a loan by the State of Connecticut and a $5 million favorable state sales tax adjustment.$7 million.

Research and development (R&D)

R&D expense ~~increased 12% to $32 million~~decreased 4% in the quarter and 8% in the first half of 2019, primarily due to ~~project timing. R&D expense increased 8% to $97 million for the first nine months of 2017, primarily due to investments~~lower spending in Global ~~Ecommerce~~Ecommerce.

Restructuring charges and ~~Software Solutions.~~asset impairments, net

Restructuring charges and asset impairments, net in the three and six months ended June 30, 2019 were $7 million and $11 million, respectively. These charges consisted of $6 million and $10 million, respectively, of restructuring related charges and $1 million of asset impairment charges. Restructuring charges and asset impairments, net in the three and six months ended June 30, 2018 were $12 million and consisted of restructuring related charges. See Note 10 to the Condensed Consolidated Financial Statements for further information.

Other (income) expense

Other (income) expense represents the loss on Market Exits.

Income taxes

See Note 1113 to the Condensed Consolidated Financial ~~Statements.~~Statements for further information.

Discontinued Operations

See Note 4 to the Condensed Consolidated Financial Statements for further information.

Business ~~segment results - 2017 compared to 2016~~Segment Results

The principal products and services of each ~~of our~~ reportable ~~segments~~segment are as follows:

Commerce Services:

Global Ecommerce: Includes the revenue and related expenses from global cross-border ecommerce transactions and domestic retail and ecommerce shipping solutions, including fulfillment and returns.

Small & Medium Business (SMB) Solutions:

~~Enterprise Business~~Software Solutions:

~~Presort Services: Includes revenue and related expenses from presort mail and parcel services for our large enterprise clients to qualify large mail volumes for postal worksharing discounts.~~

~~Digital Commerce Solutions:~~

~~Global Ecommerce:~~ ~~Includes~~Management uses segment earnings before interest and taxes (EBIT) to measure profitability and performance at the ~~worldwide revenue~~segment level and ~~related expenses from cross-border ecommerce transactions~~believes that it provides investors a useful measure of operating performance and ~~domestic retail and ecommerce shipping solutions.~~

underlying trends of the business. We determine segment EBIT by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses, ~~and~~ restructuring charges ~~that are~~and other items not allocated to a particular business segment. Management uses segment EBIT to measure profitability and performance at the segment level. Management believes segment EBIT provides a useful measure to our operating performance and underlying trends of the businesses. Segment EBIT may not be indicative of our overall consolidated performance and therefore, should be read in conjunction with our consolidated results of operations. ~~See Note 2~~

Segment information for the three and six months ended June 30, 2019 and 2018 is presented below:



	Revenue
	Three Months Ended June 30,								Six Months Ended June 30,
	2019		2018		Actual % change		Constant currency % change		2019		2018		Actual % change		Constant currency % change
Global Ecommerce	$	282,319	$	239,100	18	%	19	%	$	548,573	$	485,690	13	%	14	%
Presort Services	128,138		122,730		4	%	4	%	262,985		257,188		2	%	2	%
Commerce Services	410,457		361,830		13	%	14	%	811,558		742,878		9	%	10	%
North America Mailing	303,417		318,901		(5	)%	(5	)%	618,891		659,712		(6	)%	(6	)%
International Mailing	74,699		92,806		(20	)%	(15	)%	153,208		191,236		(20	)%	(15	)%
SMB Solutions	378,116		411,707		(8	)%	(7	)%	772,099		850,948		(9	)%	(8	)%
Software Solutions	72,206		91,703		(21	)%	(20	)%	145,524		167,997		(13	)%	(11	)%
Total	$	860,779	$	865,240	(1	)%	—	%	$	1,729,181	$	1,761,823	(2	)%	(1	)%



	EBIT
	Three Months Ended June 30,								Six Months Ended June 30,
	2019			2018			% change		2019			2018			% change
Global Ecommerce	$	(15,576	)	$	(5,993	)	(160	)%	$	(30,176	)	$	(13,704	)	(120	)%
Presort Services	15,462			12,565			23	%	30,528			39,591			(23	)%
Commerce Services	(114		)	6,572			(102	)%	352			25,887			(99	)%
North America Mailing	112,804			120,139			(6	)%	223,417			248,707			(10	)%
International Mailing	11,934			13,091			(9	)%	23,724			29,113			(19	)%
SMB Solutions	124,738			133,230			(6	)%	247,141			277,820			(11	)%
Software Solutions	2,002			18,433			(89	)%	3,694			20,925			(82	)%
Total Segment EBIT	$	126,626		$	158,235		(20	)%	$	251,187		$	324,632		(23	)%

Global Ecommerce

Global Ecommerce revenue increased 18% as reported and 19% at constant currency in the quarter and 13% as reported and 14% at constant currency in the first half of 2019 primarily due to growth in domestic parcel and shipping solutions volumes, partially offset by lower cross border volumes. EBIT for the ~~Condensed Consolidated Financial Statements for~~quarter was a ~~reconciliation~~loss of ~~segment EBIT~~$16 million compared to ~~net income.~~

~~Revenue~~a loss of $6 million in the prior year and EBIT for the ~~three~~first half of 2019 was a loss of $30 million compared to a loss of $14 million in the prior year period. The higher loss was primarily driven by a decline in margins as the business continues to shift to faster growing, lower margin services plus continued investments in market growth opportunities, including marketing programs and ~~nine months ended September 30, 2017~~new facilities, and ~~2016~~higher labor costs. EBIT for the first half of the year was also impacted by ~~reportable segment are presented below:~~higher postal costs in the first quarter due to a temporary delay in the approval of our Negotiated Service Agreement with the USPS.

Revenue
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 Actual % change Constant Currency % change 2017 2016 Actual % change Constant Currency % change
North America Mailing $ 319,966
$ 349,785
(9 )% (9 )% $ 1,016,640
$ 1,064,456
(4 )% (5 )%
International Mailing 93,770
96,730
(3 )% (5 )% 282,150
309,297
(9 )% (6 )%
Small & Medium Business Solutions 413,736
446,515
(7 )% (8 )% 1,298,790
1,373,753
(5 )% (5 )%
Production Mail 104,387
106,350
(2 )% (3 )% 278,912
289,649
(4 )% (3 )%
Presort Services 119,074
114,053
4 % 4 % 370,203
357,214
4 % 4 %
Enterprise Business Solutions 223,461
220,403
1 % 1 % 649,115
646,863
— % 1 %
Software Solutions 99,442
89,031
12 % 11 % 264,087
257,417
3 % 4 %
Global Ecommerce 106,181
83,082
28 % 28 % 288,839
241,473
20 % 21 %
Digital Commerce Solutions 205,623
172,113
19 % 19 % 552,926
498,890
11 % 12 %
Total $ 842,820
$ 839,031
— % — % $ 2,500,831
$ 2,519,506
(1 )% — %
Presort Services

Presort Services revenue increased 4% in the quarter. Higher volumes of mail processed contributed 2% of the increase, product mix contributed 1% of the increase and higher revenue per piece, primarily related to First Class mail, contributed an additional 1%. EBIT increased 23% in the quarter, primarily due to the increase in revenue and lower labor costs of $1 million, partially offset by higher consulting fees of $1 million.

Presort Services revenue increased 2% in the first half of 2019, primarily due to higher volumes of mail processed. EBIT decreased 23% in the first half of 2019, primarily due to higher transportation costs of $3 million, higher consulting fees of $3 million and higher bad debt expense of $2 million.

EBIT
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 % change 2017 2016 % change
North America Mailing $ 107,777
$ 141,968
(24 )% $ 369,662
$ 449,696
(18 )%
International Mailing 8,729
9,198
(5 )% 35,967
32,842
10 %
Small & Medium Business Solutions 116,506
151,166
(23 )% 405,629
482,538
(16 )%
Production Mail 14,920
15,696
(5 )% 31,515
35,434
(11 )%
Presort Services 19,474
19,181
2 % 69,461
69,305
— %
Enterprise Business Solutions 34,394
34,877
(1 )% 100,976
104,739
(4 )%
Software Solutions 20,912
10,329
> 100 %
31,216
17,908
74 %
Global Ecommerce (9,594 ) 1,544
> (100)%
(17,894 ) (2,608 ) > (100)%
Digital Commerce Solutions 11,318
11,873
(5 )% 13,322
15,300
(13 )%
Total $ 162,218
$ 197,916
(18 )% $ 519,927
$ 602,577
(14 )%

~~Small & Medium Business Solutions~~

North America Mailing

North America Mailing revenue decreased 9%5% in the quarter, primarily due to:

~~4% from lower equipment sales due to timing of sales and product mix;~~

~~3% from declines in rentals and support services revenue due to a decline in installed mailing equipment and lower postage volumes; and~~

2% from lower ~~financing revenue primarily~~rentals and 1% from lower supplies due to a declining ~~lease portfolio and lower fees.~~

~~North America Mailing revenue decreased 4% in the first nine months of 2017. On a constant currency basis, revenue decreased 5% primarily due to:~~

~~3% from declines in rentals and support services revenue due to a decline in installed mailing equipment and lower postage volumes; and~~

~~2% from lower financing revenue primarily due to a declining lease portfolio and lower fees.~~

~~EBIT decreased 24% in the quarter and 18% in the first nine months of 2017, primarily due to the decline in revenue and equipment margins.~~

~~International Mailing~~

~~International Mailing revenue decreased 3% in the quarter. On a constant currency basis, revenue decreased 5% primarily due to:~~

~~4% from declines in rentals, financing and support services revenue resulting from a decline in installed mailing equipment and the lease portfolio; and~~

~~1% from lower equipment sales, primarily in Italy and Japan.~~

~~EBIT decreased 5% in the quarter primarily due to the decline in revenue.~~

~~International Mailing revenue decreased 9% in the first nine months of 2017. On a constant currency basis, revenue decreased 6% primarily due to:~~

~~3% from lower equipment sales particularly in Italy and Germany; and~~

~~3% from declines in rentals, financing and support services revenue resulting from a decline in installed mailing equipment and the lease portfolio.~~

~~EBIT increased 10% in the first nine months of 2017, primarily due to lower expenses.~~

~~Enterprise Business Solutions~~

~~Production Mail~~

~~Production Mail revenue decreased 2% in the quarter. On a constant currency basis, revenue decreased 3% primarily due to:~~

~~2% from lower equipment sales due primarily to lower inserter equipment placements and a large sorter sale in the third quarter of 2016; and~~

~~1% from lower supplies revenue primarily from a difficult year-over-year comparison resulting from a large transaction in the prior year.~~

~~Production Mail revenue decreased 4% in the first nine months of 2017. On a constant currency basis, revenue decreased 3% primarily due to:~~

~~2% from lower support services revenue as a result of some in-house mailers shifting their mail processing to third-party outsourcers who service their own equipment and;~~meter population;

1% from lower equipment sales primarily due to lower ~~sorter placements offset partially by higher inserter equipment sales.~~sales of our bottom-of-the-line products; and

1% from lower financing fees.

EBIT decreased 5%6% in the quarter, primarily due to the decline in revenue and ~~11%~~increased costs from tariffs, partially offset by lower operating expenses of $8 million from cost savings initiatives.

North America Mailing revenue decreased 6% in the first ~~nine months~~half of ~~2017,~~2019, primarily due to:

2% from lower rentals, 1% from supplies and 1% from support services, all due to a declining meter population; and

2% from lower equipment sales, primarily due to lower sales of our bottom-of-the-line products.

EBIT decreased 10% in first half of 2019, primarily due to the decline in revenue and lower ~~equipment sales~~ margins ~~due to the mix of equipment sales.~~

~~Presort Services~~

~~Presort Services revenue increased 4%~~from a charge in ~~both the quarter and~~ the first ~~nine months of 2017 primarily due~~quarter related to ~~higher revenue per piece of mail processed~~a SendPro C tablet replacement program to address an underlying battery longevity issue and ~~higher volumes of Standard Class Mail and parcels processed,~~increased costs from tariffs, partially offset by lower ~~First Class mail volumes. EBIT increased 2%~~operating expenses of $12 million from cost savings initiatives.

International Mailing

International Mailing revenue decreased 20% as reported and 15% at constant currency in the quarter primarily due to ~~higher~~Market Exits and lower supplies revenue. ~~EBIT was flat~~

International Mailing revenue decreased 20% as reported and 15% at constant currency in the first ~~nine months~~half of ~~2017 compared~~2019, primarily due to:

10% from Market Exits, and

2% from lower supplies, 1% from lower support services and 1% from lower business services due to a declining meter population.

EBIT decreased 9% in the quarter and 19% during the first half of 2019, primarily due to the ~~first nine months of 2016, as higher~~decline in revenue, ~~was~~partially offset by ~~increased mail processing~~lower costs ~~and investments in our new parcel sortation capabilities.~~due to cost savings initiatives.

~~Digital Commerce Solutions~~

Software Solutions

Software revenue ~~increased 12% in the quarter. On a~~decreased 21% as reported and 20% at constant currency ~~basis, revenue increased 11% primarily due to higher licensing fees in North America, driven in part, by growth in the indirect channel and a large Location Intelligence deal in the quarter.~~

~~Software revenue increased 3% in first nine months of 2017. On a constant currency basis, revenue increased 4% primarily due to:~~

~~3% from higher licensing revenue; and~~

~~1% from higher data revenue.~~

~~EBIT increased more than 100% in the quarter and 74% in the first nine months of 2017 primarily due to an increase in high margin licensing revenue.~~

~~Global Ecommerce~~

~~Global Ecommerce revenue increased 28%~~ in the quarter, primarily due to:

~~15%~~22% from lower license revenue, primarily related to the timing of new license deals and renewals; partially offset by

2% from higher ~~domestic ecommerce shipping revenues primarily from carrier services, which are enabled by our Shipping APIs;~~data updates revenue.

~~10% from higher cross-border marketplace volumes, particularly~~Software revenue decreased 13% as reported and 11% at constant currency in the ~~UK;~~first half of 2019, primarily due to:

14% from lower license revenue and a prior year benefit from a large license deal; partially offset by

3% from higher ~~retail volumes.~~

~~Global Ecommerce revenue increased 20% in the first nine months of 2017. On a constant currency basis, revenue increased 21% primarily due to:~~

~~11% from higher domestic ecommerce shipping revenues;~~

~~6% from higher cross-border marketplace volumes, particularly in the UK;~~data updates and

~~2% from higher retail volumes.~~ SaaS revenue.

EBIT ~~was a loss of $10 million~~declined 89% in the quarter and ~~a loss of $18 million~~82% in the first ~~nine months~~half of ~~2017~~2019, primarily due to ~~investments~~the decline in ~~market growth opportunities, the resolution of a vendor contractual dispute and a specific marketing program with a cross-border client.~~revenue.

LIQUIDITY AND CAPITAL RESOURCES

We believe that existing cash and investments, cash generated from operations and borrowing capacity ~~under our commercial paper program~~through the capital markets will be sufficient to support our current cash needs, including discretionary uses such as capital investments, dividends, strategic acquisitions and share repurchases. Cash and cash equivalents and short-term investments were $~~1,742~~831 million at ~~September~~June 30, ~~2017~~2019 and $~~803~~927 million at December 31, ~~2016~~2018.We continuously review our credit profile through published credit ratings and the credit default swap market. We also monitor the creditworthiness of those banks acting as derivative counterparties, depository banks or credit providers.

Cash and cash equivalents held by our foreign subsidiaries were ~~$601~~$165 million at ~~September~~June 30, ~~2017~~2019 and ~~$475~~$189 million at December 31, ~~2016. Cash~~2018, and ~~cash equivalents held by our foreign subsidiaries~~ are generally used to support the liquidity needs of these subsidiaries. ~~Most of these amounts could be repatriated to the U.S. but would be subject to additional taxes. Repatriation of some foreign balances is restricted by local laws.~~

Cash Flow Summary

Changes in cash and cash equivalents for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 and ~~2016~~2018 were as follows:


	2017			2016			Change			2019			2018			Change
Net cash provided by operating activities	$	330,577		$	296,359		$	34,218		$	86,782		$	154,493		$	(67,711	)
Net cash used in investing activities	(155,715		)	(71,795		)	(83,920		)	(36,151		)	(80,785		)	44,634
Net cash provided by financing activities	715,062			116,061			599,001
Net cash used in financing activities										(146,770		)	(379,818		)	233,048
Effect of exchange rate changes on cash and cash equivalents	42,457			3,933			38,524			(81		)	(13,041		)	12,960
Change in cash and cash equivalents	$	932,381		$	344,558		$	587,823		$	(96,220	)	$	(319,151	)	$	222,931

Operating Activities

Cash provided by operating activities in the first half of 2019 declined $68 million compared to the prior year period. Cash flows from continuing operations ~~increased $34~~decreased $19 million, primarily due ~~to:~~

~~Lower variable compensation~~to lower income from continuing operations of $73 million, partially offset by lower restructuring payments ~~in 2017 attributable~~of $13 million, a non-cash loss on Market Exits of $18 million, and working capital changes of $22 million, primarily related to ~~2016 performance;~~

~~Timing~~collection of accounts receivable and the timing of payments ~~associated with payroll,~~of accounts payable and accrued liabilities. Cash flows from discontinued operations declined $49 million as we sold the ~~launch of our enterprise business platform and advertising campaigns~~Production Mail Business in ~~2016;~~July 2018.

~~Lower restructuring and tax payments; and~~

~~A special UK pension contribution of $37 million in 2016.~~

Investing Activities

Cash ~~flows~~ used in investing activities ~~increased $84~~in the first half of 2019 was $36 million, consisting primarily ~~due to:~~

~~Higher investment activities~~ of ~~$96 million, primarily due to the investment of residual proceeds from the issuance of debt;~~

~~Lower proceeds from the sale of assets of $12 million;~~

~~Decrease in reserve deposits of $4 million; and~~

~~Higher~~ capital expenditures of ~~$4 million;~~$61 million and a decline in reserve account balances of $8 million partially offset by net proceeds of $47 million from investment activities. Cash used in investing activities in the first half of 2018 was $81 million, consisting primarily of capital expenditures of $79 million.

~~Lower acquisition spending~~

Financing Activities

In the first half of ~~$30 million.~~2019, cash used in financing activities included $100 million to repurchase 17.4 million shares of common stock, $25 million to repay term loan debt and $18 million of common stock dividend payments.

In the first half of 2018, cash was used to repay $260 million of debt and pay dividends of $70 million. Cash ~~flows provided by~~used in financing activities ~~increased $599~~was also impacted by the settlement of $46 million ~~primarily due to:~~related to a timing difference between our investing excess cash at the subsidiary level and our funding of an intercompany transfer at year end.

~~a net increase of $389 million from debt activity;~~

~~$197 million of share repurchases in 2016; and~~

~~$9 million of dividends paid to non-controlling interests in 2016.~~

Financings and Capitalization

We are a "Well-Known Seasoned Issuer" within the meaning of Rule 405 under the Securities Act, which allows us to issue debt securities, preferred stock, preference stock, common stock, purchase contracts, depositary shares, warrants and units in an expedited fashion. We have a ~~commercial paper program that is an important source of liquidity for us and a~~ committed credit facility of $1 billion ~~to support our commercial paper issuances. During the second quarter~~that expires in January 2021. As of ~~2017,~~June 30, 2019, we ~~extended the expiration of the credit facility to 2021 under the same terms and conditions. We~~ have not drawn upon the credit facility.

At September 30, 2017 and December 31, 2016, there were no outstanding commercial paper borrowings. During the quarter, commercial paper borrowings averaged less than $1 million at a weighted average interest rate of 1.7% and the maximum amount of commercial paper outstanding at any point during the quarter was $10 million.

In September 2017, we issued $700 million of fixed rate notes and borrowed an additional $350 million under new term loan agreements. The fixed rate notes consisted of a $300 million of 3.625% notes due September 2020 and $400 million of 4.7% notes due April 2023. Interest ~~is payable semi-annually and are subject to adjustment from time to time based on changes in our credit ratings.~~

~~Both of these notes may be redeemed, at our option, in whole or in part, at any time at par plus accrued, unpaid interest and a make-whole amount, if any.~~

~~In May 2017, we issued $400 million of 3.875% Notes. Interest is payable semi-annually and is~~ subject to adjustment based on changes in our credit ratings. ~~The notes mature in~~In April 2019, Moody's lowered our corporate credit rating from Ba1 to Ba2. As a result, the interest rate on the May 2022 ~~but may be redeemed, at our option,~~notes increased 0.25% in ~~whole or in part, at any time at par plus accrued, unpaid~~the quarter and the interest rates on the September 2020 notes, October 2021 notes and ~~a make-whole amount, if any.~~April 2023 notes will increase 0.25% effective after the next interest payment date.

~~The net proceeds from these borrowings were used to repay~~In July 2019, we extended the maturity date of a $150 million term loan in June 2017 and the $385 million 5.75% Notes in September 2017. Additionally, in October 2017, we redeemed the $350 million 4.75% Notes that were due in May 2018 and funded the Newgistics acquisition (see Note 6).from August 2019 to November 2019.

~~In January 2017, bondholders of the 5.25% Notes due 2037 caused us to redeem $79 million of the debt outstanding.~~

Dividends and Share Repurchases

In February 2019, our Board of Directors approved an incremental $100 million for share repurchases, raising our authorization level to $121 million. During the ~~nine months ended September~~first half of 2019, we repurchased 17.4 million shares at an aggregate cost of $100 million. At June 30, ~~2017,~~2019, we had remaining authorization to repurchase up to $21 million of our common shares. Also, during the first half of the year, we paid dividends ~~to our stockholders~~ of ~~$105~~$18 million. Each quarter, our Board of Directors considers our recent and projected earnings and other capital needs and priorities in deciding whether to approve the payment, as well as the amount, of a dividend. There are no material restrictions on our ability to declare dividends.

WeIn June 2019, we redeemed of all of the outstanding shares of 4% Convertible Cumulative Preferred Stock (Preferred Stock) and $2.12 Convertible Preference Stock (Preference Stock). The redemption of these shares did not ~~repurchase any of our common shares during the quarter. We~~ have a ~~remaining board of directors authorization of $21 million to repurchase shares.~~material impact on our consolidated financial statements.

Off-Balance Sheet Arrangements

At ~~September~~June 30, ~~2017,~~2019, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a material ~~current or future~~ effect on our financial condition, results of operations or liquidity.

Critical Accounting Estimates

~~Finance Receivables and Allowance for Credit Losses~~Goodwill

~~Finance receivables are composed of sales-type lease receivables and unsecured revolving loan receivables. We provide an allowance for probable credit losses based~~Based on ~~historical loss experience,~~ the ~~nature and volume~~year-to-date operating results of our ~~portfolios, adverse situations that may affect~~Global Ecommerce reporting unit, we performed a ~~client's ability~~goodwill impairment test to ~~pay, prevailing economic conditions and our ability to manage~~assess the collateral. At September 30, 2017, gross finance receivables aged greater than 90 days have grown since the implementation of our North America enterprise business platform in the third quarter of 2016. We believe the majorityadequacy of the increased delinquency is administrative in nature and the result of a change in our billing format and process under our new enterprise business platform. The billing format under the platform is different and we are continuing to work with clients to reconcile amounts billed under the new format and thus such clients have not made payments. These accounts are considered delinquent in our analysis, but we continue to expect that payment in full will be received. The aging disclosed in Note 5 of the Condensed Consolidated Financial Statements represents full contract value while a smaller portion (approximately 25%) has been billed and recognized in income as of September 30, 2017.

~~As of September 30, 2017, we had North America sales-type lease receivables aged greater than 90 days with a contract~~carrying value of ~~$52 million.~~goodwill. As ~~of October 31, 2017, we received payments with a contract value of approximately $23 million related to these receivables.~~

The quality of the portfolio has not changed. Our loan portfolio delinquency has remained fairly constant when compared to loan delinquency in our legacy platform and there has been no significant changes in customers within the portfolio. Also, we use a third party to credit score our lease and loan portfolios. The credit quality of our portfolio as determined by this third party has shown no signs of deterioration suggesting that the increase in delinquency is not a result of our ~~customer's~~test, we determined that the estimated fair value of the reporting unit exceeded its carrying value by less than 20%. The assumptions used to estimate fair value were based on projections incorporated in our current operating plans as well as other available information. By their nature, projections are uncertain. Potential events and circumstances, such as declining revenue, loss of client contracts and inability to acquire new clients could have an adverse effect on our assumptions.

The goodwill balance related to the Global Ecommerce reporting unit at June 30, 2019 was $609 million. We will continue to monitor and evaluate the carrying value of goodwill for this reporting unit, and should facts and circumstances change, a non-cash impairment charge could be recorded in the future.

Property, Plant and Equipment, net

Included in property, plant and equipment, net is $37 million of capitalized software related to the development of a new enterprise resource planning (ERP) system in certain of our international markets. In connection with recent market exits in six international markets and transition to higher growth markets, we are currently reviewing our international infrastructure, including ERP system scope and implementation plans. The time period required to successfully implement a large scale ERP, as well as potential changes to our infrastructure, could necessitate a reduced implementation footprint and impact our ability to ~~pay, but instead is a result~~fully recover the value of ~~changes to invoice format and presentation. Accordingly, we do not believe that an increase in the allowance for credit losses as a result of the increase in delinquencies is necessary.~~this asset.

Regulatory Matters

There have been no significant changes to the regulatory matters disclosed in our ~~2016~~2018 Annual Report.

Item 3: Quantitative and Qualitative Disclosures ~~about~~About Market Risk

There were no material changes to the disclosures made in ~~the 2016~~our 2018 Annual Report.

Item 4: Controls and Procedures

Disclosure controls and procedures are designed to ~~reasonably assure~~ensure that information required to be disclosed in reports filed or submitted under the ~~Securities~~ Exchange Act ~~of 1934, as amended (Exchange Act)~~ is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures are also designed to reasonably ~~assure~~ensure that such information is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), ~~as appropriate~~ to allow timely decisions regarding ~~required disclosure.~~disclosures.

~~Under~~With the ~~direction~~participation of our CEO and CFO, wemanagement evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) and internal ~~control~~controls over financial reporting. Our CEO and CFO concluded that, as of the end of the period covered by this report, such disclosure controls and procedures were effective to ensure that information ~~we are~~ required to ~~disclose~~be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the required time ~~periods specified in the Exchange Act.~~periods. In addition, no changes in internal control over financial reporting occurred during the ~~fiscal~~ quarter covered by this report that ~~have~~ materially affected, or are reasonably likely to materially affect, such internal control over financial reporting. It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals. Notwithstanding this caution, the CEO and CFO have reasonable assurance that the disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~2019.

PART II. OTHER INFORMATION

Item 1: Legal Proceedings

See Note 1214 to the Condensed Consolidated Financial Statements.

Item 1A: Risk Factors

There were no material changes to the risk factors identified in our ~~2016~~2018 Annual Report.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases of Equity Securities

We periodically repurchase shares of our common stock in the open market to manage the dilution created by shares issued under employee stock plans and for other purposes. In February 2019, the Board of Directors approved an additional $100 million for share repurchases giving us the ability to repurchase up to $121 million of our shares.

The following table provides information about purchases of our common stock during the three months ended ~~September~~June 30, ~~2017:~~2019:




	~~Total number of~~ ~~shares purchased~~	~~Average price~~ ~~paid per share~~	~~Total number of~~ ~~shares purchased~~ ~~as part of~~ ~~publicly~~ ~~announced plans or programs~~	~~Approximate~~ ~~dollar value of~~ ~~shares that may~~ ~~be purchased~~ ~~under the plans or programs (in~~ ~~thousands)~~
~~Beginning balance~~				~~$21,022~~
~~July 1, 2017 - July 31, 2017~~	—	—	—	~~$21,022~~
~~August 1, 2017 - August 31, 2017~~	—	—	—	~~$21,022~~
~~September 1, 2017 - September 30, 2017~~	—	—	—	~~$21,022~~
	—	—	—



	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands)
Beginning balance					$81,880
April 1, 2019 - April 30, 2019	2,645,774	$	6.93	2,645,774	$63,553
May 1, 2019 - May 31, 2019	4,616,043	$	5.17	4,616,043	$39,684
June 1, 2019 - June 30, 2019	4,532,041	$	4.12	4,532,041	$21,022
	11,793,858	$	5.16	11,793,858

Item 6: Exhibits

Exhibit
Number
Description Exhibit Number in this Form 10-Q
2.1
Agreement and Plan of Merger, dated as of September 6, 2017, among Pitney Bowes Inc., Neutron Acquisition Corp., NGS Holdings, Inc. and Littlejohn Fund IV, L.P., solely in its capacity as stockholder representative (incorporated by reference to Exhibit 2.1 to Form 8-K filed on September 7, 2017).*
2.1
4.1
Officer's Certificate establishing the terms of the 3.625% Notes due 2020, dated September 15, 2017 (incorporated by reference to Exhibit 4.1 to Form 8-K filed September 15, 2017)
4.1
4.2
Specimen of 3.625% Notes due 2020 (incorporated by reference to exhibit 4.2 to Form 8-K filed September 15, 2017)
4.2
4.3
Officer's Certificate establishing the terms of the 4.700% Notes due 2023, dated September 15, 2017 (incorporated by reference to Exhibit 4.3 to Form 8-K filed September 15, 2017)
4.3
4.4
Specimen of 4.700% Notes due 2023 (incorporated by reference to exhibit 4.4 to Form 8-K filed September 15, 2017)
4.4
10.1
Credit Agreement $1,000,000,000, dated as of January 6, 2015, by and among the company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the “Revolving Credit Agreement”).
10.1
10.2
First Amendment to the Revolving Credit Agreement, dated as of May 31, 2017, by and among the company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto.

10.2
10.3
Second Amendment to the Revolving Credit Agreement, dated as of September 12, 2017, by and among the company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto.
10.3
10.4
Credit Agreement $300,000,000, dated as of January 6, 2015, by and among the company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (the “$300M Term Loan”).
10.4
10.5
First Amendment to the $300M Term Loan, dated as of September 12, 2017, by and among the company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto.

10.5
10.6
Credit Agreement $200,000,000, dated as of September 12, 2017, by and among the company, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto.

10.6
10.7
Term Loan Facility $150,000,000, dated as of August 30, 2017, by and between the company and The Bank of Tokyo-Mitsubishi-UFJ, Ltd.
10.7
12
Computation of ratio of earnings to fixed charges
12
31.1
Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended
31.1
31.2
Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended
31.2
32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.1
32.2
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
32.2
101.INS
XBRL Report Instance Document

101.SCH
XBRL Taxonomy Extension Schema Document

101.CAL
XBRL Taxonomy Calculation Linkbase Document

101.DEF
XBRL Taxonomy Definition Linkbase Document

101.LAB
XBRL Taxonomy Label Linkbase Document

101.PRE
XBRL Taxonomy Presentation Linkbase Document



Exhibit Number	Description	Exhibit Number in this Form 10-Q
3(c)	Restated Certificate of Incorporation of Pitney Bowes Inc. (incorporated by reference to Exhibit 3(c) to the Form 8-K filed with the Commission on May 12, 2011)	3(c)
3	Pitney Bowes Inc. Amended and Restated By-laws effective May 13, 2013 (incorporated by reference to Exhibit 3 to the Form 8-K filed with the Commission on May 15, 2013)	3
10	Amended and Restated Pitney Bowes Inc. 2018 Stock Plan (incorporated by reference to Annex A to the Definitive Proxy Statement for the 2019 Annual Meeting of Stockholder filed with the Commission on March 15, 2019)	10
31.1	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended	31.1
31.2	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended	31.2
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350	32.1
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350	32.2
101.INS	XBRL Report Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Calculation Linkbase Document
101.DEF	XBRL Taxonomy Definition Linkbase Document
101.LAB	XBRL Taxonomy Label Linkbase Document
101.PRE	XBRL Taxonomy Presentation Linkbase Document
104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in Inline XBRL.

* Pursuant to Item 601(b)(2) of Regulation S-K, certain exhibits and schedules have been omitted. The registrant hereby agrees to furnish

supplementally a copy of any omitted attachment to the SEC upon request.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, ~~as amended,~~ the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		PITNEY BOWES INC.

Date:	~~November 2, 2017~~August 6, 2019

		/s/ Stanley J. Sutula III

		Stanley J. Sutula III
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

		/s/ Joseph R. Catapano

		Joseph R. Catapano
		Vice President, ~~and~~ Chief Accounting Officer
		(Principal Accounting Officer)

4145



	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	1,696,903		$	764,522
Short-term investments	45,508			38,448
Accounts receivable (net of allowance of $15,610 and $14,372, respectively)	408,886			455,527
Short-term finance receivables (net of allowance of $11,921 and $13,323, respectively)	826,122			893,950
Inventories	118,282			92,726
Current income taxes	42,605			11,373
Other current assets and prepayments	82,251			68,637
Total current assets	3,220,557			2,325,183
Property, plant and equipment, net	338,340			314,603
Rental property and equipment, net	185,866			188,054
Long-term finance receivables (net of allowance of $5,999 and $7,177, respectively)	650,793			673,207
Goodwill	1,616,968			1,571,335
Intangible assets, net	145,376			165,172
Noncurrent income taxes	77,188			74,806
Other assets	546,319			524,773
Total assets	$	6,781,407		$	5,837,133

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities	$	1,348,395		$	1,378,822
Current income taxes	13,542			34,434
Current portion of long-term debt	620,256			614,485
Advance billings	282,537			299,878
Total current liabilities	2,264,730			2,327,619
Deferred taxes on income	257,987			204,289
Tax uncertainties and other income tax liabilities	39,671			61,276
Long-term debt	3,562,672			2,750,405
Other noncurrent liabilities	555,514			597,204
Total liabilities	6,680,574			5,940,793

Commitments and contingencies (See Note 12)

Stockholders’ equity (deficit):
Cumulative preferred stock, $50 par value, 4% convertible	1			1
Cumulative preference stock, no par value, $2.12 convertible	457			483
Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued)	323,338			323,338
Additional paid-in capital	133,394			148,125
Retained earnings	5,174,602			5,107,734
Accumulated other comprehensive loss	(818,484		)	(940,133		)
Treasury stock, at cost (136,777,086 and 137,669,194 shares, respectively)	(4,712,475		)	(4,743,208		)
Total Pitney Bowes Inc. stockholders’ equity (deficit)	100,833			(103,660		)
Total liabilities and stockholders’ equity (deficit)	$	6,781,407		$	5,837,133



	September 30, 2017			December 31, 2016
Raw materials	$	39,287		$	28,541
Work in process	6,620			6,498
Supplies and service parts	51,854			45,152
Finished products	32,664			24,678
Inventory at FIFO cost	130,425			104,869
Excess of FIFO cost over LIFO cost	(12,143		)	(12,143		)
Total inventory, net	$	118,282		$	92,726



Remaining for year ending December 31, 2017	$	7,727
Year ending December 31, 2018	27,356
Year ending December 31, 2019	23,977
Year ending December 31, 2020	18,389
Year ending December 31, 2021	15,365
Thereafter	52,562
Total	$	145,376



	December 31, 2016		Acquisitions		Foreign currency translation		September 30, 2017
North America Mailing	$	354,000	$	—	$	13,208	$	367,208
International Mailing	145,566		—		12,074		157,640
Small & Medium Business Solutions	499,566		—		25,282		524,848
Production Mail	101,099		—		5,734		106,833
Presort Services	196,890		6,229		—		203,119
Enterprise Business Solutions	297,989		6,229		5,734		309,952
Software Solutions	501,591		—		8,388		509,979
Global Ecommerce	272,189		—		—		272,189
Digital Commerce Solutions	773,780		—		8,388		782,168
Total goodwill	$	1,571,335	$	6,229	$	39,404	$	1,616,968



	Amount Reclassified from AOCI (a)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Gains (losses) on cash flow hedges
Revenue	$	(139	)	$	443		$	(133	)	$	(290	)
Cost of sales	(59		)	(301		)	89			69
Interest expense, net	(507		)	(507		)	(1,521		)	(1,521		)
Total before tax	(705		)	(365		)	(1,565		)	(1,742		)
Benefit for income tax	(274		)	(144		)	(610		)	(679		)
Net of tax	$	(431	)	$	(221	)	$	(955	)	$	(1,063	)

Gains (losses) on available for sale securities
Interest expense, net	$	(298	)	$	(1,125	)	$	(524	)	$	(1,126	)
Benefit provision for income tax	(110		)	(433		)	(194		)	(433		)
Net of tax	$	(188	)	$	(692	)	$	(330	)	$	(693	)

Pension and Postretirement Benefit Plans (b)
Transition credit	$	2		$	2		$	6		$	6
Prior service costs	(41		)	(40		)	(125		)	(123		)
Actuarial losses	(10,189		)	(9,168		)	(30,399		)	(29,036		)
Total before tax	(10,228		)	(9,206		)	(30,518		)	(29,153		)
Benefit from income tax	(3,484		)	(3,243		)	(10,440		)	(10,362		)
Net of tax	$	(6,744	)	$	(5,963	)	$	(20,078	)	$	(18,791	)

~~(203) 356-5000~~

~~(Registrant’s telephone number, including area code)~~Address:

3001 Summer Street,

Connecticut

Telephone Number: