UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 2020
OR
☐ 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: 1-03579
PITNEY BOWES INC.
(Exact name of registrant as specified in its charter)

State of incorporation:Delaware I.R.S. Employer Identification No.06-0495050
Address:3001 Summer Street,Stamford,Connecticut06926 
Telephone Number:(203)356-5000    

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
6.7% Notes due 2043 PBI.PRB 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 every Interactive Data File required to be submitted 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 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,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerþAccelerated fileroNon-accelerated filero
Smaller reporting company☐Emerging growth company☐  
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 13(a) of the 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 ☐ No þ
As of April 30,July 31, 2020, 172,626,898173,082,121 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
 
   
 Condensed Consolidated Statements of Income (loss)(Loss) for the Three and Six Months Ended March 31,June 30, 2020 and 2019
3
   
 Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended March 31,June 30, 2020 and 2019
4
   
 Condensed Consolidated Balance Sheets at March 31,June 30, 2020 and December 31, 2019
5
   
 Condensed Consolidated Statements of Cash Flows for the ThreeSix Months Ended March 31,June 30, 2020 and 2019
6
   
 
Notes to Condensed Consolidated Financial Statements
7
   
Item 2:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2831
   
Item 3:
Quantitative and Qualitative Disclosures about Market Risk
3642
   
Item 4:
Controls and Procedures
3642
   
   
Part II - Other Information:
 
   
Item 1:
Legal Proceedings
3743
   
Item 1A:
Risk Factors
3743
   
Item 2:
Unregistered Sales of Equity Securities and Use of Proceeds
3844
   
Item 6:
Exhibits
3945
   
   
Signatures
4046




PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
PITNEY BOWES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited; in thousands, except per share amounts)
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2020 20192020 2019 2020 2019
Revenue: 
  
 
  
  
  
Business services$444,379
 $406,545
$528,990
 $417,963
 $973,369
 $824,508
Support services122,015
 128,599
113,786
 127,705
 235,801
 256,304
Financing89,078
 97,043
85,462
 92,419
 174,540
 189,462
Equipment sales76,273
 89,787
57,837
 85,551
 134,110
 175,338
Supplies45,709
 50,953
32,773
 46,490
 78,482
 97,443
Rentals18,814
 22,157
18,644
 18,445
 37,458
 40,602
Total revenue796,268
 795,084
837,492
 788,573
 1,633,760
 1,583,657
Costs and expenses:          
Cost of business services374,665
 327,046
454,311
 337,918
 828,976
 664,964
Cost of support services39,760
 41,847
36,725
 40,520
 76,485
 82,367
Financing interest expense12,489
 11,364
11,939
 11,043
 24,428
 22,407
Cost of equipment sales57,359
 63,665
47,920
 58,570
 105,279
 122,235
Cost of supplies12,240
 13,550
8,379
 11,758
 20,619
 25,308
Cost of rentals6,378
 9,715
6,022
 8,418
 12,400
 18,133
Selling, general and administrative248,633
 261,669
233,631
 241,467
 482,264
 503,136
Research and development12,116
 12,577
7,467
 13,572
 19,583
 26,149
Restructuring charges3,817
 3,700
Restructuring charges and asset impairments4,922
 5,899
 8,739
 9,599
Goodwill impairment198,169
 —
—
 —
 198,169
 —
Interest expense, net25,883
 27,602
26,446
 28,019
 52,329
 55,621
Other components of net pension and postretirement income(151) (638)
Other expense, net33,487
 17,710
Other components of net pension and postretirement cost (income)386
 (1,618) 235
 (2,256)
Other (income) expense(17,375) (27) 16,112
 17,683
Total costs and expenses1,024,845
 789,807
820,773
 755,539
 1,845,618
 1,545,346
(Loss) income from continuing operations before taxes(228,577) 5,277
(Benefit) provision for income taxes(10,030) 7,820
Loss from continuing operations(218,547) (2,543)
Income (loss) from discontinued operations, net of tax10,064
 (116)
Net loss$(208,483) $(2,659)
Income (loss) from continuing operations before taxes16,719
 33,034
 (211,858) 38,311
Provision for income taxes17,016
 3,724
 6,986
 11,544
(Loss) income from continuing operations(297) 29,310
 (218,844) 26,767
(Loss) income from discontinued operations, net of tax(3,032) (5,613) 7,032
 (5,729)
Net (loss) income$(3,329) $23,697
 $(211,812) $21,038
Basic (loss) earnings per share (1):
          
Continuing operations$(1.28) $(0.01)$—
 $0.17
 $(1.28) $0.15
Discontinued operations0.06
 —
(0.02) (0.03) 0.04
 (0.03)
Net loss$(1.22) $(0.01)
Net (loss) income$(0.02) $0.13
 $(1.24) $0.12
Diluted (loss) earnings per share (1):
          
Continuing operations$(1.28) $(0.01)$—
 $0.16
 $(1.28) $0.15
Discontinued operations0.06
 —
(0.02) (0.03) 0.04
 (0.03)
Net loss$(1.22) $(0.01)
Net (loss) income$(0.02) $0.13
 $(1.24) $0.12

(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 (LOSS)
(Unaudited; in thousands)



 Three Months Ended March 31,
 2020 2019
Net loss$(208,483) $(2,659)
Other comprehensive (loss) income, net of tax:   
Foreign currency translation, net of tax of $(2,817) and $924, respectively(27,735) 21,368
Net unrealized (loss) gain on cash flow hedges, net of tax of $(58) and $56, respectively(174) 163
Net unrealized gain on investment securities, net of tax of $434 and $964, respectively1,308
 2,816
Amortization of pension and postretirement costs, net of tax benefits of $2,650 and $2,649, respectively8,870
 6,636
Other comprehensive (loss) income, net of tax(17,731) 30,983
Comprehensive (loss) income$(226,214) $28,324



 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Net (loss) income$(3,329) $23,697
 $(211,812) $21,038
Other comprehensive income, net of tax:       
Foreign currency translation, net of tax of $1,105, $(1,347), $(1,712) and $(423), respectively10,099
 10
 (17,636) 21,378
Net unrealized loss on cash flow hedges, net of tax of $(421), $(80), $(479) and $(24), respectively(1,271) (234) (1,445) (71)
Net unrealized gain on investment securities, net of tax of $467, $1,100, $900 and $2,064, respectively1,407
 3,213
 2,715
 6,029
Amortization of pension and postretirement costs, net of tax benefits of $3,502, $2,124, $6,152 and $4,773, respectively11,377
 7,311
 20,247
 13,947
Other comprehensive income, net of tax21,612
 10,300
 3,881
 41,283
Comprehensive income (loss)$18,283
 $33,997
 $(207,931) $62,321






































See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except share and per share amounts)


March 31, 2020 December 31, 2019June 30, 2020 December 31, 2019
ASSETS 
  
 
  
Current assets: 
  
 
  
Cash and cash equivalents$663,072
 $924,442
$862,897
 $924,442
Short-term investments, reported at fair value67,180
 115,879
Accounts and other receivables (net of allowance of $29,444 and $17,830, respectively)342,823
 373,471
Short-term finance receivables (net of allowance of $23,104 and $12,556, respectively)597,805
 629,643
Short-term investments (includes $28,221 and $35,879, respectively, reported at fair value)153,221
 115,879
Accounts and other receivables (net of allowance of $32,474 and $17,830, respectively)391,748
 373,471
Short-term finance receivables (net of allowance of $20,999 and $12,556, respectively)555,196
 629,643
Inventories71,848
 68,251
73,653
 68,251
Current income taxes16,356
 5,565
1,893
 5,565
Other current assets and prepayments111,104
 101,601
121,924
 101,601
Assets of discontinued operations—
 17,229
—
 17,229
Total current assets1,870,188
 2,236,081
2,160,532
 2,236,081
Property, plant and equipment, net371,464
 376,177
375,465
 376,177
Rental property and equipment, net40,264
 41,225
40,875
 41,225
Long-term finance receivables (net of allowance of $15,764 and $7,095 respectively)601,547
 625,487
Long-term finance receivables (net of allowance of $17,115 and $7,095 respectively)583,839
 625,487
Goodwill1,125,035
 1,324,179
1,132,785
 1,324,179
Intangible assets, net181,624
 190,640
175,460
 190,640
Operating lease assets193,635
 200,752
199,162
 200,752
Noncurrent income taxes73,186
 71,903
68,449
 71,903
Other assets (includes $280,083 and $232,938, respectively, reported at fair value)436,487
 400,456
Other assets (includes $264,500 and $230,442, respectively, reported at fair value)379,611
 400,456
Total assets$4,893,430
 $5,466,900
$5,116,178
 $5,466,900
      
LIABILITIES AND STOCKHOLDERS’ EQUITY   
   
Current liabilities: 
  
 
  
Accounts payable and accrued liabilities$653,539
 $793,690
$732,048
 $793,690
Customer deposits at Pitney Bowes Bank590,230
 591,118
613,449
 591,118
Current operating lease liabilities36,085
 36,060
35,432
 36,060
Current portion of long-term debt62,952
 20,108
163,257
 20,108
Advance billings96,641
 101,920
122,606
 101,920
Current income taxes3,070
 17,083
11,723
 17,083
Liabilities of discontinued operations—
 9,713
—
 9,713
Total current liabilities1,442,517
 1,569,692
1,678,515
 1,569,692
Long-term debt2,567,010
 2,719,614
2,553,490
 2,719,614
Deferred taxes on income275,815
 274,435
270,376
 274,435
Tax uncertainties and other income tax liabilities36,096
 38,834
35,928
 38,834
Noncurrent operating lease liabilities171,079
 177,711
177,901
 177,711
Other noncurrent liabilities371,483
 400,518
355,388
 400,518
Total liabilities4,864,000
 5,180,804
5,071,598
 5,180,804
      
Commitments and contingencies (See Note 14)


 




 


      
Stockholders’ equity:      
Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued)323,338
 323,338
323,338
 323,338
Additional paid-in capital69,553
 98,748
68,498
 98,748
Retained earnings5,200,024
 5,438,930
5,188,119
 5,438,930
Accumulated other comprehensive loss(857,874) (840,143)(836,262) (840,143)
Treasury stock, at cost (151,947,224 and 152,888,969 shares, respectively)(4,705,611) (4,734,777)
Treasury stock, at cost (151,737,399 and 152,888,969 shares, respectively)(4,699,113) (4,734,777)
Total stockholders’ equity29,430
 286,096
44,580
 286,096
Total liabilities and stockholders’ equity$4,893,430
 $5,466,900
$5,116,178
 $5,466,900


See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)


Three Months Ended March 31,Six Months Ended June 30,
2020 20192020 2019
Cash flows from operating activities: 
  
 
  
Net loss$(208,483) $(2,659)
Net (loss) income$(211,812) $21,038
(Income) loss from discontinued operations, net of tax(10,064) 116
(7,032) 5,729
Restructuring payments(6,047) (8,246)(11,365) (13,005)
Adjustments to reconcile net loss to net cash provided by operating activities: 
  
 
  
Restructuring charges3,817
 3,700
Restructuring charges and asset impairments8,739
 9,599
Loss on disposition of businesses—
 17,710
—
 17,683
Gain on sale of equity investment(11,908) —
Loss on extinguishment of debt36,987
 —
36,987
 —
Depreciation and amortization40,719
 36,885
81,787
 77,977
Goodwill impairment198,169
 —
198,169
 —
Stock-based compensation1,521
 6,784
6,950
 9,165
Allowance for credit losses15,926
 10,655
27,941
 14,707
Amortization of debt fees2,300
 2,456
5,054
 4,924
Changes in operating assets and liabilities, net of acquisitions/divestitures: 
  
 
  
Decrease in accounts receivable7,182
 29,947
(Increase) decrease in accounts receivable(49,403) 18,565
Decrease in finance receivables18,843
 43,388
84,342
 34,984
Increase in inventories(4,815) (6,232)(6,306) (10,881)
Increase in other current assets and prepayments(7,969) (33,948)(24,067) (33,476)
Decrease in accounts payable and accrued liabilities(104,556) (14,986)(25,168) (53,885)
Increase (decrease) in current and noncurrent income taxes10,797
 (2,365)
(Decrease) increase in advance billings(4,148) 878
Increase in current and noncurrent income taxes29,959
 663
Increase (decrease) in advance billings21,402
 (941)
Decrease in pension and retiree medical liabilities(24,164) (22,772)
Other, net(18,658) (15,612)(4,873) 1,174
Net cash (used in) provided by operating activities - continuing operations(28,479) 68,471
Net cash provided by operating activities - continuing operations125,232
 81,248
Net cash (used in) provided by operating activities - discontinued operations(37,805) 1,257
(38,423) 5,534
Net cash (used in) provided by operating activities(66,284) 69,728
Net cash provided by operating activities86,809
 86,782
Cash flows from investing activities: 
  
 
  
Purchases of available-for-sale securities(67,312) —
(115,565) (6,391)
Proceeds from sales/maturities of available-for-sale securities24,102
 31,404
94,425
 54,964
Net activity from short-term and other investments48,431
 (1,778)(44,035) (1,608)
Capital expenditures(25,778) (27,694)(59,954) (59,187)
Acquisitions, net of cash acquired(1,281) (4,882)(6,608) (4,882)
Change in customer deposits at Pitney Bowes Bank(888) (23,036)
Sale of other investments (See Note 8)58,248
 —
Increase (decrease) in customer deposits at Pitney Bowes Bank22,331
 (8,316)
Other investing activities(230) (7,841)(885) (8,591)
Net cash used in investing activities - continuing operations(22,956) (33,827)(52,043) (34,011)
Net cash used in investing activities - discontinued operations(2,502) (1,060)(2,502) (2,140)
Net cash used in investing activities(25,458) (34,887)(54,545) (36,151)
Cash flows from financing activities: 
  
 
  
Increase in short-term borrowings100,000
 —
Proceeds from the issuance of long-term debt816,544
 —
816,544
 —
Principal payments of long-term debt(932,600) (12,541)(948,224) (25,087)
Premiums and fees paid to extinguish debt(32,645) —
(32,645) —
Dividends paid to stockholders(8,523) (9,408)(17,099) (18,346)
Common stock repurchases—
 (39,142)—
 (100,000)
Other financing activities(2,372) (2,901)(3,174) (3,337)
Net cash used in financing activities(159,596) (63,992)(84,598) (146,770)
Effect of exchange rate changes on cash and cash equivalents(10,032) 794
(9,211) (81)
Change in cash and cash equivalents(261,370) (28,357)(61,545) (96,220)
Cash and cash equivalents at beginning of period924,442
 867,262
924,442
 867,262
Cash and cash equivalents at end of period$663,072
 $838,905
$862,897
 $771,042
      
Cash interest paid$44,891
 $33,393
$82,732
 $78,280
Cash income tax payments, net of refunds$13,270
 $10,071
$12,176
 $17,348



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) is a global technology company providing commerce solutions that power billions of transactions. Clients around the world rely on the accuracy and precision delivered by our equipment, solutions, analytics, and application programming interface technology in the areas of ecommerce fulfillment, shipping and returns, cross-border ecommerce, office mailing and shipping, presort services and financing. Pitney Bowes Inc. was incorporated in the state of Delaware in 1920. For more information about us, our products, services and solutions, visit www.pitneybowes.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, 2019 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, 2020, particularly in light of the novel coronavirus pandemic (COVID-19) and its effects on domestic and global businesses and economies. 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, 2019 (2019 Annual Report). Certain prior year amounts have been reclassified to conform to the current year presentation.
In August 2019, we entered into a definitive agreement to sell our Software Solutions business and recast prior periods to reflect the operating results of the Software Solutions business as discontinued operations. The sale was completed in December 2019, with the exception of the software business in Australia, which closed in January 2020. See Note 4 for additional information.
Accounts and other receivables includes other receivables of $71$61 million at March 31,June 30, 2020 and $91 million at December 31, 2019. In January 2019, we sold the direct operations and moved to a dealer model in 6 smaller international markets (Market Exits) within Sending Technology Solutions (SendTech Solutions). In connection with the sale, we recognized a receivable for the transfer of the lease portfolio in these international marketsOther receivables includes gross receivables of $24 million.million related to these direct operations.

Risks and Uncertainties
On March 11, 2020, the World Health Organization designatedThe effects of COVID-19 as a global pandemic. Through the end of February 2020, consolidated revenue was trending in line with our expectations versus the same two-month period in 2019. Beginning in March, COVID-19 and its impacts on global economies and businesses begancontinues to negatively impact our year-over-year consolidated revenue trendshow we conduct business and results of operations. We expect COVID-19 and the resulting significantly weaker global economic conditions to negatively impact our operating results, for the second quarter of 2020. Additionally, sincefinancial position and cash flows. There still remains uncertainty around the severity, duration and durationgovernments' responses to COVID-19, particularly in the United States as parts of this pandemic is uncertain,the country are experiencing a resurgence in COVID-19 cases and taking actions to modify re-opening plans. Accordingly, we are not able to reasonably estimate the full extent of the impact of the pandemic on our operating results, financial position and liquidity for the remainder of the year. Actual results could differ significantly from our estimates and assumptions, possibly resulting in additional impairments or other charges in future reporting periods.
We assessed certain accounting matters that require the use of estimates, assumptions and consideration of forecasted financial information in context with the known and projected future impacts of COVID-19 as of March 31, 2020 and through the date of this report.COVID-19. The most significant impacts for the quarter ended March 31, 2020 are included below. While the outcomes of COVID-19 are uncertain, it is possible that the severity and duration of the pandemic could result in material impacts to our financial condition, results of operations and liquidity in future reporting periods and may cause us to take further cost-savings and cash conservation measures.
The determination of our provision for credit losses is now impacted by changes in forecasted economic conditions (see Accounting Pronouncements Adopted in 2020 below). The impact of COVID-19 and its impact on global economies and businesses resulted in an increased probability of recessionary conditions, which impacteddelinquency rates and business bankruptcy. As a result, our current year credit loss provision by $11 million.for the three and six months ended June 30, 2020 was $12 million and $28 million compared to $4 million and $15 million for the three and six months ended June 30, 2019.
At December 31, 2019, the fair value of our Global Ecommerce business exceeded its carrying value by less than 20%. The determination of fair value is based on a number of estimates and assumptions, including, but not limed to, projected revenue growth, profitability and cash flows. During the first quarter of 2020, our Global Ecommerce reporting unitbusiness experienced weaker than expected performance in part due to the macroeconomic conditions resulting from COVID-19,COVID-19. As a result, we evaluated the Global Ecommerce goodwill for impairment and we recorded a non-cash, pre-tax goodwill impairment charge of $198 million. Seemillion in the first quarter of 2020 (see Note 8 for additional information.information).



PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Accounting Pronouncements Adopted in 2020
Effective January 1, 2020, we adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses. We adopted this standard using the modified retrospective transition approach with a cumulative effect adjustment to retained earnings. The adoption of the standard resulted in an increase in the opening reserve balance for Accounts and other receivables of $15 million and the opening reserve balance for finance receivables of $10 million and a net reduction to retained earnings of $22 million. The ASU applies to financial assets measured at amortized cost, including finance receivables, trade and other receivables and investments in debt securities classified as available-for-sale and held-to-maturity. The ASU replaces the current incurred loss impairment model that recognizes losses when a probable threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. The models to estimate credit losses are required to be based on historical loss experience, current conditions, reasonable and supportable forecasts and current economic outlook.
Activity in the allowance for credit losses for accounts and other receivables for the six months ended June 30, 2020 is presented below. See Note 7 for additional information pertaining to our finance receivables.
 Balance at December 31, 2019 Cumulative effect of accounting change Amounts charged to expense Write-offs, recoveries and currency impact 
Balance at
March 31, 2020
Allowance for credit losses$17,830
 $15,336
 $3,280
 $(7,002) $29,444
 Balance at December 31, 2019 Cumulative effect of accounting change Amounts charged to expense Write-offs, recoveries and currency impact 
Balance at
June 30, 2020
Allowance for credit losses$17,830
 $15,336
 $12,692
 $(13,384) $32,474

 
Accounts receivable greater than 365 days past due, subject to certain exceptions, are written off against the allowance, although collection efforts may continue.

Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles and also clarifies and amends existing guidance. This standard is effective beginning January 1, 2021, with early adoption permitted. We do not expect this standard to have a material impact on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU is intended to provide temporary optional expedients and exceptions to U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The transition to new reference interest rates will require certain contracts to be modified and the ASU is intended to mitigate the effects of this transition. The accommodations provided by the ASU are effective as of March 12, 2020 through December 31, 2022 and may be applied at the beginning of any interim period within that time frame. We are currently assessing the impact this standard will have on our consolidated financial statements.

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

2. Revenue
Disaggregated Revenue
The following tables disaggregate our revenue by source and timing of recognition:
 Three Months Ended June 30, 2020
 Global EcommercePresort ServicesSendTech SolutionsRevenue from products and servicesRevenue from leasing transactions and financingTotal consolidated revenue
Major products/service lines      
Business services$398,453
$118,127
$12,410
$528,990
$—
$528,990
Support services—
—
113,786
113,786
—
113,786
Financing—
—
—
—
85,462
85,462
Equipment sales—
—
14,492
14,492
43,345
57,837
Supplies—
—
32,773
32,773
—
32,773
Rentals—
—
—
—
18,644
18,644
Subtotal398,453
118,127
173,461
690,041
$147,451
$837,492
       
Revenue from leasing transactions and financing      
Financing—
—
85,462
85,462
  
Equipment sales—
—
43,345
43,345
  
Rentals—
—
18,644
18,644
  
     Total revenue$398,453
$118,127
$320,912
$837,492
  
       
Timing of revenue recognition from products and services    
Products/services transferred at a point in time$—
$—
$58,750
$58,750
  
Products/services transferred over time398,453
118,127
114,711
631,291
  
      Total$398,453
$118,127
$173,461
$690,041
  
 Three Months Ended March 31, 2020
 Global EcommercePresort ServicesSendTech SolutionsRevenue from products and servicesRevenue from leasing transactions and financingTotal consolidated revenue
Major products/service lines      
Business services$292,323
$140,720
$11,336
$444,379
$—
$444,379
Support services—
—
122,015
122,015
—
122,015
Financing—
—
—
—
89,078
89,078
Equipment sales—
—
17,130
17,130
59,143
76,273
Supplies—
—
45,709
45,709
—
45,709
Rentals—
—
—
—
18,814
18,814
Subtotal292,323
140,720
196,190
629,233
$167,035
$796,268
       
Revenue from leasing transactions and financing      
Financing—
—
89,078
89,078
  
Equipment sales—
—
59,143
59,143
  
Rentals—
—
18,814
18,814
  
     Total revenue$292,323
$140,720
$363,225
$796,268
  
       
Timing of revenue recognition from products and services    
Products/services transferred at a point in time$—
$—
$78,374
$78,374
  
Products/services transferred over time292,323
140,720
117,816
550,859
  
      Total$292,323
$140,720
$196,190
$629,233
  

 Three Months Ended June 30, 2019
 Global EcommercePresort ServicesSendTech SolutionsRevenue from products and servicesRevenue from leasing transactions and financingTotal consolidated revenue
Major products/service lines      
Business services$282,319
$128,138
$7,506
$417,963
$—
$417,963
Support services—
—
127,705
127,705
—
127,705
Financing—
—
—
—
92,419
92,419
Equipment sales—
—
19,384
19,384
66,167
85,551
Supplies—
—
46,490
46,490
—
46,490
Rentals—
—
—
—
18,445
18,445
Subtotal282,319
128,138
201,085
611,542
$177,031
$788,573
       
Revenue from leasing transactions and financing      
Financing—
—
92,419
92,419
  
Equipment sales—
—
66,167
66,167
  
Rentals—
—
18,445
18,445
  
     Total revenue$282,319
$128,138
$378,116
$788,573
  
       
Timing of revenue recognition from products and services    
Products/services transferred at a point in time$—
$—
$82,790
$82,790
  
Products/services transferred over time282,319
128,138
118,295
528,752
  
      Total$282,319
$128,138
$201,085
$611,542
  

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Three Months Ended March 31, 2019Six Months Ended June 30, 2020
Global EcommercePresort ServicesSendTech SolutionsRevenue from products and servicesRevenue from leasing transactions and financingTotal consolidated revenueGlobal EcommercePresort ServicesSendTech SolutionsRevenue from products and servicesRevenue from leasing transactions and financingTotal consolidated revenue
Major products/service lines  
Business services$266,254
$134,847
$5,444
$406,545
$—
$406,545
$690,776
$258,847
$23,746
$973,369
$—
$973,369
Support services—
—
128,599
128,599
—
128,599
—
—
235,801
235,801
—
235,801
Financing—
—
—
—
97,043
97,043
—
—
—
—
174,540
174,540
Equipment sales—
—
21,293
21,293
68,494
89,787
—
—
31,621
31,621
102,489
134,110
Supplies—
—
50,953
50,953
—
50,953
—
—
78,482
78,482
—
78,482
Rentals—
—
—
—
22,157
22,157
—
—
—
—
37,458
37,458
Subtotal266,254
134,847
206,289
607,390
$187,694
$795,084
690,776
258,847
369,650
1,319,273
$314,487
$1,633,760
    
Revenue from leasing transactions and financing  
Financing—
—
97,043
97,043
 —
—
174,540
174,540
 
Equipment sales—
—
68,494
68,494
 —
—
102,489
102,489
 
Rentals—
—
22,157
22,157
 —
—
37,458
37,458
 
Total revenue$266,254
$134,847
$393,983
$795,084
 $690,776
$258,847
$684,137
$1,633,760
 
    
Timing of revenue recognition from products and servicesTiming of revenue recognition from products and services Timing of revenue recognition from products and services 
Products/services transferred at a point in time$—
$—
$86,877
$86,877
 $—
$—
$137,124
$137,124
 
Products/services transferred over time266,254
134,847
119,412
520,513
 690,776
258,847
232,526
1,182,149
 
Total$266,254
$134,847
$206,289
$607,390
 $690,776
$258,847
$369,650
$1,319,273
 

 Six Months Ended June 30, 2019
 Global EcommercePresort ServicesSendTech SolutionsRevenue from products and servicesRevenue from leasing transactions and financingTotal consolidated revenue
Major products/service lines      
Business services$548,573
$262,985
$12,950
$824,508
$—
$824,508
Support services—
—
256,304
256,304
—
256,304
Financing—
—
—
—
189,462
189,462
Equipment sales—
—
40,677
40,677
134,661
175,338
Supplies—
—
97,443
97,443
—
97,443
Rentals—
—
—
—
40,602
40,602
Subtotal548,573
262,985
407,374
1,218,932
$364,725
$1,583,657
       
Revenue from leasing transactions and financing      
Financing—
—
189,462
189,462
  
Equipment sales—
—
134,661
134,661
  
Rentals—
—
40,602
40,602
  
     Total revenue$548,573
$262,985
$772,099
$1,583,657
  
       
Timing of revenue recognition from products and services    
Products/services transferred at a point in time$—
$—
$169,666
$169,666
  
Products/services transferred over time548,573
262,985
237,708
1,049,266
  
      Total$548,573
$262,985
$407,374
$1,218,932
  



PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Our performance obligations for revenue from products and services are as follows:
Business services includes providing mail processing services, cross-bordershipping subscription solutions, shipping solutions and fulfillment, delivery and return services.services and cross-border solutions. Revenue for mail processing services, fulfillment, delivery and return services and cross-border solutions is recognized over time as the services are provided.provided and revenue for shipping subscription solutions is recognized ratably over the contract period. Contract terms for these services range from one to five years followed by annual renewal periods.
Support services includes providing maintenance, professional meter and other subscription services for our mailing equipment.equipment and professional services for our shipping solutions. Contract terms range from one to five years, depending on the term of the lease contract for the related equipment. Revenue for maintenance meter and other subscription services is recognized ratably over the contract period and revenue for professional services is recognized when services are provided.
Equipment sales generally includeincludes the sale of mailing and shipping equipment, excluding sales-type leases. We recognize revenue upon delivery for self-install equipment 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.
Supplies revenue is recognized upon delivery.
Revenue from leasing transactions and financing includes revenue from sales-type leases, operating leases, finance income and late fees.

Advance Billings from Contracts with Customers
Balance sheet location March 31, 2020 December 31, 2019 Increase/ (decrease)Balance sheet location June 30, 2020 December 31, 2019 Increase/ (decrease)
Advance billings, currentAdvance billings $88,038
 $92,464
 $(4,426)Advance billings $113,799
 $92,464
 $21,335
Advance billings, noncurrentOther noncurrent liabilities $1,192
 $1,245
 $(53)Other noncurrent liabilities $1,102
 $1,245
 $(143)

Advance billings are recorded when cash payments are due in advance of our performance. Revenue is recognized ratably over the contract term. Items in advance billings primarily relate to support services on mailing equipment. Revenue is recognized ratably over the contract term.Advance billings at both June 30, 2020 and December 31, 2019 also includes $9 million from leasing transactions.
The net decreaseincrease in advance billings at March 31,June 30, 2020 is due to revenuenew advance billings recognized during the period in excess of advance billings.revenue recognized. Revenue recognized during the period includes $55$75 million of advance billings at the beginning of the period, partially offset by advance billings in the quarter.

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

period.
Future Performance Obligations
Future performance obligations include revenue streams bundled with our leasing contracts, primarily maintenance meter and other subscription services. The transaction prices allocated to future performance obligations will be recognized as follows:
  Remainder of 2020 2021 2022-2025 Total
SendTech Solutions $219,155
 $238,137
 $306,647
 $763,939
  Remainder of 2020 2021 2022-2025 Total
SendTech Solutions $146,357
 $252,289
 $346,874
 $745,520
The table above does not include revenue related to performance obligations for contracts with terms less than 12 months and expected consideration for those performance obligations where revenue is recognized based on the amount billable to the customer.

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

3. Segment Information
Our reportable segments are Global Ecommerce, Presort Services and SendTech Solutions. Global Ecommerce and Presort Services comprise the Commerce Services reporting group. The principal products and services of each reportable segment are as follows:
Global Ecommerce: Includes the revenue and related expenses from products and services that facilitate domestic retail and ecommerce shipping solutions, including fulfillment and returns, and global cross-border ecommerce transactions.
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 (MarketingMarketing Mail Flats and Bound Printed Matter)Matter for postal worksharing discounts.
SendTech Solutions: Includes the revenue and related expenses from sending technology solutions for physical mailing,and digital mailing and shipping technology solutions, financing, services, supplies and other applications to help simplify and save on the sending, tracking and receiving of letters, parcels and packages.flats.
Management measures segment profitability and performance using segment earnings before interest and taxes (EBIT). Segment EBIT is calculated by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses, restructuring charges, asset impairment charges and other items not allocated to a particular business segment. Management believes that it provides investors a useful measure of operating performance and underlying trends of the business. 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 net loss.(loss) income.
 Revenue
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Global Ecommerce$398,453
 $282,319
 $690,776
 $548,573
Presort Services118,127
 128,138
 258,847
 262,985
Commerce Services516,580
 410,457
 949,623
 811,558
SendTech Solutions320,912
 378,116
 684,137
 772,099
Total revenue$837,492
 $788,573
 $1,633,760
 $1,583,657
 Revenue
 Three Months Ended March 31,
 2020 2019
Global Ecommerce$292,323
 $266,254
Presort Services140,720
 134,847
Commerce Services433,043
 401,101
SendTech Solutions363,225
 393,983
Total revenue$796,268
 $795,084



PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

EBITEBIT
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2020 20192020 2019 2020 2019
Global Ecommerce$(29,475) $(14,600)$(18,894) $(15,576) $(48,369) $(30,176)
Presort Services15,695
 15,066
12,582
 15,462
 28,277
 30,528
Commerce Services(13,780) 466
(6,312) (114) (20,092) 352
SendTech Solutions106,562
 122,403
104,268
 124,738
 210,830
 247,141
Total segment EBIT92,782
 122,869
97,956
 124,624
 190,738
 247,493
Reconciliation of Segment EBIT to net loss: 
  
Reconciliation of Segment EBIT to net (loss) income:     
  
Unallocated corporate expenses(43,722) (56,958)(49,489) (45,048) (93,211) (102,006)
Restructuring charges(3,817) (3,700)
Restructuring charges and asset impairments(4,922) (5,899) (8,739) (9,599)
Interest expense, net(38,372) (38,966)(38,385) (39,062) (76,757) (78,028)
Gain on sale of equity investment11,908
 —
 11,908
 —
Goodwill impairment(198,169) —
—
 —
 (198,169) —
Loss on extinguishment of debt(36,987) —
—
 —
 (36,987) —
Loss on Market Exits—
 (17,710)
Transaction costs(292) (258)
Benefit (provision) for income taxes10,030
 (7,820)
Loss from continuing operations(218,547) (2,543)
Income (loss) from discontinued operations, net of tax10,064
 (116)
Net loss$(208,483) $(2,659)
Loss on dispositions and transaction costs(349) (1,581) (641) (19,549)
Provision for income taxes(17,016) (3,724) (6,986) (11,544)
(Loss) income from continuing operations(297) 29,310
 (218,844) 26,767
(Loss) income from discontinued operations, net of tax(3,032) (5,613) 7,032
 (5,729)
Net (loss) income$(3,329) $23,697
 $(211,812) $21,038


During the three and six months ended March 31,June 30, 2020, we received an advanceinsurance proceeds of $4$5 million against our insurance claimand $9 million, respectively, related to the October 2019 ransomwaremalware attack, a portion of which has been allocated to the business segments.

4. Discontinued Operations
Discontinued operations includes the Software Solutions business, sold in December 2019, with the exception of the software business in Australia, which closed in January 2020, and the Production Mail business, sold in July 2018. Selected financial information of discontinued operations is as follows:
 Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
 Software Solutions Production Mail Total Software Solutions Production Mail Total
Revenue$—
 $—
 $—
 $72,206
 $—
 $72,206
            
Earnings from discontinued operations$—
 $—
 $—
 $1,342
 $—
 $1,342
(Loss) gain on sale(3,416) 245
 (3,171) —
 (8,589) (8,589)
(Loss) income from discontinued operations before taxes$(3,416) $245
 (3,171) $1,342
 $(8,589) (7,247)
Tax benefit    (139)     (1,634)
Loss from discontinued operations, net of tax    $(3,032)     $(5,613)

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Three Months Ended March 31, 2020 Three Months Ended March 31, 2019Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
Software Solutions Production Mail Total Software Solutions Production Mail TotalSoftware Solutions Production Mail Total Software Solutions Production Mail Total
Revenue$—
 $—
 $—
 $73,318
 $750
 $74,068
$—
 $—
 $—
 $145,524
 $—
 $145,524
                      
Earnings (loss) from discontinued operations$—
 $—
 $—
 $1,594
 $(663) $931
$—
 $—
 $—
 $2,938
 $(663) $2,275
Gain (loss) on sale (including transaction costs)10,285
 (412) 9,873
 —
 (667) (667)
Gain (loss) on sale6,869
 (167) 6,702
 —
 (9,257) (9,257)
Income (loss) from discontinued operations before taxes$10,285
 $(412) 9,873
 $1,594
 $(1,330) 264
$6,869
 $(167) 6,702
 $2,938
 $(9,920) (6,982)
Tax (benefit) provision    (191)     380
Tax benefit    (330)     (1,253)
Income (loss) from discontinued operations, net of tax    $10,064
     $(116)    $7,032
     $(5,729)

Assets of discontinued operations and liabilities of discontinued operations at December 31, 2019 includes the assets and liabilities of the software business in Australia.
  



PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

5. Earnings per Share (EPS)
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2020 20192020 2019 2020 2019
Numerator: 
  
 
  
  
  
Loss from continuing operations$(218,547) $(2,543)
Income (loss) from discontinued operations, net of tax10,064
 (116)
Net loss (numerator for diluted EPS)(208,483) (2,659)
(Loss) income from continuing operations$(297) $29,310
 $(218,844) $26,767
(Loss) income from discontinued operations, net of tax(3,032) (5,613) 7,032
 (5,729)
Net (loss) income (numerator for diluted EPS)(3,329) 23,697
 (211,812) 21,038
Less: Preference stock dividend—
 8
—
 —
 —
 8
Loss attributable to common stockholders (numerator for basic EPS)$(208,483) $(2,667)
(Loss) income attributable to common stockholders (numerator for basic EPS)$(3,329) $23,697
 $(211,812) $21,030
Denominator: 
  
 
  
  
  
Weighted-average shares used in basic EPS170,912
 185,971
171,478
 177,192
 171,167
 181,446
Dilutive effect of common stock equivalents (1)
—
 —
—
 1,089
 —
 1,192
Weighted-average shares used in diluted EPS170,912
 185,971
171,478
 178,281
 171,167
 182,638
Basic (loss) earnings per share (2):
 
  
Basic earnings (loss) per share (2):
 
  
  
  
Continuing operations$(1.28) $(0.01)$—
 $0.17
 $(1.28) $0.15
Discontinued operations0.06
 —
(0.02) (0.03) 0.04
 (0.03)
Net loss$(1.22) $(0.01)
Diluted (loss) earnings per share (2):
   
Net (loss) income$(0.02) $0.13
 $(1.24) $0.12
Diluted earnings (loss) per share (2):
       
Continuing operations$(1.28) $(0.01)$—
 $0.16
 $(1.28) $0.15
Discontinued operations0.06
 —
(0.02) (0.03) 0.04
 (0.03)
Net loss$(1.22) $(0.01)
Net (loss) income$(0.02) $0.13
 $(1.24) $0.12
          
Anti-dilutive options excluded from diluted earnings per share:17,617
 14,989
Common stock equivalents excluded from calculation of diluted earnings per share because their impact would be anti-dilutive:19,963
 16,297
 18,297
 16,077

(1)
Dilutive effect of common stock equivalents for the three and six months ended March 31,June 30, 2020 was 1,019 and 2019 was 1,554 and 1,618,1,190, respectively; however, areis not included in the calculation of diluted earnings per share as the Company is reporting a net loss for both periods.
(2)
The sum of the earnings per share amounts may not equal the totals due to rounding.


PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

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 consisted of the following:
March 31,
2020		 December 31,
2019		June 30,
2020		 December 31,
2019
Raw materials$16,631
 $13,514
$20,021
 $13,514
Supplies and service parts24,133
 21,840
22,787
 21,840
Finished products35,156
 36,969
34,681
 36,969
Inventory at FIFO cost75,920
 72,323
77,489
 72,323
Excess of FIFO cost over LIFO cost(4,072) (4,072)(3,836) (4,072)
Total inventory, net$71,848
 $68,251
$73,653
 $68,251



PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

7. Finance Assets and Lessor Operating Leases
Finance 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 clients for postage and supplies. Most loan receivables are generally due each month; however, 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. Client acquisition costs are expensed as incurred.
Finance receivables consisted of the following:
March 31, 2020 December 31, 2019June 30, 2020 December 31, 2019
North America International Total North America International TotalNorth America International Total North America International Total
Sales-type lease receivables 
  
  
  
  
  
 
  
  
  
  
  
Gross finance receivables$1,031,493
 $200,053
 $1,231,546
 $1,055,852
 $224,202
 $1,280,054
$998,450
 $196,767
 $1,195,217
 $1,055,852
 $224,202
 $1,280,054
Unguaranteed residual values40,345
 11,301
 51,646
 41,934
 11,789
 53,723
37,742
 11,283
 49,025
 41,934
 11,789
 53,723
Unearned income(301,136) (61,379) (362,515) (319,281) (65,888) (385,169)(282,027) (58,487) (340,514) (319,281) (65,888) (385,169)
Allowance for credit losses(25,933) (4,883) (30,816) (10,920) (2,085) (13,005)(26,603) (4,743) (31,346) (10,920) (2,085) (13,005)
Net investment in sales-type lease receivables744,769
 145,092
 889,861
 767,585
 168,018
 935,603
727,562
 144,820
 872,382
 767,585
 168,018
 935,603
Loan receivables   
  
  
  
  
   
  
  
  
  
Loan receivables292,699
 24,844
 317,543
 298,247
 27,926
 326,173
254,786
 18,635
 273,421
 298,247
 27,926
 326,173
Allowance for credit losses(7,422) (630) (8,052) (5,906) (740) (6,646)(6,482) (286) (6,768) (5,906) (740) (6,646)
Net investment in loan receivables285,277
 24,214
 309,491
 292,341
 27,186
 319,527
248,304
 18,349
 266,653
 292,341
 27,186
 319,527
Net investment in finance receivables$1,030,046
 $169,306
 $1,199,352
 $1,059,926
 $195,204
 $1,255,130
$975,866
 $163,169
 $1,139,035
 $1,059,926
 $195,204
 $1,255,130


Maturities of gross sales-type lease receivables and gross loan receivables at March 31, 2020 were as follows:

 Sales-type Lease Receivables Loan Receivables
 North America International Total North America International Total
Remaining for year ending December 31, 2020$321,928
 $58,207
 $380,135
 $256,712
 $24,844
 $281,556
Year ending December 31, 2021320,823
 64,327
 385,150
 11,660
 —
 11,660
Year ending December 31, 2022217,470
 43,949
 261,419
 9,999
 —
 9,999
Year ending December 31, 2023120,443
 23,495
 143,938
 5,222
 —
 5,222
Year ending December 31, 202446,447
 8,389
 54,836
 6,603
 —
 6,603
Thereafter4,382
 1,686
 6,068
 2,503
 —
 2,503
Total$1,031,493
 $200,053
 $1,231,546
 $292,699
 $24,844
 $317,543











PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Maturities of gross sales-type lease receivables and gross loan receivables at June 30, 2020 were as follows:
 Sales-type Lease Receivables Loan Receivables
 North America International Total North America International Total
Remaining for year ending December 31, 2020$220,405
 $41,451
 $261,856
 $216,777
 $18,635
 $235,412
Year ending December 31, 2021336,863
 68,465
 405,328
 12,032
 —
 12,032
Year ending December 31, 2022234,552
 47,971
 282,523
 10,414
 —
 10,414
Year ending December 31, 2023138,308
 26,324
 164,632
 5,582
 —
 5,582
Year ending December 31, 202458,803
 10,403
 69,206
 6,807
 —
 6,807
Thereafter9,519
 2,153
 11,672
 3,174
 —
 3,174
Total$998,450
 $196,767
 $1,195,217
 $254,786
 $18,635
 $273,421

Aging of Receivables
The aging of gross finance receivables was as follows:
March 31, 2020June 30, 2020
Sales-type Lease Receivables Loan Receivables  Sales-type Lease Receivables Loan Receivables  
North
America
 International 
North
America
 International Total
North
America
 International 
North
America
 International Total
Past due amounts 0 - 90 days$1,008,879
 $197,681
 $288,180
 $24,562
 $1,519,302
$974,864
 $194,055
 $246,491
 $18,288
 $1,433,698
Past due amounts > 90 days22,614
 2,372
 4,519
 282
 29,787
23,586
 2,712
 8,295
 347
 34,940
Total$1,031,493
 $200,053
 $292,699
 $24,844
 $1,549,089
$998,450
 $196,767
 $254,786
 $18,635
 $1,468,638
Past due amounts > 90 days 
  
  
  
  
 
  
  
  
  
Still accruing interest$4,856
 $1,309
 $2,538
 $125
 $8,828
$4,982
 $1,091
 $5,205
 $191
 $11,469
Not accruing interest17,758
 1,063
 1,981
 157
 20,959
18,604
 1,621
 3,090
 156
 23,471
Total$22,614
 $2,372
 $4,519
 $282
 $29,787
$23,586
 $2,712
 $8,295
 $347
 $34,940
 December 31, 2019
 Sales-type Lease Receivables Loan Receivables  
 
North
America
 International 
North
America
 International Total
Past due amounts 0 - 90 days$1,032,912
 $220,819
 $294,001
 $27,697
 $1,575,429
Past due amounts > 90 days22,940
 3,383
 4,246
 229
 30,798
Total$1,055,852
 $224,202
 $298,247
 $27,926
 $1,606,227
Past due amounts > 90 days 
  
  
  
  
Still accruing interest$4,835
 $1,081
 $2,094
 $121
 $8,131
Not accruing interest18,105
 2,302
 2,152
 108
 22,667
Total$22,940
 $3,383
 $4,246
 $229
 $30,798


Allowance for Credit Losses
We estimate an allowance for credit losses based on historical loss experience, the nature of our portfolios, adverse situations that may affect a client's ability to pay, current conditions, reasonable and supportable forecasts and current economic outlook. Credit losses are estimated at the portfolio level based on asset type and geographic market. Historical loss experience was based on actual loss rates over the average term of the asset of five years for sales-type lease receivables and three years for loan receivables (including accrued interest). Additionally, we evaluate current conditions and review third-party economic forecasts on a quarterly basis to determine the impact on the allowance for credit losses. The assumptions used in determining an estimate of credit losses are inherently subjective and actual results may differ significantly from estimated reserves. The allowance for credit losses for the threesix months ended March 31,June 30, 2020 includes an increased probability of anconsiders the current economic recessionconditions and resulting impact on a client's future ability to pay amounts due.

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

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. As of March 31, 2020,We monitor delinquency rates and have experienced a slight increase in our delinquencies during this current economic situation. However, 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. We have not experienced a significant change in the collections of amounts due, but in light of the current economic situation, it is possible that our delinquency rates could increase.







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 finance receivables was as follows:
Sales-type Lease Receivables Loan Receivables  Sales-type Lease Receivables Loan Receivables  
North
America
 International 
North
America
 International Total
North
America
 International 
North
America
 International Total
Balance at December 31, 2019$10,920
 $2,085
 $5,906
 $740
 $19,651
$10,920
 $2,085
 $5,906
 $740
 $19,651
Cumulative effect of accounting change9,271
 1,750
 (1,116) (402) 9,503
9,271
 1,750
 (1,116) (402) 9,503
Amounts charged to expense6,892
 1,345
 4,006
 403
 12,646
9,025
 1,257
 4,758
 208
 15,248
Write-offs(1,618) (248) (2,058) (104) (4,028)(3,536) (386) (4,542) (297) (8,761)
Recoveries592
 31
 691
 —
 1,314
946
 44
 1,386
 1
 2,377
Other(124) (80) (7) (7) (218)(23) (7) 90
 36
 96
Balance at March 31, 2020$25,933
 $4,883
 $7,422
 $630
 $38,868
Balance at June 30, 2020$26,603
 $4,743
 $6,482
 $286
 $38,114
                  
Sales-type Lease Receivables Loan Receivables  Sales-type Lease Receivables Loan Receivables  
North
America
 International 
North
America
 International Total
North
America
 International 
North
America
 International Total
Balance at January 1, 2019$10,253
 $2,355
 $6,777
 $837
 $20,222
$10,253
 $2,355
 $6,777
 $837
 $20,222
Amounts charged to expense3,399
 231
 957
 20
 4,607
3,660
 455
 2,329
 315
 6,759
Write-offs(878) (245) (2,280) (169) (3,572)(3,452) (533) (4,649) (451) (9,085)
Recoveries347
 40
 942
 —
 1,329
813
 167
 1,909
 4
 2,893
Other15
 (497) 3
 44
 (435)48
 (182) 8
 54
 (72)
Balance at March 31, 2019$13,136
 $1,884
 $6,399
 $732
 $22,151
Balance at June 30, 2019$11,322
 $2,262
 $6,374
 $759
 $20,717


Credit Quality
The extension of credit and management of credit lines to new and existing clients uses a combination of a client's credit score, where available, and a detailed manual review of their financial condition and payment history or an automated process for certain small dollar applications. 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 in place 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. The relative scores are determined based on a number of factors, including financial information, payment history, company type and ownership structure. 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 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.











PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

The table below shows the gross sales-type lease receivable and loan receivable balances by relative risk class and year of origination based on the relative scores of the accounts within each class.
Sales Type Lease Receivables Loan Receivables TotalSales Type Lease Receivables Loan Receivables Total
2020 2019 2018 2017 2016 Prior 2020 2019 2018 2017 2016 Prior 
Low$80,794
 $278,796
 $225,328
 $141,499
 $62,994
 $28,603
 $216,717
 $1,034,731
$136,197
 $252,315
 $199,078
 $118,201
 $49,013
 $19,906
 $187,311
 $962,021
Medium13,337
 52,267
 45,057
 29,346
 12,816
 7,091
 58,152
 218,066
25,754
 57,452
 45,269
 28,693
 10,886
 5,688
 53,748
 227,490
High1,651
 5,961
 5,516
 3,610
 2,478
 833
 5,158
 25,207
3,249
 6,342
 5,295
 3,380
 1,802
 323
 4,210
 24,601
Not Scored23,483
 86,463
 60,505
 37,683
 20,153
 5,282
 37,516
 271,085
35,880
 82,099
 56,596
 33,466
 15,450
 2,883
 28,152
 254,526
Total$119,265
 $423,487
 $336,406
 $212,138
 $98,441
 $41,809
 $317,543
 $1,549,089
$201,080
 $398,208
 $306,238
 $183,740
 $77,151
 $28,800
 $273,421
 $1,468,638


The majority of the Not Scored amounts above is comprised ofwithin our International portfolio. 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. International credit applications below $50 thousand are subjected to an automated review process. All other credit applications are manually reviewed. A manual review includes obtaining client financial information, credit reports and other available financial information. Approximately 80% of credit applications are approved or denied through the automated review process.

Lease Income
Lease income from sales-type leases was as follows:
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2020 20192020 2019 2020 2019
Profit recognized at commencement (1)
$28,920
 $36,360
$21,271
 $36,508
 $51,166
 $73,112
Interest income34,260
 59,478
34,055
 58,045
 68,315
 117,523
Total lease income from sales-type leases$63,180
 $95,838
$55,326
 $94,553
 $119,481
 $190,635
(1) Lease contracts do not include variable lease payments.

Lessor Operating Leases
We also lease mailing equipment under operating leases with terms of one to five years. Maturities of these operating leases are as follows:
Remaining for year ending December 31, 2020$28,961
$20,222
Year ending December 31, 202124,361
27,899
Year ending December 31, 20229,159
10,881
Year ending December 31, 20234,262
4,899
Year ending December 31, 20241,165
1,528
Thereafter60
200
Total$67,968
$65,629



PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

8. Intangible Assets, Goodwill and GoodwillOther Assets
Intangible Assets
Intangible assets consisted of the following:
March 31, 2020 December 31, 2019June 30, 2020 December 31, 2019
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Customer relationships$265,630
 $(95,136) $170,494
 $265,665
 $(88,550) $177,115
$268,178
 $(101,688) $166,490
 $265,665
 $(88,550) $177,115
Software & technology31,600
 (21,576) 10,024
 31,600
 (19,999) 11,601
31,600
 (23,012) 8,588
 31,600
 (19,999) 11,601
Trademarks & other13,324
 (12,218) 1,106
 13,324
 (11,400) 1,924
13,324
 (12,942) 382
 13,324
 (11,400) 1,924
Total intangible assets$310,554
 $(128,930) $181,624
 $310,589
 $(119,949) $190,640
$313,102
 $(137,642) $175,460
 $310,589
 $(119,949) $190,640


Amortization expense was $9 million for both the three months ended March 31,June 30, 2020 and 2019, and $18 million for both the six months ended June 30, 2020 and 2019.
Future amortization expense as of March 31,June 30, 2020 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, 2020$24,412
$15,699
Year ending December 31, 202129,972
30,227
Year ending December 31, 202229,026
29,281
Year ending December 31, 202326,188
26,443
Year ending December 31, 202426,188
26,443
Thereafter45,838
47,367
Total$181,624
$175,460


Goodwill
Changes in the carrying value of goodwill, by reporting segment, are shown in the table below.
 December 31, 2019 Impairment Acquisition Currency impact June 30,
2020
Global Ecommerce$609,431
 $(198,169) $—
 $—
 $411,262
Presort Services212,529
 —
 8,463
 —
 220,992
Commerce Services821,960
 (198,169) 8,463
 —
 632,254
SendTech Solutions502,219
 —
 —
 (1,688) 500,531
Total goodwill$1,324,179
 $(198,169) $8,463
 $(1,688) $1,132,785


During the first quarter of 2020, our Global Ecommerce reporting unit experienced weaker than expected performance, in part due to the macroeconomic conditions resulting from COVID-19. BasedAt December 31, 2019, the fair value of our Global Ecommerce business exceeded its carrying value by less than 20%, and the deteriorating macroeconomic conditions and uncertainty brought on this,by COVID-19 caused us to evaluate the Global Ecommerce goodwill for impairment.
To test the Global Ecommerce goodwill for impairment, we determined the fair value of the Global Ecommerce reporting unit and compared it to the reporting unit's carrying value, including goodwill. We engaged a third-party to assist in the determination of the fair value of the reporting unit.
The determination of fair value, and the resulting impairment charge, relied on internal projections developed using numerous estimates and assumptions andthat are inherently subject to significant uncertainties. These estimates and assumptions used included revenue growth, profitability, cash flows, capital spending and other available information. The determination of fair value also incorporated a risk-adjusted discount rate, terminal growth rates and other assumptions that market participants may use. Changes in any of these estimates or assumptions could materially affect the determination of fair value and the associated goodwill impairment charge and could result in an additional impairment charge to be recorded in the future. These estimates and assumptions are considered Level 3 inputs under 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)

We determined that the reporting unit's estimated fair value was less than its carrying value and recorded a non-cash, pre-tax goodwill impairment charge of $198 million in the first quarter to reduce the carrying value of the Global Ecommerce reporting unit to its estimated fair value.

ChangesOther Assets
During the second quarter of 2020, we surrendered certain company owned life insurance policies and received proceeds of $46 million. We did not record a gain or loss on the surrender; however, the surrender resulted in a tax expense of $12 million (see Note 13 for further information). Also, during the carrying valuesecond quarter of goodwill, by reporting segment are shown2020, we sold our interest in the table below.
 December 31, 2019 Impairment Acquisition Currency impact March 31,
2020
Global Ecommerce$609,431
 $(198,169) $—
 $—
 $411,262
Presort Services212,529
 —
 4,338
 —
 216,867
Commerce Services821,960
 (198,169) 4,338
 —
 628,129
SendTech Solutions502,219
 —
 —
 (5,313) 496,906
Total goodwill$1,324,179
 $(198,169) $4,338
 $(5,313) $1,125,035

an equity investment for $12 million and recognized a gain of $12 million.


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.
March 31, 2020June 30, 2020
Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
Assets: 
  
  
  
 
  
  
  
Investment securities 
  
  
  
 
  
  
  
Money market funds$148,561
 $111,903
 $—
 $260,464
$85,243
 $441,600
 $—
 $526,843
Equity securities—
 17,044
 —
 17,044
—
 20,822
 —
 20,822
Commingled fixed income securities1,691
 18,688
 —
 20,379
1,713
 19,376
 —
 21,089
Government and related securities60,388
 25,454
 —
 85,842
39,525
 18,583
 —
 58,108
Corporate debt securities—
 72,012
 —
 72,012
—
 75,557
 —
 75,557
Mortgage-backed / asset-backed securities—
 107,457
 —
 107,457
—
 115,742
 —
 115,742
Derivatives     
 

     
 

Foreign exchange contracts—
 6,071
 —
 6,071
—
 308
 —
 308
Total assets$210,640
 $358,629
 $—
 $569,269
$126,481
 $691,988
 $—
 $818,469
Liabilities: 
  
  
  
 
  
  
  
Derivatives 
  
  
  
 
  
  
  
Interest rate swaps$—
 $(1,605) $—
 $(1,605)
Foreign exchange contracts$—
 $(3,758) $—
 $(3,758)—
 (1,106) —
 (1,106)
Total liabilities$—
 $(3,758) $—
 $(3,758)$—
 $(2,711) $—
 $(2,711)

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

 December 31, 2019
 Level 1 Level 2 Level 3 Total
Assets: 
  
  
  
Investment securities 
  
  
  
Money market funds$161,441
 $240,364
 $—
 $401,805
Equity securities—
 21,979
 —
 21,979
Commingled fixed income securities1,656
 18,404
 —
 20,060
Government and related securities64,572
 17,478
 —
 82,050
Corporate debt securities—
 72,149
 —
 72,149
Mortgage-backed / asset-backed securities—
 66,339
 —
 66,339
Derivatives 
  
  
 

Foreign exchange contracts—
 3,256
 —
 3,256
Total assets$227,669
 $439,969
 $—
 $667,638
Liabilities: 
  
  
  
Derivatives 
  
  
  
Foreign exchange contracts$—
 $(1,402) $—
 $(1,402)
Total liabilities$—
 $(1,402) $—
 $(1,402)

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: 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.
•
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.

Derivative Securities
•
Foreign Exchange Contracts: 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. These securities are classified as Level 2.
•
Interest Rate Swaps: The valuation of interest rate swaps is based on an income approach using inputs that are observable or that can be derived from, or corroborated by, observable market data. These securities are classified as Level 2.




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
Available-for-sale investment securities are predominantly held at the Pitney Bowes Bank, whose primary business is to provide financing solutions to clients that rent postage meters and purchase supplies. Investment securities classified as available-for-sale are recorded at fair value with changes in fair value due to market conditions (i.e. interest rates) recorded in accumulated other comprehensive income (AOCI) and changes in fair value due to credit conditions recorded in earnings. Individual securities are considered impaired when the fair value declines below amortized cost. We use a discounted cash flow model to determine the amount of unrealized losses due to credit losses which are recognized in earnings.losses. Unrealized losses and gains relatedrecorded during the period due to marketcredit conditions (i.e. interest rates) are recorded, net of tax, in AOCI.


PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)
were immaterial.

Available-for-sale securities consisted of the following:
March 31, 2020June 30, 2020
Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair valueAmortized cost Gross unrealized gains Gross unrealized losses Estimated fair value
Government and related securities$81,698
 $4,462
 $(360) $85,800
$55,576
 $1,289
 $(338) $56,527
Corporate debt securities73,338
 1,270
 (2,596) 72,012
71,689
 4,558
 (690) 75,557
Commingled fixed income securities1,684
 7
 —
 1,691
1,692
 21
 —
 1,713
Mortgage-backed / asset-backed securities104,968
 2,822
 (333) 107,457
113,497
 2,520
 (275) 115,742
Total$261,688
 $8,561
 $(3,289) $266,960
$242,454
 $8,388
 $(1,303) $249,539
 December 31, 2019
 Amortized cost Gross unrealized gains Gross unrealized losses Estimated fair value
Government and related securities$80,732
 $1,358
 $(114) $81,976
Corporate debt securities70,426
 2,009
 (286) 72,149
Commingled fixed income securities1,675
 —
 (19) 1,656
Mortgage-backed / asset-backed securities65,679
 960
 (300) 66,339
Total$218,512
 $4,327
 $(719) $222,120


Investment securities in a loss position were as follows:
March 31, 2020 December 31, 2019June 30, 2020 December 31, 2019
Fair Value Gross unrealized losses Fair Value Gross unrealized lossesFair Value Gross unrealized losses Fair Value Gross unrealized losses
Less than 12 continuous months$59,815
 $3,104
 $52,521
 $583
$46,650
 $1,192
 $52,521
 $583
Greater than 12 continuous months7,906
 185
 9,227
 136
4,441
 111
 9,227
 136
Total$67,721
 $3,289
 $61,748
 $719
$51,091
 $1,303
 $61,748
 $719

Our allowance for credit losses on available for saleavailable-for-sale investment securities was not significant at March 31,June 30, 2020. Unrealized losses recorded during the period specifically due to credit losses were immaterial. At March 31,June 30, 2020, approximately 30%10% of total securities in the investment portfolio were in a net loss position. We believe our available for sale allowance for credit losslosses on available-for-sale investment securities is adequate as the majority of our investments are within short-term, highly liquid investments, high grade corporate securities and U.S. government agencies.securities. We have not recognized an 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 or expect to receive the stated principal and interest at maturity.


PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

Scheduled maturities of available-for-sale securities at March 31,June 30, 2020 were as follows:
Amortized cost Estimated fair valueAmortized cost Estimated fair value
Within 1 year$26,602
 $26,831
$26,274
 $26,407
After 1 year through 5 years49,024
 50,100
56,027
 58,709
After 5 years through 10 years61,991
 61,909
47,838
 49,663
After 10 years124,071
 128,120
112,315
 114,760
Total$261,688
 $266,960
$242,454
 $249,539

The scheduled maturities of mortgage-backed and asset-backed securities may not coincide with the actual payment, as borrowers have the right to prepay 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)

Held-to-Maturity Securities
Held-to-maturity securities at March 31,June 30, 2020 and December 31, 2019, include $267$257 million and $383 million, respectively, of short-term, highly liquid time deposits. Due to the short-term nature of these securities, the carrying value approximates fair value.

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 mitigate these 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 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. No amount of ineffectiveness was recorded in earnings for these designated cash flow hedges. At March 31,both June 30, 2020 and December 31, 2019, we had outstanding contracts associated with these anticipated transactions with notional amounts of $8 million and $7 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 in the three months ended March 31, 2020.
The fair value of derivative instruments was as follows:
Designation of Derivatives Balance Sheet Location March 31,
2020		 December 31,
2019
Derivatives designated as
hedging instruments
    
  
Foreign exchange contracts Other current assets and prepayments $77
 $207
  Accounts payable and accrued liabilities (157) (56)
       
Derivatives not designated as
hedging instruments
    
  
Foreign exchange contracts Other current assets and prepayments 5,994
 3,049
  Accounts payable and accrued liabilities (3,601) (1,346)
       
  Total derivative assets $6,071
 $3,256
  Total derivative liabilities (3,758) (1,402)
  Total net derivative asset $2,313
 $1,854

million. Amounts included in AOCI at March 31,June 30, 2020 related to derivative instruments will be recognized in earnings within the next 12 months.
The following represents
Interest Rate Swaps
During the resultsquarter, we entered into interest rate swap agreements with an aggregate notional amount of $500 million that are designated as cash flow hedging relationships:hedges. The fair value of the interest rate swaps is recorded as a derivative asset or liability at the end of each reporting period with the change in fair value reflected in AOCI.

  Three Months Ended March 31,
  
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 2020 2019  2020 2019
Foreign exchange contracts $(160) $345
 Revenue $61
 $111
   
  
 Cost of sales 10
 16
  


 


   $71
 $127










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 was as follows:
Designation of Derivatives Balance Sheet Location June 30,
2020		 December 31,
2019
Derivatives designated as
hedging instruments
    
  
Foreign exchange contracts Other current assets and prepayments $46
 $207
  Accounts payable and accrued liabilities (214) (56)
       
Interest rate swaps Other noncurrent liabilities (1,605) —
       
Derivatives not designated as
hedging instruments
    
  
Foreign exchange contracts Other current assets and prepayments 262
 3,049
  Accounts payable and accrued liabilities (892) (1,346)
       
  Total derivative assets $308
 $3,256
  Total derivative liabilities (2,711) (1,402)
  Total net derivative (liability) asset $(2,403) $1,854


Results of cash flow hedging relationships were as follows:
  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 2020 2019  2020 2019
Foreign exchange contracts $(121) $(320) Revenue $(64) $(36)
   
  
 Cost of sales 32
 29
Interest rate swap (1,605) —
 Interest expense —
 —
  $(1,726) $(320)   $(32) $(7)
           
  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 2020 2019  2020 2019
Foreign exchange contracts $(281) $25
 Revenue $(3) $75
   
  
 Cost of sales 42
 45
Interest rate swap (1,605) —
 Interest expense —
 —
  $(1,886) $25
   $39
 $120

We 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 intercompany loans and interest and the corresponding mark-to-market adjustment on derivatives are recorded in earnings. The table below represents the mark-to-market adjustments of non-designated derivative instruments. All outstanding contracts at March 31,June 30, 2020 mature within 12 months.
    Three Months Ended March 31,
    Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument Location of Derivative Gain (Loss) 2020 2019
Foreign exchange contracts Selling, general and administrative expense $(4,867) $5,269


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. 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 was as follows:
 March 31, 2020 December 31, 2019
Carrying value$2,629,962
 $2,739,722
Fair value$1,967,357
 $2,572,794


10. Restructuring Charges
Activity in our restructuring reserves was as follows:
 Severance and benefits costs 
Other exit
costs
 Total
Balance at January 1, 2020$11,937
 $69
 $12,006
Expenses, net2,979
 75
 3,054
Cash payments(5,933) (114) (6,047)
Balance at March 31, 2020$8,983
 $30
 $9,013
      
Balance at January 1, 2019$13,641
 $1,808
 $15,449
Expenses, net3,432
 268
 3,700
Cash payments(7,293) (953) (8,246)
Balance at March 31, 2019$9,780
 $1,123
 $10,903

The majority of the remaining restructuring reserves are expected to be paid over the next 12 to 24 months.

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

The mark-to-market adjustments of non-designated derivative instruments were as follows:
    Three Months Ended June 30,
    Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument Location of Derivative Gain (Loss) 2020 2019
Foreign exchange contracts Selling, general and administrative expense $1,200
 $(65)
       
    Six Months Ended June 30,
    Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument Location of Derivative Gain (Loss) 2020 2019
Foreign exchange contracts Selling, general and administrative expense $(3,667) $5,205


Fair Value of Financial Instruments
Financial instruments not reported at fair value on a recurring basis include cash and cash equivalents, accounts receivable, loan receivables, accounts payable and debt. The carrying value for cash and cash equivalents, accounts receivable, loans receivable and accounts payable approximate fair value. The fair value of debt is estimated based on recently executed transactions and market price quotations. The inputs used to determine the fair value of debt are classified as Level 2 in the fair value hierarchy. The carrying value and estimated fair value of debt was as follows:
 June 30, 2020 December 31, 2019
Carrying value$2,716,747
 $2,739,722
Fair value$2,156,837
 $2,572,794


10. Restructuring Charges and Asset Impairments
Restructuring Charges
Activity in our restructuring reserves was as follows:
 Severance and benefits costs 
Other exit
costs
 Total
Balance at January 1, 2020$11,937
 $69
 $12,006
Expenses, net6,357
 546
 6,903
Cash payments(10,772) (593) (11,365)
Balance at June 30, 2020$7,522
 $22
 $7,544
      
Balance at January 1, 2019$13,641
 $1,808
 $15,449
Expenses, net7,101
 707
 7,808
Cash payments(10,786) (2,219) (13,005)
Balance at June 30, 2019$9,956
 $296
 $10,252

The majority of the restructuring reserves are expected to be paid over the next 12 to 24 months.

Other Charges
Restructuring charges and asset impairments for the six months ended June 30, 2020 and 2019 also includes $2 million of non-cash charges related to asset impairments, pension settlements and facilities abandonment.
11. Debt
Total debt consisted of the following:


Interest rate March 31, 2020 December 31, 2019Interest rate June 30, 2020 December 31, 2019
Notes due October 20214.125% $172,456
 $600,000
4.625% $172,456
 $600,000
Notes due May 20224.625% 150,000
 400,000
5.375% 150,000
 400,000
Notes due April 20235.20% 275,000
 400,000
5.70% 275,000
 400,000
Notes due March 20244.625% 375,000
 500,000
4.625% 375,000
 500,000
Notes due January 20375.25% 35,841
 35,841
5.25% 35,841
 35,841
Notes due March 20436.70% 425,000
 425,000
6.70% 425,000
 425,000
Term loan due November 2024Variable 395,000
 400,000
Variable 390,000
 400,000
Term loan due January 2025Variable 850,000
 —
Variable 839,375
 —
Credit FacilityVariable 100,000
 —
Other debt 5,051
 5,108
 5,052
 5,108
Principal amount 2,683,348
 2,765,949
 2,767,724
 2,765,949
Less: unamortized costs, net 53,386
 26,227
 50,977
 26,227
Total debt 2,629,962
 2,739,722
 2,716,747
 2,739,722
Less: current portion long-term debt 62,952
 20,108
 163,257
 20,108
Long-term debt $2,567,010
 $2,719,614
 $2,553,490
 $2,719,614


Interest rates on certain notes are subject to adjustment based on changes in our credit ratings. As a result of credit rating downgrades in November 2019 and May 2020, the interest rates on the October 2021 notes and April 2023 notes increased 0.50% and the interest rate on the May 2022 notes increased 0.75%. Further, the interest rates on the October 2021 notes and April 2023 notes will increase an additional 0.25% in the fourth quarter of 2020.
In February 2020, we secured a five-year $850 million term loan scheduled to maturematuring January 2025 (the 2025 Term Loan). The 2025 Term Loan bears interest at LIBOR plus 5.5% and resets monthly. In May 2020, we entered into interest rate swap agreements with an aggregate notional amount of $500 million to mitigate the interest rate risk associated with $500 million of our variable-rate term loans. Under the terms of the swap agreements, we pay fixed-rate interest of 0.4443% and receive variable-rate interest based on one-month LIBOR. The variable interest rate under the term loans and the swaps reset monthly.
In March 2020, we purchased under a tender offer $428 million of the October 2021 notes, $250 million of the May 2022 notes, $125 million of the April 2023 notes and $125 million of the March 2024 notes. A $37 million loss was incurred on the early redemption of debt and is recorded in other expense. debt.
During the first quarterhalf of 2020, we repaid $5$21 million of principal related to our term loans.
We have a $500 million secured revolving credit facility that expires in November 2024 and contains financial and non-financial covenants. Through March 31,In April 2020, we had not drawn upon the credit facility; however in light of the current macroeconomic environment, we drew down $100 million under the credit facility as a precautionary measure in April.measure. This borrowing is considered short-term as the amount is due and interest resets monthly. At March 31,June 30, 2020, we were in compliance with all covenants.

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

12. Pensions and Other Benefit Programs
The components of net periodic benefit cost (income) were as follows:
Defined Benefit Pension Plans Nonpension Postretirement Benefit PlansDefined Benefit Pension Plans Nonpension Postretirement Benefit Plans
United States Foreign  United States Foreign  
Three Months Ended Three Months Ended Three Months EndedThree Months Ended Three Months Ended Three Months Ended
March 31, March 31, March 31,June 30, June 30, June 30,
2020 2019 2020 2019 2020 20192020 2019 2020 2019 2020 2019
Service cost$26
 $21
 $399
 $384
 $217
 $255
$27
 $21
 $399
 $388
 $217
 $228
Interest cost13,179
 15,878
 3,518
 4,488
 1,245
 1,654
13,179
 15,708
 3,407
 4,308
 1,242
 1,637
Expected return on plan assets(21,304) (23,179) (8,208) (8,764) —
 —
(21,303) (23,184) (7,969) (8,505) —
 —
Amortization of transition credit—
 —
 (1) (2) —
 —
—
 —
 (1) (1) —
 —
Amortization of prior service (credit) cost(15) (15) 61
 63
 93
 80
(15) (15) 59
 60
 94
 81
Amortization of net actuarial loss8,198
 7,036
 2,059
 1,612
 736
 511
8,197
 6,037
 2,005
 1,572
 738
 503
Settlement389
 —
 —
 —
 —
 —
Settlement (1)
612
 801
 3,190
 397
 —
 —
Net periodic benefit cost (income)$473
 $(259) $(2,172) $(2,219) $2,291
 $2,500
$697
 $(632) $1,090
 $(1,781) $2,291
 $2,449
Contributions to benefit plans$1,929
 $1,628
 $7,988
 $8,210
 $4,455
 $4,756
$1,969
 $2,423
 $580
 $878
 $3,616
 $4,457
           
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,
2020 2019 2020 2019 2020 2019
Service cost$53
 $42
 $798
 $772
 $434
 $483
Interest cost26,358
 31,586
 6,925
 8,796
 2,487
 3,291
Expected return on plan assets(42,607) (46,363) (16,177) (17,269) —
 —
Amortization of transition credit—
 —
 (2) (3) —
 —
Amortization of prior service (credit) cost(30) (30) 120
 123
 187
 161
Amortization of net actuarial loss16,395
 13,073
 4,064
 3,184
 1,474
 1,014
Settlement (1)
1,001
 801
 3,190
 397
 —
 —
Net periodic benefit cost (income)$1,170
 $(891) $(1,082) $(4,000) $4,582
 $4,949
Contributions to benefit plans$3,898
 $4,051
 $8,568
 $9,088
 $8,071
 $9,213


(1) Approximately $2.6 million and $0.5 million of total settlement charges were recorded in discontinued operations and restructuring charges, respectively, for the three and six months ended June 30, 2020 and approximately $0.3 million and $0.7 million of total settlement charges were recorded in discontinued operations and restructuring charges, respectively, for the three and six months ended June 30, 2019.

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

13. Income Taxes
The effective tax rate for the three and six months ended March 31,June 30, 2020 was 101.8% and 2019 was 4.4%(3.3)%, respectively and 148.2%, respectively.includes a $12 million charge for the surrender of company owned life insurance policies (see Note 8). The effective tax rate for the threesix months ended March 31,June 30, 2020 also includes a benefit of $2 million on the $198 million goodwill impairment charge as the majority of this charge is nondeductible. The effective tax rate also includesnondeductible, a benefit of $2 million from the resolution of certain tax examinations and a charge of $3 million for the write-off of deferred tax assets associated with the expiration of out-of-money vested stock options and the vesting of restricted stock.
The effective tax rate for the three and six months ended March 31,June 30, 2019 was 11.3% and 30.1%, respectively, and includes benefits from the resolution of certain tax examinations of $3 million and $6 million, respectively. The effective tax rate for the six months ended June 30, 2019 also includes a $2 million tax on the $18 million book loss incurred from Market Exits,the disposition of operations in certain international markets, primarily due to nondeductible basis differences. The effective tax rate for the three months ended March 31, 2019 also includes a benefit of $2 million from the resolution of certain tax examinationsdifferences and a charge of $2 million for the write-off of deferred tax assets associated with the expiration of out-of-money vested stock options and the vesting of restricted stock.
As is the case with other large corporations, our tax returns are examined 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 unrecognized tax benefits will decrease in the next 12 months, and this decrease could be up to 10% of our unrecognized tax benefits.
The Internal Revenue Service examinations of our consolidated U.S. income tax returns for tax years prior to 2017 are closed to audit; however, various post-2011 U.S. state and local tax returns are still subject to examination. In Canada, the examination of our tax filings prior to 2015 are closed to audit. Other significant jurisdictions include France (closed through 2016), Germany (closed through 2016) and the U.K. (except for an item under appeal, closed(closed through 2017). We also have other less significant tax filings currently subject to examination.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was passed into law in response to market volatility and instability resulting from COVID-19. The CARES Act includes provisions relating to the deferment of the employer portion of certain payroll taxes, refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds and modifications to the net interest deduction limitations. We are currently assessing the impact on our consolidated financial statements, but do not expect it to be material.


PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

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 as of March 31,June 30, 2020. However, as litigation is inherently unpredictable, there can be no assurances in this regard.
In December 2018 and then in February 2019, certain of the Company’s officers and directors were named as defendants in two2 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. Both of these are derivative claims related to a prior action filed in Connecticut state court, City of Livonia Retiree Health and Disability Benefits Plan v. Pitney Bowes Inc. et al. (“Livonia”). On October 24, 2019, the court had granted the defendants’ motions to dismiss the Livonia case, and that judgment is now final. Given that the defendants prevailed in the Livonia action, the plaintiffs in the Clem and Devolin actions moved to withdraw their complaints, and on February 20, 2020 the court granted the motions. Both cases have now been dismissed.

15. Stockholders’ EquityWe have entered into 3 equipment leases for our Commerce Services operations that will commence in the fourth quarter with terms ranging from seven to nine years. Aggregate lease payments for the three leases will approximate $30 million.

Changes in stockholders’ equity were as follows:
 Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Total equity
Balance at January 1, 2020$323,338
 $98,748
 $5,438,930
 $(840,143) $(4,734,777) $286,096
Cumulative effect of accounting change—
 —
 (21,900) —
 —
 (21,900)
Net loss—
 —
 (208,483) —
 —
 (208,483)
Other comprehensive loss—
 —
 —
 (17,731) —
 (17,731)
Dividends paid ($0.05 per common share)—
 —
 (8,523) —
 —
 (8,523)
Issuance of common stock—
 (30,716) —
 —
 29,166
 (1,550)
Stock-based compensation expense—
 1,521
 —
 —
 —
 1,521
Balance at March 31, 2020$323,338
 $69,553
 $5,200,024
 $(857,874) $(4,705,611) $29,430

 
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 loss—
 —
 —
 —
 (2,659) —
 —
 (2,659)
Other comprehensive income—
 —
 —
 —
 —
 30,983
 —
 30,983
Dividends paid ($0.05 per common share)—
 —
 —
 —
 (9,408) —
 —
 (9,408)
Issuance of common stock—
 —
 —
 (18,925) —
 —
 16,975
 (1,950)
Conversion to common stock—
 (8) —
 (168) —
 —
 176
 —
Stock-based compensation expense—
 —
 —
 6,784
 —
 —
 —
 6,784
Repurchase of common stock—
 —
 —
 —
 —
 —
 (39,142) (39,142)
Balance at March 31, 2019$1
 $388
 $323,338
 $109,166
 $5,267,615
 $(917,978) $(4,696,080) $86,450



PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)

15. Stockholders’ Equity

Changes in stockholders’ equity were as follows:
 Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Total equity
Balance at April 1, 2020$323,338
 $69,553
 $5,200,024
 $(857,874) $(4,705,611) $29,430
Net loss—
 —
 (3,329) —
 —
 (3,329)
Other comprehensive income—
 —
 —
 21,612
 —
 21,612
Dividends paid ($0.05 per common share)—
 —
 (8,576) —
 —
 (8,576)
Issuance of common stock—
 (6,484) —
 —
 6,498
 14
Stock-based compensation expense—
 5,429
 —
 —
 —
 5,429
Balance at June 30, 2020$323,338
 $68,498
 $5,188,119
 $(836,262) $(4,699,113) $44,580

 
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
 $(917,978) $(4,696,080) $86,450
Net income—
 —
 —
 —
 23,697
 —
 —
 23,697
Other comprehensive income—
 —
 —
 —
 —
 10,300
 —
 10,300
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

 Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Total equity
Balance at January 1, 2020$323,338
 $98,748
 $5,438,930
 $(840,143) $(4,734,777) $286,096
Cumulative effect of accounting changes—
 —
 (21,900) —
 —
 (21,900)
Net loss—
 —
 (211,812) —
 —
 (211,812)
Other comprehensive income—
 —
 —
 3,881
 —
 3,881
Dividends paid ($0.10 per common share)—
 —
 (17,099) —
 —
 (17,099)
Issuance of common stock—
 (37,200) —
 —
 35,664
 (1,536)
Stock-based compensation expense—
 6,950
 —
 —
 —
 6,950
Balance at June 30, 2020$323,338
 $68,498
 $5,188,119
 $(836,262) $(4,699,113) $44,580

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, 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


16. Accumulated Other Comprehensive Loss (AOCL)
Reclassifications out of AOCL were as follows:
Amount Reclassified from AOCI (1)
Gain (Loss) Reclassified from AOCL
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2020 20192020 2019 2020 2019
Gains on cash flow hedges   
Cash flow hedges       
Revenue$61
 $111
$(64) $(36) $(3) $75
Cost of sales10
 16
32
 29
 42
 45
Total before tax71
 127
(32) (7) 39
 120
Income tax provision17
 32
Income tax (benefit) provision(8) (1) 10
 31
Net of tax$54
 $95
$(24) $(6) $29
 $89
          
Gains (losses) on available for sale securities   
Available-for-sale securities       
Interest expense, net$284
 $(23)$3,233
 $(81) $3,517
 $(104)
Income tax provision (benefit)71
 (6)805
 (21) 876
 (27)
Net of tax$213
 $(17)$2,428
 $(60) $2,641
 $(77)
          
Pension and Postretirement Benefit Plans (2)
   
Pension and postretirement benefit plans       
Transition credit$1
 $2
$1
 $1
 $2
 $3
Prior service costs(139) (128)(138) (126) (277) (254)
Actuarial losses(10,993) (9,159)(10,940) (8,112) (21,933) (17,271)
Settlement(389) —
(3,802) (1,198) (4,191) (1,198)
Total before tax(11,520) (9,285)(14,879) (9,435) (26,399) (18,720)
Income tax benefit(2,650) (2,649)(3,502) (2,124) (6,152) (4,773)
Net of tax$(8,870) $(6,636)$(11,377) $(7,311) $(20,247) $(13,947)
(1)













PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands unless otherwise noted, except per share amounts)
Amounts in parentheses indicate reductions to income and increases to other comprehensive loss.
(2)
Reclassified from AOCL into other components of net pension and postretirement income (see Note 12 for additional details).

Changes in AOCL were as follows:
Cash flow hedges Available for sale securities Pension and postretirement benefit plans Foreign currency adjustments TotalCash flow hedges Available for sale securities Pension and postretirement benefit plans Foreign currency adjustments Total
Balance at January 1, 2020$337
 $2,849
 $(819,018) $(24,311) $(840,143)$337
 $2,849
 $(819,018) $(24,311) $(840,143)
Other comprehensive (loss) income before reclassifications (1)
(120) 1,521
 —
 (27,735) (26,334)(1,416) 5,356
 —
 (17,636) (13,696)
Reclassifications into earnings (1), (2)
(54) (213) 8,870
 —
 8,603
(Gain) loss reclassified into earnings (1)
(29) (2,641) 20,247
 —
 17,577
Net other comprehensive (loss) income(174) 1,308
 8,870
 (27,735) (17,731)(1,445) 2,715
 20,247
 (17,636) 3,881
Balance at March 31, 2020$163
 $4,157
 $(810,148) $(52,046) $(857,874)
Balance at June 30, 2020$(1,108) $5,564
 $(798,771) $(41,947) $(836,262)

 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)
258
 2,799
 —
 21,368
 24,425
Reclassifications into earnings (1), (2)
(95) 17
 6,636
 —
 6,558
Net other comprehensive income163
 2,816
 6,636
 21,368
 30,983
Balance at March 31, 2019$354
 $(245) $(839,825) $(78,262) $(917,978)
 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
(Gain) loss reclassified into earnings (1)
(89) 77
 13,947
 —
 13,935
Net other comprehensive (loss) income(71) 6,029
 13,947
 21,378
 41,283
Balance at June 30, 2019$120
 $2,968
 $(832,514) $(78,252) $(907,678)
(1)     Amounts are net of tax. Amounts in parentheses indicate debits to AOCL.
(2)     See table above for additional details of these reclassifications.



Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This 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, 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. In particular, the uncertainty around the severity, magnitude and duration of the COVID-19 pandemic (COVID-19), including governments' responses to COVID-19, its continuing impact on our operations, employees, the availability and cost of labor, global supply chain and consumer demand across our and our clients' businesses, as well as any deterioration or instability in global macroeconomic conditions, could cause our actual results to differ than those expressed in any forward-looking statement. Other factors which could cause future financial performance to differ materially from the expectations, and which may also be exacerbated by COVID-19 or a negative change in the economy, include, without limitation:
declining physical mail volumes
changes in postal regulations, or the financial health of posts, in the U.S. or other major markets or the loss of, or significant changes to, our contractual relationship with the United States Postal Service (USPS)
expenses and potential impacts resulting from a breach of security, including cyber-attacks or other comparable events
our ability to continue to grow volumes, gain additional economies of scale and improve profitability within our Commerce Services group
the loss of some of our larger clients in our Commerce Services group
our success at managing customer credit risk
third-party suppliers' ability to provide products and services required by our clients
changes in labor conditions and transportation costs
capital market disruptions or credit rating downgrades that adversely impact our ability to access capital markets at reasonable costs
a breach of security, including a future cyber-attack or other comparable event
our success in developing and marketing new products and services and obtaining regulatory approvals, if required
competitive factors, including pricing pressures, technological developments and the introduction of new products and services by competitors
expenses and potential impact on client relationships resulting from the October 2019 ransomware attack that affected the Company's operations
the continued availability and security of key information technology systems and the cost to comply with information security requirements and privacy laws
changes in global political conditions and international trade policies, including the imposition or expansion of trade tariffs
our success at managing relationships and costs with outsource providers of certain functions and operations
changes in banking regulations or the loss of our Industrial Bank charter or changes in foreign currency exchange rates and interest rates
the United Kingdom's recent exit from the European Union
intellectual property infringement claims
the use of the postal system for transmitting harmful biological agents, illegal substances or other terrorist attacks
acts of nature


Further information about factors that could materially affect us, including our results of operations and financial condition, is contained in Item 1A. "Risk Factors" in our 2019 Annual Report, as supplemented by Part II, Item 1A in thethis Quarterly Report on Form 10-Q.


Overview
Financial Results Summary - Three and Six Months Ended March 31:June 30:
RevenueRevenue
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2020 2019 Actual % change Constant Currency % Change2020 2019 Actual % change Constant Currency % Change 2020 2019 Actual % change Constant Currency % change
Business services$444,379
 $406,545
 9 % 9 %$528,990
 $417,963
 27 % 27 % $973,369
 $824,508
 18 % 18 %
Support services122,015
 128,599
 (5)% (5)%113,786
 127,705
 (11)% (10)% 235,801
 256,304
 (8)% (8)%
Financing89,078
 97,043
 (8)% (8)%85,462
 92,419
 (8)% (7)% 174,540
 189,462
 (8)% (7)%
Equipment sales76,273
 89,787
 (15)% (15)%57,837
 85,551
 (32)% (32)% 134,110
 175,338
 (24)% (23)%
Supplies45,709
 50,953
 (10)% (10)%32,773
 46,490
 (30)% (29)% 78,482
 97,443
 (19)% (19)%
Rentals18,814
 22,157
 (15)% (14)%18,644
 18,445
 1 % 2 % 37,458
 40,602
 (8)% (7)%
Total revenue$796,268
 $795,084
 — % — %$837,492
 $788,573
 6 % 7 % $1,633,760
 $1,583,657
 3 % 3 %
RevenueRevenue
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2020 2019 Actual % change Constant currency % change2020 2019 Actual % change Constant currency % change 2020 2019 Actual % change Constant currency % change
Global Ecommerce$292,323
 $266,254
 10 % 10 %$398,453
 $282,319
 41 % 41 % $690,776
 $548,573
 26 % 26 %
Presort Services140,720
 134,847
 4 % 4 %118,127
 128,138
 (8)% (8)% 258,847
 262,985
 (2)% (2)%
Commerce Services433,043
 401,101
 8 % 8 %516,580
 410,457
 26 % 26 % 949,623
 811,558
 17 % 17 %
SendTech Solutions363,225
 393,983
 (8)% (7)%320,912
 378,116
 (15)% (15)% 684,137
 772,099
 (11)% (11)%
Total$796,268
 $795,084
 — % — %$837,492
 $788,573
 6 % 7 % $1,633,760
 $1,583,657
 3 % 3 %
EBITEBIT
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2020 2019 % change2020 2019 % change 2020 2019 % change
Global Ecommerce$(29,475) $(14,600) >(100%)
$(18,894) $(15,576) (21)% $(48,369) $(30,176) (60)%
Presort Services15,695
 15,066
 4 %12,582
 15,462
 (19)% 28,277
 30,528
 (7)%
Commerce Services(13,780) 466
 >(100%)
(6,312) (114) >(100%)
 (20,092) 352
 >(100%)
SendTech Solutions106,562
 122,403
 (13)%104,268
 124,738
 (16)% 210,830
 247,141
 (15)%
Total Segment EBIT$92,782
 $122,869
 (24)%$97,956
 $124,624
 (21)% $190,738
 $247,493
 (23)%

Revenue increased 6% as reported and 7% at constant currency for the quarter was $796 million and flat compared to the prior year. Business services revenue increased 27% driven by significantly higher volumes in our Global Ecommerce business, which more than offset double digit declines in equipment sales, supplies and support services driven in part by the continuing impacts of COVID-19. In our business segments, Global Ecommerce revenue grew 41% due to increased volumes, Presort Services revenue declined 8% due to lower First Class and Marketing Mail volumes and SendTech Solutions revenue declined 15%, primarily due to lower equipment sales and supplies revenue. Segment EBIT decreased 21%, primarily due to lower revenue in SendTech Solutions, higher credit losses in Global Ecommerce and increased costs attributed to COVID-19.
Revenue increased 3% for the quarter increased overfirst half of 2020 compared to the prior year,year. Business services revenue increased 18% due to higher Global Ecommerce volumes but was partially offset by declines in other revenue line items. Commerce Services revenue grew 8% asIn our business segments, Global Ecommerce revenue increased 10%grew 26% due to increased volumes, and Presort Services revenue increased 4% primarily due to volume growth driven by acquisitions. These revenue increases were offset by a decline indeclined 2% and SendTech Solutions revenue of 8%declined 11%. Segment EBIT decreased 24%23%, primarily due to lower revenue in SendTech Solutions, higher credit losses and the mix of business in Global Ecommerce and lower revenue in SendTech Solutions.increased costs attributed to COVID-19. Refer to Results of Operations section for further information.
Commerce Services EBIT margins in the quarter and year-to-date periods were adversely impacted by increased labor and postal costs at Global Ecommerce due to the sudden and significant increase in volumes, higher credit losses at Global Ecommerce, lower volumes at Presort Services and increased costs and reduced productivity driven by COVID-19. However, the Global Ecommerce EBIT margin


in the second quarter was improved from the first quarter 2020 and prior year period reflecting scale-related benefits in per unit transportation and warehousing costs. SendTech Solutions EBIT margins in the quarter and year-to-date periods were relatively unchanged compared to the prior year periods despite double-digit declines in revenue, primarily due to lower operating expenses from cost savings initiatives.
Second Quarter Highlights
We drew down $100 million under our revolving credit facility as a precautionary measure and invested these proceeds in highly liquid, short-term investments.
We surrendered certain company owned life insurance (COLI) policies and sold our interest in an equity investment for aggregate proceeds of $58 million. We recognized a gain of $12 million on the sale of the equity investment and while the surrender of the COLI policies did not result in a pre-tax gain or loss, the surrender resulted in a $12 million tax charge.
We also received insurance proceeds of $5 million related to the October 2019 malware attack that temporarily disrupted customer access to some services.
In May 2020, we were affected by a Maze ransomware attack. Although the Maze attackers were able to exfiltrate a small amount of our confidential data, working with our third-party security consultants, we were able to successfully thwart the attack before any of our operations could be disrupted or any data encrypted. The attempted attack did not have any impact on our financial results, and we satisfied all regulatory obligations arising out of the attack.
Impacts of COVID-19
The global spread of COVID-19 and the efforts to contain it have negatively impactedadversely affected the U.S. and international economies, decreasedimpacting demand for a broad variety of goods and services, createdcreating disruptions and shortages in global supply chains and causedcausing significant volatility in financial markets. Businesses engaged in mailing and shippingOur employees worldwide that have been designated as an essential service. Accordingly, ourthe ability to work remotely are doing so. Our facilities continue to operate, and many of our employees continue to report to work at these facilities. We have takenimplemented additional measures to protect the health and safety of our employees and contractors, including staggering shifts and the communities in which we operate. Within our facilities, we are enforcingbreaks to enhance social distancing, providing personal protection equipment, conducting temperature checks and sanitizing equipment and facilities multiple times a day.
COVID-19 has impacted our first quarter financial results in different ways in each of our businesses. In Global Ecommerce, we saw significantly higher volumes in the quarter due to the demand for ecommerce solutions in the current environment. In Presort Services, First Class and Marketing Mail volumes have declined due to lower market demand and changing client behaviors in the current environment. As a result of the additional health and safety measures implemented in all our Commerce Services facilities, we have incurred, and will continue to incur, additional costs and reduced productivity.
In SendTech Solutions, operations, the global shut-down of businesses and increase in the number of clients working remotely significantly adversely impacted demand for and usage of our mailing equipment and supplies, as well as our ability to contact and service clients and perform on-site installations. ThroughDespite the endnegative impacts of February, global shipments were down slightly from the prior year. In March, global shipments declined significantly due to COVID-19, resulting in a significant decreasewe saw improving trends in equipment sales revenueand supplies revenues as we exited the quarter. Also, as businesses continue to operate remotely, we are seeing improvement in our cloud-enabled shipping and mailing solutions.


comparedIn March 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was passed into law in response to market volatility and instability resulting from COVID-19. The CARES Act includes provisions relating to the prior year. In Global Ecommerce,deferment of the employer portion of certain payroll taxes, net operating loss carryback periods and modifications to the net interest deduction limitations. We continue to assess the impact of these provisions; which we experienced low double-digit revenue growth through February; however, that growth rate declined to mid-single-digits in the month of March. The impact on Presort Services revenue was minimal in the quarter partly due tobelieve could affect the timing of volumes already scheduled to be processed; however, we began to experience declines in mail volumes in late March. Commerce Services margins were impacted by lower productivity due to social distancing and higher costs related to sanitizing the equipment and facilities.
During the quarter, we secured a new five-year $850 million term loan scheduled to mature in January 2025. The net proceeds from the term loan along with existingcertain cash were used to purchase under a tender offer $928 million in principalpayments but not materially impact our financial position or results of certain notes scheduled to mature between 2021 and 2024. We recognized in other expense a loss of $37 million from the early extinguishment of debt.
During the first quarter of 2020, our Global Ecommerce reporting unit experienced weaker than expected performance, in part due to the macroeconomic conditions resulting from COVID-19, and we recorded a non-cash, pre-tax goodwill impairment charge of $198 million. See Critical Accounting Estimates for further details.

Effective January 1, 2020, we adopted the new accounting standard for credit losses. The new standard requires companies to consider, among other factors, current and future economic factors. As a result of the current economic recessionary conditions and outlook caused by COVID-19, we recorded an additional $11 million credit loss provision.
During the quarter, we received an advance of $4 million against our insurance claim related to the October 2019 ransomware attack that temporarily disrupted customer access to some services. These proceeds were recognized as income within other expense.

operations.
Outlook
The severity, duration and governmental responses of COVID-19 and the resulting significantly weaker global economic conditions have negatively impacted our results of operations and are expected to continue to impact our business, results of operations, cash flowsuncertain, and liquidity; however, the severity and duration of this pandemic is uncertain. Accordingly, we are not able to reasonably estimate the full extent of the impact on our operating results, liquidity, cash flows or financial position for the remainder of the year. From the onset ofAs COVID-19 continues to affect global economies and how businesses operate, we have taken, and will continue to take proactive stepsmeasures to protect the health and safety of our employees, clients, partners and suppliers. We have business continuity plansThese additional safety measures will result in place that are designed to address various threatsadditional expenses and vulnerabilities, including a response to pandemics. Employees worldwide that have the ability to work remotely are doing soreduced productivity. Corporate and local management will continue to do so until it is no longer required by government authorities. We have also implemented travel restrictions as appropriate. Within our facilities, we are enforcing social distancing and sanitizing equipment and facilities multiple times a day, including during and between shifts. We will continueassess conditions to incur additional expenses in connection with our responsedetermine when, or how, employees currently working remotely should return to COVID-19, including costs related to the cleaning of equipment and facilities and redirecting mail and parcels to different facilities within our network. The distancing and safety measures we are taking will also affect productivity in our facilities.office locations.
Our Commerce Services businesses are more demand-driven and it is difficult to predict how demand and volumes will trend and the impact to productivity throughout the duration of COVID-19. Within Global Ecommerce, domestic parcel delivery volumes have increased significantly due to a global market shift to ecommerce solutions. While we cannot predict the mixmagnitude of our business is resulting in varying impactsvolume increases, we expect


this shift to continue throughout the remainder of the year. We signed on demand. Earlyover 100 new clients in the second quarter weand volumes from these clients will benefit the second half of the year. Cross-border volumes are seeing volume growth in domestic delivery and fulfillment as well as digital volumes. We arestill experiencing declines in cross-border volumes and we expect the businessthis to be further impacted by higher transportation costs due to thecontinue as long as there are restrictions on international shipments. The sudden and significant increase in volumes resulted in higher labor and postal costs in the second quarter as we needed to react quickly to process and deliver these parcels. However, the higher volumes resulted in scale-related benefits in per unit transportation and warehousing costs. We expect continued improvements in per unit transportation and warehousing costs as volumes increase and improvements in per unit labor costs as the business sizes itself to handle the higher volumes.
In Presort Services, approximately 80% of mail volumes processed are First Class Mail with the remaining 20% primarily Marketing Mail. There were declines in mail volumes from the onset of COVID-19COVID-19; however, these volume declines started to moderate as clients reacted to market demand and looked to reduce costs. Wewe exited the second quarter. For the remainder of the year, we expect lower volumes of First Class Mail and Marketing Mail withto be lower compared to the prior year. As businesses begin to re-open and clients return to their normal behaviors, we expect volumes to improve from current levels; however, the timing and magnitude of this improvement would be contingent on the severity and duration of COVID-19. While currently a more significant decreasesmall part of total volumes, volumes in Marketing Mail volumes; however,Flats and Bound Printed Matter grew over 30% in the second quarter and we cannot predict the duration and magnitude ofanticipate these declines or determine when, or if, volumes will returncontinue to normal levels.
Within Global Ecommerce and Presort Services, we are consolidating facilities in certain markets to reduce costs and improve productivity. Productivity will be impactedgrow throughout the COVID-19 crisis as we continue to enforce social distancing measures and follow safety guidelines.remainder of the year.
Within SendTech Solutions, approximately two-thirds of revenue is recurring in nature and materially contributes to our cash flows. Nonrecurring revenues, primarily equipment sales and to a lesser extent, supplies, will continue to be adversely impacted by COVID-19 due to declining demand and usage. We are unable to predict the duration and magnitude of these declines or determine when, or if, demand and usage will return to normal levels.levels; however, we would expect to see improving trends as more businesses start to re-open. As a result of clients working remotely and the necessity of alternate solutions, we saw an improvement in our cloud-enabled shipping and mailing solutions during the second quarter and expect this shift in market preference to continue as clients realize the value of our digital capabilities. We are also monitoringcontinue to monitor cash collections from our recurring revenue streams; however, atstreams. There was an increase in delinquency rates during the second quarter that was in-line with our expectations, but we are starting to see an improvement in delinquency rates and positive changes in customer payment behaviors. There are no assurances that this point it is too early to determineimprovement in delinquency rates and payment behaviors will continue, or that the impactimpacts of any delinquency rates.COVID-19 will not result in higher client bankruptcies or account write-offs.
Before the onset of COVID-19 and the resulting economic decline, we had taken steps to reduce and refinance debt, and improve liquidity and strengthen our balance sheet that we believe will enable us to manage through the current economic downturn. We are taking further actions to manage cash flows and maintain liquidity, including, but not limited to, prioritizing our capital expenditures to essential and necessary investments and reducing targeted loan originations at Wheeler Financial. We estimate that these actions alone will benefit annual cash flows by approximately $85 million to $95$75 million. Refer to the Liquidity and Capital Resources section for further information.



RESULTS OF OPERATIONS
In our Results of Operations discussion, we present and discuss revenue and cost of revenue at the segment level since our revenue and related costs of revenue sources are predominantly specific to the segments. Operating and other expenses are presented and discussed on a consolidated basis as this basis provides a better understanding of the underlying drivers of change in these expense and cost line items or they are not allocated to a specific segment.
In our revenue discussion, we may refer to revenue growth on a constant currency basis. Constant currency measures exclude the impact of changes in currency exchange rates since the prior period under comparison. We believe that excluding the impacts of currency exchange rates provides a better understanding of the underlying revenue performance. Constant currency change is calculated by converting the current period non-U.S. dollar denominated revenue using the prior year’s exchange rate. Where constant currency measures are not provided, the actual change and constant currency change are the same.  
Management measures segment profitability and performance using segment earnings before interest and taxes (EBIT). Segment EBIT is calculated by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses, restructuring charges, asset impairment charges, goodwill impairment charges and other items not allocated to a particular business segment. Management believes that it provides investors a useful measure of operating performance and underlying trends of the business. Segment EBIT may not be indicative of our overall consolidated performance and therefore, should be read in conjunction with our consolidated results of operations.

REVENUE AND SEGMENT EBIT
Global Ecommerce
Global Ecommerce includes the revenue and related expenses from products and services that enable domestic and cross-border ecommerce transactions, including shipping, fulfillment and returns.
Revenue Cost of Revenue Gross MarginRevenue Cost of Revenue Gross Margin
Three Months Ended March 31, Three Months Ended March 31, Three Months Ended March 31,Three Months Ended June 30, Three Months Ended June 30, Three Months Ended June 30,
2020 2019 Actual % change Constant Currency % change 2020 2019 2020 20192020 2019 Actual % change Constant Currency % change 2020 2019 2020 2019
Business services$292,323
 $266,254
 10% 10% $265,221
 $222,635
 9.3% 16.4%$398,453
 $282,319
 41 % 41% $355,861
 $238,854
 10.7% 15.4%
                              
Segment EBIT          Segment EBIT          
Three Months Ended March 31,          Three Months Ended June 30,          
2020 2019 Actual % change          2020 2019 Actual % change          
Segment EBIT$(29,475) $(14,600) >(100%)
          $(18,894) $(15,576) (21)%          
Global Ecommerce revenue increased 10%41% in the firstsecond quarter of 2020 with higherdue to significant growth in domestic parcel delivery volumes contributingdriven in part, by the market shift to ecommerce solutions as a result of COVID-19, and higher digital domestic and fulfillment services volumes. This volume growth contributed revenue growth of 9 percentage points47%, while a decline in domestic returns and fulfillment services contributing revenue growth of 1 percentage point.cross-border volumes contributed a 6% decline in revenue.
Gross margin decreased to 9.3%10.7% from 16.4%15.4% in the prior year primarily due to higher labor, postage and other incremental costs driven by COVID-19.
Segment EBIT for the continuingsecond quarter of 2020 was a loss of $19 million compared to a loss of $16 million in the prior year period. The increased loss was primarily driven by incremental costs associated with COVID-19 including higher credit loss expense of $6 million, higher labor and postal costs of $3 million due to the rapid increase in volumes and incremental costs of $1 million related to sanitizing and safety measures. Segment EBIT margin of (4.7)% improved from the prior year period reflecting scale-related benefits in transportation and warehouse costs offset by increased labor and postal costs driven by COVID-19.



 Revenue Cost of Revenue Gross Margin
 Six Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30,
 2020 2019 Actual % change Constant Currency % change 2020 2019 2020 2019
Business services$690,776
 $548,573
 26 % 26% $621,082
 $461,312
 10.1% 15.9%
                
 Segment EBIT          
 Six Months Ended June 30,          
 2020 2019 Actual % change          
Segment EBIT$(48,369) $(30,176) (60)%          
Global Ecommerce revenue increased 26% in the first half of 2020 with higher domestic parcel delivery volumes driven in part, by the market shift to ecommerce solutions as a result of COVID-19, and higher digital domestic and fulfillment services volumes contributing revenue growth of 30%, partially offset by domestic returns volumes contributing a revenue decline of 4%.
Gross margin decreased to 10.1% from 15.9% in the prior year primarily due to a shift in the mix of business to lighter weight, lower margin services and reduced productivityincremental costs driven by COVID-19.
Segment EBIT for the first quarterhalf of 2020 was a loss of $29$48 million compared to a loss of $15$30 million in the prior year period. The higherincreased loss was primarily driven by higher credit loss expense of $8 million, higher labor and postal costs, incremental costs related to sanitizing and safety measures, the shift in the mix of business to lighter weight, lower margin services,and incremental costs associated with new facilities that opened during the fourth quarter of 2019 and lower labor productivity related to social distancing and safety measures taken in response to COVID-19.











2019.

Presort Services
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 (MarketingMarketing Mail Flats and Bound Printed Matter)Matter for postal worksharing discounts.
Revenue Cost of Revenue Gross MarginRevenue Cost of Revenue Gross Margin
Three Months Ended March 31, Three Months Ended March 31, Three Months Ended March 31,Three Months Ended June 30, Three Months Ended June 30, Three Months Ended June 30,
2020 2019 Actual % change Constant Currency % change 2020 2019 2020 20192020 2019 Actual % change Constant Currency % change 2020 2019 2020 2019
Business services$140,720
 $134,847
 4% 4% $105,238
 $101,962
 25.2% 24.4%$118,127
 $128,138
 (8)% (8)% $93,542
 $97,040
 20.8% 24.3%
                              
Segment EBIT          Segment EBIT          
Three Months Ended March 31,          Three Months Ended June 30,          
2020 2019 Actual % change          2020 2019 Actual % change          
Segment EBIT$15,695
 $15,066
 4%          $12,582
 $15,462
 (19)%          
Presort Services revenue increased 4%decreased 8% in the firstsecond quarter of 2020. Acquisitions contributed2020 compared to the prior year period due to a 3% increase while higher revenue per piece contributed a 1% increase.reduction in volumes. Volumes increaseddecreased in the firstsecond quarter compared to the prior year driven by higherprimarily due to lower Marketing Mail and First Class Mail, driven by COVID-19, partially offset by higher volumes of Marketing Mail Flats and Bound Printed MatterMatter. Revenue declined 11% due to lower organic volumes but benefited 3% from existing clients and from acquisitions, partially offset by lower Marketing Mail volumes, primarily driven by COVID-19.acquisitions.
Gross margin increaseddecreased to 25.2%20.8% from 24.4%24.3% and segment EBIT increased $0.6 million, or 4%,declined 19% in the firstsecond quarter of 2020. The improvementdecrease in gross margin was primarily due to the decline in revenue and increased costs associated with COVID-19, including $2 million for sanitizing and safety measures and quarantine payments. The increased costs were partially offset by improvements in transportation due to ongoing productivity actions, which increasedinitiatives. Segment EBIT byincludes $3 million.million from insurance proceeds related to the malware attack in late 2019. Segment EBIT also improved $2 millionmargin of 10.7% was down 1 percentage point from the prior year period largely driven by reduced volumes and increased labor costs driven by COVID-19.



 Revenue Cost of Revenue Gross Margin
 Six Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30,
 2020 2019 Actual % change Constant Currency % change 2020 2019 2020 2019
Business services$258,847
 $262,985
 (2)% (2)% $198,781
 $199,002
 23.2% 24.3%
                
 Segment EBIT          
 Six Months Ended June 30,          
 2020 2019 Actual % change          
Segment EBIT$28,277
 $30,528
 (7)%          
Presort Services revenue decreased 2% in the first half of 2020 compared to the prior year period due to lower bad debt expensevolumes of Marketing Mail and First Class Mail, driven by COVID-19. Revenue declined 5% due to lower organic volumes but wasbenefited 3% from acquisitions.
Gross margin decreased to 23.2% from 24.3% and segment EBIT declined $2 million, or 7%, in the first half of 2020. Gross margins were adversely impacted by $4lower revenue and the incremental costs associated with COVID-19. The decline in segment EBIT was driven by lower revenue and a $2 million from unrealizedcharge for losses on certain investment securities driven by market conditions.conditions, partially offset by $3 million of insurance proceeds related to the malware attack in late 2019.

SendTech Solutions
SendTech Solutions includes the revenue and related expenses from sending technology solutions for physical mailing,and digital mailing and shipping technology solutions, financing, services, supplies and other applications to help simplify and save on the sending, tracking and receiving of letters, parcels and flats.
 Revenue Cost of Revenue Gross Margin
 Three Months Ended March 31, Three Months Ended March 31, Three Months Ended March 31,
 2020 2019 Actual % change Constant Currency % change 2020 2019 2020 2019
Business services$11,336
 $5,444
 >100%
 >100%
 $4,185
 $2,189
 63.1% 59.8%
Support services122,015
 128,599
 (5)% (5)% 39,628
 41,764
 67.5% 67.5%
Financing89,078
 97,043
 (8)% (8)% 12,489
 11,364
 86.0% 88.3%
Equipment sales76,273
 89,787
 (15)% (15)% 57,348
 63,407
 24.8% 29.4%
Supplies45,709
 50,953
 (10)% (10)% 12,240
 13,550
 73.2% 73.4%
Rentals18,814
 22,157
 (15)% (14)% 6,378
 9,715
 66.1% 56.2%
Total revenue$363,225
 $393,983
 (8)% (7)% $132,268
 $141,989
 63.6% 64.0%
                
 Segment EBIT          
 Three Months Ended March 31,          
 2020 2019 Actual % change          
Segment EBIT$106,562
 $122,403
 (13)%          





 Revenue Cost of Revenue Gross Margin
 Three Months Ended June 30, Three Months Ended June 30, Three Months Ended June 30,
 2020 2019 Actual % change Constant Currency % change 2020 2019 2020 2019
Business services$12,410
 $7,506
 65 % 68 % $4,856
 $1,803
 60.9% 76.0%
Support services113,786
 127,705
 (11)% (10)% 36,196
 40,637
 68.2% 68.2%
Financing85,462
 92,419
 (8)% (7)% 11,939
 11,043
 86.0% 88.1%
Equipment sales57,837
 85,551
 (32)% (32)% 47,866
 58,486
 17.2% 31.6%
Supplies32,773
 46,490
 (30)% (29)% 8,377
 11,758
 74.4% 74.7%
Rentals18,644
 18,445
 1 % 2 % 6,021
 8,418
 67.7% 54.4%
Total revenue$320,912
 $378,116
 (15)% (15)% $115,255
 $132,145
 64.1% 65.1%
                
 Segment EBIT          
 Three Months Ended June 30,          
 2020 2019 Actual % change          
Segment EBIT$104,268
 $124,738
 (16)%          
SendTech Solutions revenue decreased 8% as reported and 7% at constant currency15% in the firstsecond quarter of 2020 compared to the prior year. Equipment sales and supplies decreased 15%32% and 10%,29% at constant currency, respectively, as the outbreakimpacts of COVID-19 significantly impacted our ability to deliver equipmentcontact and suppliesservice clients and perform on-site installations. Financinginstallations and reduced usage and demand for supplies. Support services revenue decreased 8% primarily10% at constant currency driven by a declining lease portfoliometer population and lower late fees of $1 million. Support servicesfinancing revenue decreased 5% and rentals revenue decreased 14%7% at constant currency primarily driven by a declining meter population. Slightly offsetting these revenue declines, businesslease portfolio. Business services revenue increased $6$5 million, or 68% at constant currency, primarily due to higher revenue from the SendPro Online product.an overall increase in our shipping offerings.
GrossThe total gross margin remained relatively flatdecreased 1 percentage point compared to the prior year. Business services gross margin decreased to 60.9% from 76.0% primarily driven by an increase in sales of lower margin solutions. Equipment sales gross margin for the first quarter 2020 decreased 514 percentage points


to 24.8%. Current year margins were adversely impacted approximately 11 percentage points17.2%, primarily due to changinglower revenue and the mix of product sales and 3 percentage points due to delays in scheduling and performing on-site installations of our higher engineering costs. Equipment sales margins in the prior year quarter were adversely impacted 10 percentage points due to a $9 million charge related to a SendPro C tablet replacement program.end products. Rentals gross margin increased to 66.1%67.7% from 56.2%54.4% primarily due to a $2 million favorable inventory provision adjustment. Business services increased to 63.1% from 59.8%, primarily driven by lower scrap 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. The financing gross margin decreased to 86.0% from 88.3%88.1% compared to the prior year primarily due to a higher effective interest rate.
Segment EBIT decreased 13%16% in the second quarter of 2020 compared to the prior year, driven by the decline in revenue partially offset by lower expenses of $15 million from cost savings initiatives, including professional fees of $3 million, marketing and advertising costs of $3 million, travel related expenses of $2 million and research and development costs of $4 million. Segment EBIT margin of 32.5% was flat compared to the prior year period as lower costs offset the decline in revenue.

 Revenue Cost of Revenue Gross Margin
 Six Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30,
 2020 2019 Actual % change Constant Currency % change 2020 2019 2020 2019
Business services$23,746
 $12,950
 83 % 86 % $9,042
 $3,992
 61.9% 69.2%
Support services235,801
 256,304
 (8)% (8)% 75,823
 82,400
 67.8% 67.9%
Financing174,540
 189,462
 (8)% (7)% 24,428
 22,407
 86.0% 88.2%
Equipment sales134,110
 175,338
 (24)% (23)% 105,214
 121,893
 21.5% 30.5%
Supplies78,482
 97,443
 (19)% (19)% 20,619
 25,308
 73.7% 74.0%
Rentals37,458
 40,602
 (8)% (7)% 12,400
 18,133
 66.9% 55.3%
Total revenue$684,137
 $772,099
 (11)% (11)% $247,526
 $274,133
 63.8% 64.5%
                
 Segment EBIT          
 Six Months Ended June 30,          
 2020 2019 Actual % change          
Segment EBIT$210,830
 $247,141
 (15)%          

SendTech Solutions revenue decreased 11% in the first half of 2020 compared to the prior year. Equipment sales and supplies decreased 23% and 19% at constant currency, respectively, as the impacts of COVID-19 impacted our ability to contact and service clients and perform on-site installations and reduced usage and demand for supplies. Financing revenue decreased 7% at constant currency, primarily driven by a declining lease portfolio. Support services and rentals revenue decreased 8% and 7% at constant currency, respectively, primarily driven by a declining meter population. Business services revenue increased $11 million, or 86% at constant currency, primarily due to an increase in our shipping offerings, including the SendPro Online product.
The total gross margin remained relatively flat compared to the prior year. Business services gross margin decreased to 61.9% from 69.2%, primarily driven by higher sales of lower margin solutions. Equipment sales gross margin decreased 9 percentage points to 21.5%, primarily due to lower revenue and the mix of product sales. Equipment sales margin in the prior year period was impacted by a $9 million charge related to a SendPro C tablet replacement program. Rentals gross margin increased to 66.9% from 55.3%, primarily due to lower scrap costs in the current year and a $2 million favorable inventory provision adjustment. Financing gross margin decreased to 86.0% from 88.2% compared to the prior year primarily due to a higher effective interest rate.
Segment EBIT decreased 15% in first quarterhalf of 2020 compared to the prior year, primarily due to the decline in revenue and higher current year credit loss provisionsprovision of $10 million due to the current economic recessionary conditions and outlook caused by COVID-19, partially offset by lower expenses of $10$33 million from cost savings initiatives.initiatives, including lower professional fees of $8 million, lower research and development costs of $6 million and lower marketing expenses of $5 million.











CONSOLIDATED OPERATING AND OTHER EXPENSES

Selling, general and administrative (SG&A)
SG&A expense of $249$234 million in the quarter decreased 5%3% compared to the prior period, primarily due to lower employee-related coststravel related expenses of $7 million as we imposed travel restrictions in response to COVID-19, lower professional fees of $10$5 million due to contract renegotiations and lower marketing expenses of $2$3 million, partially offset by an increasehigher credit loss provision of $8 million. SG&A expense of $482 million in the first half of 2020 decreased 4% compared to the prior period, primarily due to lower professional fees of $15 million, lower employee costs of $8 million and lower travel related expenses of $7 million, partially offset by higher credit loss provision for credit losses of $5 million driven in part by the adoption of a new accounting standard and the current economic recessionary conditions and outlook caused by COVID-19.$13 million.

Research and development (R&D)
R&D expense decreased 4%45%, or $0.5$6 million, in the second quarter of 2020 and decreased 25%, or $7 million, in the first half of 2020 primarily due to lower project spending.

Restructuring charges and asset impairments
Restructuring charges and asset impairments for the each of the three months ended March 31,June 30, 2020 and 2019 were $4 million.$5 million and $6 million, respectively, and restructuring charges and asset impairments for the six months ended June 30, 2020 and 2019 were $9 million and $10 million, respectively. See Note 10 to the Condensed Consolidated Financial Statements for further information.

Goodwill impairment
In the three months ended March 31, 2020, weWe recorded a non-cash, pre-tax goodwill impairment charge of $198 million associated with our Global Ecommerce reporting unit.unit in the first quarter of 2020. See Critical Accounting Estimates for further information.

Other (income) expense net
Other (income) expense net for the three months ended March 31,June 30, 2020 includes a $12 million gain on the sale of an equity investment and insurance proceeds of $5 million related to the 2019 malware attack. Other (income) expense for the six months ended June 30, 2020 includes a $37 million loss on the early extinguishment of debt, partially offset by the $12 million gain on the sale of an advanceequity investment and $9 million of $4 million against our insurance claimproceeds related to the October 2019 ransomwaremalware attack. Other (income) expense for the threesix months ended March 31,June 30, 2019 includes thea loss on Market Exits of $18 million, primarily from the write-off of cumulative translation adjustments.adjustments, in connection with the disposition of operations in certain international markets.

Income taxes
Provision for income taxes for the three and six months ended June 30, 2020 includes a tax charge of $12 million in connection with the surrender of company owned life insurance policies for which no pre-tax income or loss was recognized. The provision for income taxes for the six months ended June 30, 2020 also includes a benefit of $2 million on the $198 million goodwill impairment charge as most of this charge is nondeductible. See Note 13 to the Condensed Consolidated Financial Statements for further information.

Discontinued Operations
IncomeLoss from discontinued operations for the three months ended March 31,June 30, 2020 primarily includes a pension settlement charge related to the Software Solutions sale. Income from discontinued operations for the six months ended June 30, 2020 primarily includes the gain on the sale of the Australia software business, which closed in January 2020.2020, and the pension settlement charge related to the Software Solutions sale. See Note 4 to the Condensed Consolidated Financial Statements for further information.




LIQUIDITY AND CAPITAL RESOURCES
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.
At March 31,June 30, 2020, we had cash and cash equivalents and short-term investments of $730 million,$1 billion, of which $144$182 million was held by our foreign subsidiaries. Cash held by our foreign subsidiaries is generally used to support the liquidity needs of those subsidiaries. WeOur ability to maintain adequate liquidity for our operations is dependent upon a number of factors, including our revenue and earnings, our clients ability to pay their balances on a timely basis, the length and severity of COVID-19 and its impact on macroeconomic conditions and our ability to take further cost-savings and cash conservation measures if necessary. At this time, we believe that existing cash and investments, cash generated from operations and borrowing capacity under our $500 million revolving credit facility will be sufficient to support our current cash needs. Our ability to maintain adequate liquidity for our operations in the future is dependent upon a number of factors, including our revenue and earnings, macroeconomic conditions, the length and severity of business disruptions caused by COVID-19, and our ability to take further cost-savings and cash conservation measures. At this time, based on our expected impact of COVID-19, we continue to believe we have the ability to fund our cash needs for the next 12 months. In April 2020, in light of the current macroeconomic environment, we drew down $100 million under the credit facility as a precautionary measure. At March 31, 2020, we were in compliance with all covenants. 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 Flow Summary
Changes in cash and cash equivalents were as follows:
2020 2019 Change2020 2019 Change
Net cash (used in) provided by operating activities$(66,284) $69,728
 $(136,012)
Net cash provided by operating activities$86,809
 $86,782
 $27
Net cash used in investing activities(25,458) (34,887) 9,429
(54,545) (36,151) (18,394)
Net cash used in financing activities(159,596) (63,992) (95,604)(84,598) (146,770) 62,172
Effect of exchange rate changes on cash and cash equivalents(10,032) 794
 (10,826)(9,211) (81) (9,130)
Change in cash and cash equivalents$(261,370) $(28,357) $(233,013)$(61,545) $(96,220) $34,675
Operating Activities
Cash used in operating activities in the first quarter of 2020 was $66 million compared to cash provided by operating activities of $70$87 million in the first half of 2020 was flat compared to the prior year. Cash flows from continuing operations decreased $97increased $44 million, primarily due to working capital changes including the timing of payments of accounts payable and interest and lower collections of accounts and finance receivables.payable. Cash flows from discontinued operations declined due to taxes related to the gain on the sale of our Software Solutions business.
Investing Activities
Cash used in investing activities in the first quarterhalf of 2020 of $25$55 million consisted primarilyincludes $65 million of net investment activity and $60 million in capital expenditures.expenditures, partially offset by $46 million in proceeds from the surrender of COLI policies, higher customer deposits at the PB Bank of $22 million and proceeds of $12 million from the sale of an equity investment. Cash used in investing activities in the first quarterhalf of 2019 was $35$36 million, consisting primarily of capital expenditures of $28$59 million and a decline inlower customer deposits at the PB Bank of $23$8 million, partially offset by net proceeds of $30$47 million from investment activities.
Financing Activities
In the first quarter of 2020, we entered into an $850 million term loan and received net proceeds of $817 million. We used these proceeds and available cash to purchase under a tender offer $928 million of certain of our senior notes scheduled to mature between 2021 and 2024. Cash used in financing activities also includein the first half of 2020 was $85 million, and includes payments of $33 million for premiums and fees associated with the tender offer, $9early extinguishment of debt, net cash of $32 million of dividend payments and $5used for debt activities, including $21 million of scheduled term loan repayments.
repayments and $17 million of dividend payments. See Financings and Capitalization below for additional information. In the first quarterhalf of 2019, cash used in financing activities included $39$100 million to repurchase 5.617.4 million shares of common stock, $9 million of dividends and $13$25 million to repay term loan debt.debt and $18 million of dividend payments.

Financings and Capitalization
Interest rates on certain notes are subject to adjustment based on changes in our credit ratings. In November 2019, Moody's and Standard and Poor's (S&P) lowered the credit rating of our unsecured notes. As a result, the interest rates on the October 2021 notes, May 2022 notes and April 2023 notes will increase 0.50% in the secondfirst quarter of 2020.
During the quarter,2020, we secured a five-year, $850 million term loan scheduled to mature January 2025 (the 2025 Term Loan). The 2025 Term Loan bears interest at LIBOR plus 5.5% and resets monthly. We used the net proceeds plus available cash to purchase under a tender offer $428 million of the October 2021 notes, $250 million of the May 2022 notes, $125 million of the April 2023 notes and $125 million of the March 2024 notes. We incurred a loss of a $37 million on the early redemption of debt.
We have a $500 million secured revolving credit facility that expires in November 2024 and contains financial and non-financial covenants. In April 2020, in light of the current macroeconomic environment, we drew down $100 million under the credit facility as a precautionary measure. At June 30, 2020, we were in compliance with all covenants.
Interest rates on certain notes are subject to adjustment based on changes in our credit ratings. As a result of credit rating downgrades in November 2019 and May 2020, the interest rates on the October 2021 notes and April 2023 notes increased 0.50% and the interest rate on the May 2022 notes increased 0.75%. Further, the interest rates on the October 2021 notes and April 2023 notes will increase an additional 0.25% in the fourth quarter of 2020.



Dividends and Share Repurchases
We paid dividends of $9 million in the quarter. 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. InWe expect to continue to pay a quarterly dividend, however; in light of COVID-19 and the current macroeconomic conditions, we expect to continue to pay a quarterly dividend; however, no assurances can be given.
We did not repurchase any shares of our common stock during the quarter andfirst half of 2020. We have remaining authorization to repurchase up to $16 million of our common shares.stock.

Contractual Obligations and Off-Balance Sheet Arrangements
We have entered into three equipment leases for our Commerce Services operations that will commence in the fourth quarter with terms ranging from seven to nine years. Aggregate lease payments for the three leases will approximate $30 million.

At March 31,June 30, 2020, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our financial condition, results of operations or liquidity.

Critical Accounting Estimates
Goodwill impairment review
At December 31, 2019, the fair value of our Global Ecommerce business exceeded its carrying value by less than 20%. During the first quarter of 2020, our Global Ecommerce reporting unit experienced weaker than expected performance, in part due to the macroeconomic conditions resulting from COVID-19. At December 31, 2019, the fair value of our Global Ecommerce business exceeded its carrying value by less than 20% and the deteriorating macroeconomic conditions and uncertainty brought on by COVID-19 pandemic. Based on this,caused us to evaluate the Global Ecommerce goodwill for impairment.
To test the Global Ecommerce goodwill for impairment, we determined the fair value of the Global Ecommerce reporting unit and compared it to the reporting unit's carrying value, including goodwill. We engaged a third-party to assist in the determination of the fair value of the reporting unit.
The determination of fair value, and the resulting impairment charge, relied on internal projections developed using numerous estimates and assumptions andthat are inherently subject to significant uncertainties. These estimates and assumptions used included revenue growth, profitability, cash flows, capital spending and other available information. The determination of fair value also incorporated a risk-adjusted discount rate, terminal growth rates and other assumptions that market participants may use. Changes in any of these estimates or assumptions could materially affect the determination of fair value and the associated goodwill impairment charge and could result in an additional impairment charge to be recorded in the future. These estimates and assumptions are considered Level 3 inputs under the fair value hierarchy.
We determined that the reporting unit's estimated fair value was less than its carrying value and recorded a non-cash, pre-tax goodwill impairment charge of $198 million in the first quarter to reduce the carrying value of the Global Ecommerce reporting unit to its estimated fair value.
Regulatory Matters
There have been no significant changes to the regulatory matters disclosed in our 2019 Annual Report.



Item 3: Quantitative and Qualitative Disclosures About Market Risk
There were no material changes to the disclosures made in our 2019 Annual Report.
Item 4: Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the 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 ensure that such information is accumulated and communicated to management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), to allow timely decisions regarding disclosures.
With the participation of our CEO and CFO, management evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) and internal 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 required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the required time periods. In addition, no changes in internal control over financial reporting occurred during the quarter covered by this report that materially affected, or are reasonably likely to materially affect, such internal control over financial reporting. Further, we have not experienced any material impact to our internal controls over financial reporting given that most of our employees are working remotely due to the COVID-19 pandemic.COVID-19. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact to their design and operating effectivenesseffectiveness.
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 March 31,June 30, 2020.



PART II. OTHER INFORMATION
Item 1: Legal Proceedings
See Note 14 to the Condensed Consolidated Financial Statements.
Item 1A: Risk Factors
There were no material changes to the risk factors identified in our 2019 Annual Report. However, we are supplementing the risk factors described in Item 1A of our 2019 Annual Report with the following additional risk factor:
Our operations and financial performance are being affected and will continue to be affected by the global coronavirus outbreak. The duration and severity of the COVID-19 crisis is unknown and constantly changing, and a prolonged duration of this crisis or a reoccurrence of COVID-19 or other similar virus in the future could have a significantly material effect on our operations, financial condition and liquidity
The COVID-19 pandemic is negatively impacting, and is expected to continue to negatively impact, our business, operations and financial performance. Given the unpredictability of the severity, magnitude and duration of the COVID-19 pandemic, including various governments’ responses to the pandemic, and its effect on the global economy, the ultimate impact of the pandemic on our business, operations and financial performance remains uncertain. There are many factors, not within our control, which could affect the pandemic’s ultimate outcome on our business and our ability to execute our business strategies and initiatives in the expected time frame. These include, but are not limited to: government, businesses and individuals’ actions in response to the pandemic; an acceleration of the decline on the use of physical mail; the impact of the pandemic on the global economy and economic activity; the changing spending habits of consumers and businesses; disruptions in global supply chains; and significant volatility and disruption of financial markets. A prolonged duration of this crisis or a reoccurrence of the COVID-19 pandemic could exacerbate the impact on our business, operations and financial performance. It is also uncertain the extent to which the COVID-19 will permanently affect aspects of the economy to the detriment of our business, including:

•
The dramatic acceleration in the decline of physical mail volume in the geographies in which we operate, which adversely affects both our Presort Services and SendTech Solutions businesses. We cannot yet assess the extent to which these declines in mail volumes, and resulting impact to our business, are permanent or temporary. Further detail on the risk of physical mail volume decline, including an acceleration of that decline, is described in the risk factor in our Annual Report on Form 10-K for the year ended December 31, 2019 (the 2019 Annual Report) relating to the “The Continuing Decline in the Volume of Physical Mail Delivered via Traditional Postal Services”.
•
The adverse effect that declines in physical mail are having on the financial health of posts around the world, especially that of the United States Postal Service. If these financial difficulties are not resolved, or if any resolution requires them to operate differently, price in a manner that hurts their competitiveness or reduces postal volume, or causes them to change their contractual relationships with their partners or vendors, these changes could have a material adverse effect on our business. Further detail on this risk is described in the risk factor in our 2019 Annual Report related to “Significant Disruptions to Postal Operations”.
•
Significant declines in the retail industry caused by the pandemic. Although our Global Ecommerce business has seen an increase in volume of packages in the short-term, should there be a long-term change in consumer sentiment or purchasing habits it could have a material effect on our retail clients, including some of our largest clients, which could have an adverse impact on our financial performance. Further detail on this risk is described in the risk factor in our 2019 Annual Report related to “Material Change in Consumer Sentiment or Spending Habits”.
The decline in frequency of long-distance airplane flights has increased the costs of, and therefore the demand for, products purchased in our Global Ecommerce service’s cross-border business.
The effect that social distancing rules and heightened security policies have inhibited, and will continue to inhibit, our ability to sell products and provide services to our clients, fulfill orders and install equipment on a timely basis and market to prospective new clients.
Increased costs and reduced labor productivity associated with the extended the safety protocols, including sanitizing facilities and equipment multiple times a day, implemented in our facilities and incremental costs that may be required to hire temporary labor or redirect volumes to other facilities.
We could experience an increasefurther increases in delinquencies in collections and an increase in bankruptcies in our clients, which could affect our cash flow. Client requests for potential payment deferrals or other contract modifications could also reduce the profitability or ongoing cash flow from some of our current customers.


•
Given the severity of the pandemic, the business continuity plans of our suppliers and third-party service providers may not be sufficient to enable them to satisfy their obligations to us. If they are unable to satisfy these obligations, it could affect our ability to satisfy service or sales obligations to our clients, or it may affect other aspects of our internal operations. Further detail on this risk is described in the risk factor in our 2019 Annual Report related to “Third-party Suppliers and Outsource Providers”.
•
A prolonged period of generating lower earnings or cash from operations could result in aadditional credit rating downgrade,downgrades, higher costs of borrowing, or limit our access to additional debt. Further detail on this risk is described in the risk factor in our 2019 Annual Report related to “Future Credit Rating Downgrades or Capital Market Disruptions”.

As the COVID-19 pandemic continues to adversely affect our business, operations and financial performance, it may also have the effect of heightening many of the other risks described in the risk factors in our 2019 Annual Report, including the risks described above. Further, the COVID-19 pandemic may also affect our business, operations and financial performance in a manner that is not presently known to us.

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. We did not repurchase any shares during the quartersix months ended June 30, 2020 and maintain Board authorization to repurchase up to $16 million of our common stock.
        



Item 6: Exhibits
Exhibit
Number
Description Exhibit Number in this Form 10-QDescription Exhibit Number in this Form 10-Q
3(i)(a)
Amended and Restated Certificate of Incorporation of Pitney Bowes Inc. (incorporated by reference to Exhibit 3(i)(a) to the Form 8-K filed with the Commission on September 30, 2019)
 3(i)(a)
Amended and Restated Certificate of Incorporation of Pitney Bowes Inc. (incorporated by reference to Exhibit 3(i)(a) to the Form 8-K filed with the Commission on September 30, 2019)
 3(i)(a)
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
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
4.1
Supplemental Indenture No. 2 dated as of February 26, 2020, by and between the Company and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.1 to the Form 8-K filed with the Commission on February 26, 2020)
 4.1
10.1*
First Incremental Facility Amendment, dated as of February 19, 2020, to the Credit Agreement, among the company, the lenders and issuing banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the Commission on February 20, 2020)
 10.1
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
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
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
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
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
 32.2
101.SCHInline XBRL Taxonomy Extension Schema Document  Inline XBRL Taxonomy Extension Schema Document  
101.CALInline XBRL Taxonomy Calculation Linkbase Document  Inline XBRL Taxonomy Calculation Linkbase Document  
101.DEFInline XBRL Taxonomy Definition Linkbase Document  Inline XBRL Taxonomy Definition Linkbase Document  
101.LABInline XBRL Taxonomy Label Linkbase Document  Inline XBRL Taxonomy Label Linkbase Document  
101.PREInline XBRL Taxonomy Presentation Linkbase Document  Inline XBRL Taxonomy Presentation Linkbase Document  
104The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL. (included as Exhibit 101). The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL. (included as Exhibit 101). 
* Pursuant to Item 601(a)(5) 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, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  PITNEY BOWES INC.
   
Date:May 4,August 3, 2020 
   
  /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, Chief Accounting Officer
  (Principal Accounting Officer)


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