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 ~~September~~June 30, ~~2020~~2021

☐ 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 of Principal Executive Offices:

3001 Summer Street,

Stamford,

Connecticut

06926

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 filer

þ☐

Accelerated filer

oþ

Non-accelerated filer

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 ~~October 28, 2020, 173,108,679~~July 30, 2021, 175,915,380 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)~~Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	4

	Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020	5

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3231

Item 3:	Quantitative and Qualitative Disclosures about Market Risk	4240

Item 4:	Controls and Procedures	4240


Part II - Other Information:

Item 1:	Legal Proceedings	4341

Item 1A:	Risk Factors	4341

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	4441

Item 6:	Exhibits	4542


Signatures		4643

PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME (LOSS)~~OPERATIONS

(Unaudited; in thousands, except per share amounts)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Revenue:	Revenue:									Revenue:
Business services	Business services	$	550,954	$	419,101	$	1,524,323	$	1,243,609	Business services	$	567,022	$	528,990	$	1,137,476	$	973,369
Support services	Support services	117,519		126,274		353,320		382,578		Support services	115,156		113,786		233,853		235,801
Financing	Financing	86,218		90,577		260,758		280,039		Financing	73,453		85,462		151,265		174,540
Equipment sales	Equipment sales	79,572		89,618		213,682		264,956		Equipment sales	86,267		57,837		173,070		134,110
Supplies	Supplies	39,635		44,818		118,117		142,261		Supplies	38,655		32,773		80,879		78,482
Rentals	Rentals	18,000		19,737		55,458		60,339		Rentals	18,650		18,644		37,857		37,458
Total revenue	Total revenue	891,898		790,125		2,525,658		2,373,782		Total revenue	899,203		837,492		1,814,400		1,633,760
Costs and expenses:	Costs and expenses:									Costs and expenses:
Cost of business services	Cost of business services	482,965		338,519		1,311,941		1,003,483		Cost of business services	482,814		454,311		982,348		828,976
Cost of support services	Cost of support services	37,647		41,086		114,132		123,453		Cost of support services	37,679		36,725		74,396		76,485
Financing interest expense	Financing interest expense	11,626		11,026		36,054		33,433		Financing interest expense	11,773		11,939		23,659		24,428
Cost of equipment sales	Cost of equipment sales	59,766		59,859		165,045		182,094		Cost of equipment sales	61,561		47,920		123,401		105,279
Cost of supplies	Cost of supplies	10,132		12,225		30,751		37,533		Cost of supplies	10,467		8,379		21,678		20,619
Cost of rentals	Cost of rentals	6,055		5,090		18,455		23,223		Cost of rentals	6,013		6,022		12,460		12,400
Selling, general and administrative	Selling, general and administrative	238,618		254,092		720,882		757,228		Selling, general and administrative	236,190		233,631		474,292		482,264
Research and development	Research and development	9,255		12,272		28,838		38,421		Research and development	11,059		7,467		22,375		19,583
Restructuring charges and asset impairments		3,766		47,017		12,505		56,616
Restructuring charges										Restructuring charges	4,844		4,922		7,733		8,739
Goodwill impairment	Goodwill impairment	0		0		198,169		0		Goodwill impairment	0		0		0		198,169
Interest expense, net	Interest expense, net	27,175		28,704		79,504		84,325		Interest expense, net	24,346		26,446		49,504		52,329
Other components of net pension and postretirement (income) cost		(109)		(882)		126		(3,138)
Other components of net pension and postretirement cost										Other components of net pension and postretirement cost	312		386		662		235
Other (income) expense	Other (income) expense	(6,325)		667		9,787		18,350		Other (income) expense	(13,646)		(17,375)		37,748		16,112
Total costs and expenses	Total costs and expenses	880,571		809,675		2,726,189		2,355,021		Total costs and expenses	873,412		820,773		1,830,256		1,845,618
Income (loss) from continuing operations before taxes	Income (loss) from continuing operations before taxes	11,327		(19,550)		(200,531)		18,761		Income (loss) from continuing operations before taxes	25,791		16,719		(15,856)		(211,858)
Provision (benefit) for income taxes	Provision (benefit) for income taxes	554		(24,895)		7,540		(13,351)		Provision (benefit) for income taxes	4,915		17,016		(9,077)		6,986
Income (loss) from continuing operations	Income (loss) from continuing operations	10,773		5,345		(208,071)		32,112		Income (loss) from continuing operations	20,876		(297)		(6,779)		(218,844)
Income (loss) from discontinued operations, net of tax		616		(8,470)		7,648		(14,199)
(Loss) income from discontinued operations, net of tax										(Loss) income from discontinued operations, net of tax	(1,020)		(3,032)		(4,906)		7,032
Net income (loss)	Net income (loss)	$	11,389	$	(3,125)	$	(200,423)	$	17,913	Net income (loss)	$	19,856	$	(3,329)	$	(11,685)	$	(211,812)
Basic earnings (loss) per share (1):	Basic earnings (loss) per share (1):									Basic earnings (loss) per share (1):
Continuing operations	Continuing operations	$	0.06	$	0.03	$	(1.21)	$	0.18	Continuing operations	$	0.12	$	0	$	(0.04)	$	(1.28)
Discontinued operations	Discontinued operations	0		(0.05)		0.04		(0.08)		Discontinued operations	(0.01)		(0.02)		(0.03)		0.04
Net income (loss)	Net income (loss)	$	0.07	$	(0.02)	$	(1.17)	$	0.10	Net income (loss)	$	0.11	$	(0.02)	$	(0.07)	$	(1.24)
Diluted earnings (loss) per share (1):	Diluted earnings (loss) per share (1):									Diluted earnings (loss) per share (1):
Continuing operations	Continuing operations	$	0.06	$	0.03	$	(1.21)	$	0.18	Continuing operations	$	0.12	$	0	$	(0.04)	$	(1.28)
Discontinued operations	Discontinued operations	0		(0.05)		0.04		(0.08)		Discontinued operations	(0.01)		(0.02)		(0.03)		0.04
Net income (loss)	Net income (loss)	$	0.07	$	(0.02)	$	(1.17)	$	0.10	Net income (loss)	$	0.11	$	(0.02)	$	(0.07)	$	(1.24)

(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 September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Net income (loss) $ 11,389 $ (3,125) $ (200,423) $ 17,913
Other comprehensive income (loss), net of tax:
Foreign currency translation, net of tax of $1,621, $(655), $(91) and $(1,078), respectively 22,676 (27,962) 5,040 (6,584)
Net unrealized (loss) gain on cash flow hedges, net of tax of $(317), $51, $(796) and $27, respectively (957) 149 (2,402) 78
Net unrealized (loss) gain on investment securities, net of tax of $(2,716), $509, $(1,816) and $2,573, respectively (8,191) 1,487 (5,476) 7,516
Amortization of pension and postretirement costs, net of tax benefits of 2,875, 2,633, 9,027 and 7,406, respectively 9,162 7,552 29,409 21,499
Other comprehensive income (loss), net of tax 22,690 (18,774) 26,571 22,509
Comprehensive income (loss) $ 34,079 $ (21,899) $ (173,852) $ 40,422


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income (loss)	$	19,856	$	(3,329)	$	(11,685)	$	(211,812)
Other comprehensive income, net of tax:
Foreign currency translation, net of tax of $309, $1,105, $297 and $(1,712), respectively	3,509		10,099		(10,749)		(17,636)
Net unrealized (loss) gain on cash flow hedges, net of tax of $(466), $(421), $1,135 and $(479), respectively	(1,406)		(1,271)		3,424		(1,445)
Net unrealized gain (loss) on investment securities, net of tax of $1,306, $467, $(1,650) and $900, respectively	3,939		1,407		(4,977)		2,715

Amortization of pension and postretirement costs, net of tax of $3,303, $3,502, $6,511 and $6,152, respectively	10,193		11,377		20,130		20,247
Other comprehensive income, net of tax	16,235		21,612		7,828		3,881
Comprehensive income (loss)	$	36,091	$	18,283	$	(3,857)	$	(207,931)

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	799,177	$	924,442	Cash and cash equivalents	$	799,470	$	921,450
Short-term investments (includes $21,185 and $35,879, respectively, reported at fair value)		21,185		115,879
Accounts and other receivables (net of allowance of $29,669 and $17,830, respectively)		348,565		373,471
Short-term finance receivables (net of allowance of $21,289 and $12,556, respectively)		559,148		629,643
Short-term investments, reported at fair value						Short-term investments, reported at fair value	14,904		18,974
Accounts and other receivables (net of allowance of $13,959 and $18,899, respectively)						Accounts and other receivables (net of allowance of $13,959 and $18,899, respectively)	309,177		389,240
Short-term finance receivables (net of allowance of $18,313 and $18,012, respectively)						Short-term finance receivables (net of allowance of $18,313 and $18,012, respectively)	552,858		568,050
Inventories	Inventories	66,974		68,251		Inventories	67,538		65,845
Current income taxes	Current income taxes	11,477		5,565		Current income taxes	37,384		23,219
Other current assets and prepayments	Other current assets and prepayments	115,981		101,601		Other current assets and prepayments	117,425		120,145

Assets of discontinued operations		0		17,229

Total current assets	Total current assets	1,922,507		2,236,081		Total current assets	1,898,756		2,106,923
Property, plant and equipment, net	Property, plant and equipment, net	367,466		376,177		Property, plant and equipment, net	429,785		391,280
Rental property and equipment, net	Rental property and equipment, net	40,352		41,225		Rental property and equipment, net	38,814		38,435
Long-term finance receivables (net of allowance of $16,779 and $7,095 respectively)		587,548		625,487
Long-term finance receivables (net of allowance of $17,253 and $17,857 respectively)						Long-term finance receivables (net of allowance of $17,253 and $17,857 respectively)	588,602		605,292
Goodwill	Goodwill	1,142,144		1,324,179		Goodwill	1,130,164		1,152,285
Intangible assets, net	Intangible assets, net	167,493		190,640		Intangible assets, net	144,692		159,839
Operating lease assets	Operating lease assets	213,490		200,752		Operating lease assets	205,584		201,916
Noncurrent income taxes	Noncurrent income taxes	69,305		71,903		Noncurrent income taxes	69,150		72,653
Other assets (includes $418,100 and $230,442, respectively, reported at fair value)		533,726		400,456
Other assets (includes $363,613 and $355,799, respectively, reported at fair value)						Other assets (includes $363,613 and $355,799, respectively, reported at fair value)	507,748		491,514
Total assets	Total assets	$	5,044,031	$	5,466,900	Total assets	$	5,013,295	$	5,220,137

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	760,363	$	793,690	Accounts payable and accrued liabilities	$	820,065	$	880,616
Customer deposits at Pitney Bowes Bank	Customer deposits at Pitney Bowes Bank	610,582		591,118		Customer deposits at Pitney Bowes Bank	632,833		617,200
Current operating lease liabilities	Current operating lease liabilities	38,007		36,060		Current operating lease liabilities	41,835		39,182
Current portion of long-term debt	Current portion of long-term debt	63,509		20,108		Current portion of long-term debt	97,015		216,032
Advance billings	Advance billings	102,919		101,920		Advance billings	119,645		114,550
Current income taxes	Current income taxes	2,527		17,083		Current income taxes	5,844		2,880

Liabilities of discontinued operations		0		9,713

Total current liabilities	Total current liabilities	1,577,907		1,569,692		Total current liabilities	1,717,237		1,870,460
Long-term debt	Long-term debt	2,531,712		2,719,614		Long-term debt	2,330,698		2,348,361
Deferred taxes on income	Deferred taxes on income	279,526		274,435		Deferred taxes on income	286,338		279,451
Tax uncertainties and other income tax liabilities	Tax uncertainties and other income tax liabilities	40,642		38,834		Tax uncertainties and other income tax liabilities	37,155		38,163
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	192,789		177,711		Noncurrent operating lease liabilities	182,746		180,292
Other noncurrent liabilities	Other noncurrent liabilities	342,330		400,518		Other noncurrent liabilities	405,751		437,015
Total liabilities	Total liabilities	4,964,906		5,180,804		Total liabilities	4,959,925		5,153,742

Commitments and contingencies (See Note 14)	Commitments and contingencies (See Note 14)					Commitments and contingencies (See Note 14)	0		0

Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued)	Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued)	323,338		323,338		Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued)	323,338		323,338
Additional paid-in capital	Additional paid-in capital	67,512		98,748		Additional paid-in capital	5,903		68,502
Retained earnings	Retained earnings	5,190,914		5,438,930		Retained earnings	5,172,185		5,201,195
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(813,572)		(840,143)		Accumulated other comprehensive loss	(831,303)		(839,131)
Treasury stock, at cost (151,413,053 and 152,888,969 shares, respectively)		(4,689,067)		(4,734,777)
Treasury stock, at cost (149,078,067 and 151,362,724 shares, respectively)						Treasury stock, at cost (149,078,067 and 151,362,724 shares, respectively)	(4,616,753)		(4,687,509)
Total stockholders’ equity	Total stockholders’ equity	79,125		286,096		Total stockholders’ equity	53,370		66,395
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	5,044,031	$	5,466,900	Total liabilities and stockholders’ equity	$	5,013,295	$	5,220,137

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in thousands)

Nine Months Ended September 30,
2020 2019
Cash flows from operating activities:
Net (loss) income $ (200,423) $ 17,913
(Income) loss from discontinued operations, net of tax (7,648) 14,199
Restructuring payments (15,869) (18,845)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 120,403 118,514
Allowance for credit losses 35,400 22,131
Stock-based compensation 15,236 15,867
Restructuring charges and asset impairments 12,505 56,616
Amortization of debt fees 7,962 8,014
Goodwill impairment 198,169 0
Loss on extinguishment of debt 36,987 667
Gain on sale of investments (21,969) 0
Loss on sale of business 0 17,683
Changes in operating assets and liabilities, net of acquisitions/divestitures:
Increase in accounts receivable (8,064) (248)
Decrease in finance receivables 85,593 25,300
Decrease (increase) in inventories 1,051 (14,559)
Increase in other current assets and prepayments (18,400) (30,546)
Increase in accounts payable and accrued liabilities (1,047) 892
Increase (decrease) in current and noncurrent income taxes 21,682 (30,401)
Increase (decrease) in advance billings 687 (3,802)
Decrease in pension and retiree medical liabilities (25,095) (39,231)
Other, net (8,113) 6,262
   Net cash provided by operating activities - continuing operations 229,047 166,426
   Net cash (used in) provided by operating activities - discontinued operations (38,423) 15,858
   Net cash provided by operating activities 190,624 182,284
Cash flows from investing activities:
Capital expenditures (80,787) (95,221)
Purchases of available-for-sale securities (392,427) (45,178)
Proceeds from sales/maturities of available-for-sale securities 241,924 78,024
Net activity from short-term and other investments 68,464 (92,418)
Acquisitions, net of cash acquired (6,608) (22,100)
Sale of other investments (See Note 8) 58,248 0
Increase in customer deposits at Pitney Bowes Bank 19,464 3,125
Other investing activities (1,511) (9,341)
   Net cash used in investing activities - continuing operations (93,233) (183,109)
   Net cash used in investing activities - discontinued operations (2,502) (18,572)
   Net cash used in investing activities (95,735) (201,681)
Cash flows from financing activities:
Proceeds from the issuance of long-term debt 916,544 0
Principal payments of long-term debt (1,072,260) (202,640)
Premiums and fees paid to extinguish debt (32,645) 0
Dividends paid to stockholders (25,693) (26,854)
Common stock repurchases 0 (105,000)
Other financing activities (3,318) 7,302
   Net cash used in financing activities (217,372) (327,192)
Effect of exchange rate changes on cash and cash equivalents (2,782) (5,822)
Change in cash and cash equivalents (125,265) (352,411)
Cash and cash equivalents at beginning of period 924,442 867,262
Cash and cash equivalents at end of period $ 799,177 $ 514,851
Cash interest paid $ 115,143 $ 110,943
Cash income tax payments, net of refunds $ 19,861 $ 25,527


	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(11,685)	$	(211,812)
Loss (income) from discontinued operations, net of tax	4,906		(7,032)
Restructuring payments	(8,825)		(11,365)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	79,416		81,787
Allowance for credit losses	4,988		27,941
Stock-based compensation	12,278		6,950
Restructuring charges	7,733		8,739
Amortization of debt fees	4,103		5,054
Goodwill impairment	0		198,169
Loss on debt refinancing	52,383		36,987
Gain on sale of equity investment	0		(11,908)
Gain on sale of business	(10,201)		0
Gain on sale of assets	(1,434)		0

Changes in operating assets and liabilities, net of acquisitions/divestitures:
Accounts and other receivables	72,791		(49,403)
Finance receivables	30,620		83,955
Inventories	(1,884)		(6,306)
Other current assets and prepayments	1,567		(24,067)
Accounts payable and accrued liabilities	(56,038)		(25,168)
Current and noncurrent income taxes	(11,807)		29,959
Advance billings	5,271		21,402
Pension and retiree medical liabilities	(42,407)		(22,735)
Other, net	12,954		(6,302)
Net cash from operating activities - continuing operations	144,729		124,845
Net cash from operating activities - discontinued operations	0		(38,423)
Net cash from operating activities	144,729		86,422
Cash flows from investing activities:
Capital expenditures	(83,703)		(59,954)
Purchases of investment securities	(68,143)		(282,065)
Proceeds from sales/maturities of investment securities	58,870		214,466
Net investment in loan receivables	(2,964)		387
Proceeds from sale of other investments	0		58,248
Acquisitions, net of cash acquired	0		(6,608)
Proceeds from sale of business, net of cash sold	27,573		0
Proceeds from sale of assets	1,840		0
Other investing activities	0		1,539
Net cash from investing activities - continuing operations	(66,527)		(73,987)
Net cash from investing activities - discontinued operations	(1,507)		(2,502)
Net cash from investing activities	(68,034)		(76,489)
Cash flows from financing activities:
Increase in short-term borrowings	0		100,000
Proceeds from the issuance of debt, net of discount	1,195,500		816,544
Principal payments of debt	(1,339,568)		(948,224)
Premiums and fees paid to refinance debt	(46,937)		(32,645)
Dividends paid to stockholders	(17,325)		(17,099)
Customer deposits at Pitney Bowes Bank	15,633		22,331

Other financing activities	(6,327)		(3,174)
Net cash from financing activities	(199,024)		(62,267)
Effect of exchange rate changes on cash and cash equivalents	349		(9,211)
Change in cash and cash equivalents	(121,980)		(61,545)
Cash and cash equivalents at beginning of period	921,450		924,442


Cash and cash equivalents at end of period	$	799,470	$	862,897

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.~~solutions. 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~~2020 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,~~2021, particularly in light of the ~~novel~~ coronavirus pandemic (COVID-19) and its effect on 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~~2020 (2020 Annual Report).

~~Accounts~~

In the fourth quarter 2020, we determined that based on their nature, certain cash flows from loan receivables classified as cash flows from operating activities should have been classified as investment in loans receivables within cash flows from investing activities. It was also determined that certain investment purchases and ~~other receivables includes other~~maturities that were previously reported on a net ~~receivables of $60 million~~basis should have been reported on a gross basis. Finally, previously reported cash flows from investing activities resulting from changes in customer deposits at ~~September~~the Pitney Bowes Bank (the Bank) are now reported as cash flows from financing activities. These adjustments were not material to the previously issued 2020 interim financial statements; however, the cash flow statement for the period ended June 30, 2020 has been revised and ~~$91 million at December 31, 2019. In January 2019, we sold~~ the ~~direct operations and moved to a dealer model~~impact on our previously issued interim Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 is as follows:


	Six Months Ended June 30, 2020
(unaudited)	As Previously Reported		Adjustments		As Revised
Cash flows from operating activities
Changes in finance receivables	$	84,342	$	(387)	$	83,955
Net cash from operating activities: continuing operations	$	125,232	$	(387)	$	124,845
Net cash from operating activities	$	86,809	$	(387)	$	86,422

Cash flows from investing activities
Purchases of investment securities	$	(115,565)	$	(166,500)	$	(282,065)
Proceeds from sales/maturities of investment securities	$	94,425	$	120,041	$	214,466
Net change in short-term and other investing activities	$	(44,035)	$	44,035	$	—
Net investment in loan receivables	$	—	$	387	$	387
Customer deposits at the Bank	$	22,331	$	(22,331)	$	—
Other investing activities	$	(885)	$	2,424	$	1,539
Net cash from investing activities: continuing operations	$	(52,043)	$	(21,944)	$	(73,987)
Net cash from investing activities	$	(54,545)	$	(21,944)	$	(76,489)

Cash flows from financing activities
Customer deposits at the Bank	$	—	$	22,331	$	22,331
Net cash from financing activities	$	(84,598)	$	22,331	$	(62,267)

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; table amounts in ~~6 smaller international markets within Sending Technology Solutions (SendTech Solutions). Other receivables includes gross receivables of $20 million related to these direct operations.~~thousands unless otherwise noted, except per share amounts)

Risks and Uncertainties

The effects of COVID-19 on global economies and businesses continues to impact how we conduct business and our operating results, financial position and cash flows. Its impact on our business remains unpredictable and accordingly, we are not able to reasonably estimate the full extent of the impact of COVID-19 on our operating results, financial position and cash flows.

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. The most significant impacts were to our allowance for credit losses (see Accounting Pronouncements Adopted in 2020 below) and the carrying value of goodwill (see Note 8). Actual results could differ significantly from our estimates and assumptions, possibly resulting in additional impairments or other charges.

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 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. 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 impact of COVID-19 on global businesses and economies resulted in an increased probability of recessionary conditions, delinquency rates and business bankruptcy resulting in an additional $11 million provision in the first quarter of 2020. Through September 30, 2020, our credit loss provision was $35 million compared to $22 million through September 30, 2019.

~~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 accounts and other receivables for the nine months ended September 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
September 30, 2020
Allowance for credit losses $ 17,830 $ 15,336 $ 16,856 $ (20,353) $ 29,669

~~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~~2021

In ~~December 2019, the Financial Accounting Standards Board (FASB) issued~~January 2021 we adopted 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~~The adoption ~~permitted. We do not expect~~of this standard todid not have a material impact on our consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

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 transition to new reference interest rates will require certain contracts to be modified and 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 September 30, 2020													Three Months Ended June 30, 2021
		Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue			Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines	Major products/service lines													Major products/service lines
Business services	Business services	$	409,981	$	127,705	$	13,268	$	550,954	$	0	$	550,954	Business services	$	418,429	$	134,619	$	13,974	$	567,022	$	0	$	567,022
Support services	Support services	0		0		117,519		117,519		0		117,519		Support services	0		0		115,156		115,156		0		115,156
Financing	Financing	0		0		0		0		86,218		86,218		Financing	0		0		0		0		73,453		73,453
Equipment sales	Equipment sales	0		0		17,935		17,935		61,637		79,572		Equipment sales	0		0		22,394		22,394		63,873		86,267
Supplies	Supplies	0		0		39,635		39,635		0		39,635		Supplies	0		0		38,655		38,655		0		38,655
Rentals	Rentals	0		0		0		0		18,000		18,000		Rentals	0		0		0		0		18,650		18,650
Subtotal	Subtotal	409,981		127,705		188,357		726,043		$	165,855	$	891,898	Subtotal	418,429		134,619		190,179		743,227		$	155,976	$	899,203

Revenue from leasing transactions and financing	Revenue from leasing transactions and financing													Revenue from leasing transactions and financing
Financing	Financing	0		0		86,218		86,218						Financing	0		0		73,453		73,453
Equipment sales	Equipment sales	0		0		61,637		61,637						Equipment sales	0		0		63,873		63,873
Rentals	Rentals	0		0		18,000		18,000						Rentals	0		0		18,650		18,650
Total revenue	Total revenue	$	409,981	$	127,705	$	354,212	$	891,898					Total revenue	$	418,429	$	134,619	$	346,155	$	899,203

Timing of revenue recognition from products and services	Timing of revenue recognition from products and services													Timing of revenue recognition from products and services
Products/services transferred at a point in time	Products/services transferred at a point in time	$	0	$	0	$	73,602	$	73,602					Products/services transferred at a point in time	$	0	$	0	$	77,275	$	77,275
Products/services transferred over time	Products/services transferred over time	409,981		127,705		114,755		652,441						Products/services transferred over time	418,429		134,619		112,904		665,952
Total	Total	$	409,981	$	127,705	$	188,357	$	726,043					Total	$	418,429	$	134,619	$	190,179	$	743,227


		Three Months Ended September 30, 2019													Three Months Ended June 30, 2020
		Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue			Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines	Major products/service lines													Major products/service lines
Business services	Business services	$	278,995	$	131,483	$	8,623	$	419,101	$	0	$	419,101	Business services	$	398,453	$	118,127	$	12,410	$	528,990	$	0	$	528,990
Support services	Support services	0		0		126,274		126,274		0		126,274		Support services	0		0		113,786		113,786		0		113,786
Financing	Financing	0		0		0		0		90,577		90,577		Financing	0		0		0		0		85,462		85,462
Equipment sales	Equipment sales	0		0		19,062		19,062		70,556		89,618		Equipment sales	0		0		14,492		14,492		43,345		57,837
Supplies	Supplies	0		0		44,818		44,818		0		44,818		Supplies	0		0		32,773		32,773		0		32,773
Rentals	Rentals	0		0		0		0		19,737		19,737		Rentals	0		0		0		0		18,644		18,644
Subtotal	Subtotal	278,995		131,483		198,777		609,255		$	180,870	$	790,125	Subtotal	398,453		118,127		173,461		690,041		$	147,451	$	837,492

Revenue from leasing transactions and financing	Revenue from leasing transactions and financing													Revenue from leasing transactions and financing
Financing	Financing	0		0		90,577		90,577						Financing	0		0		85,462		85,462
Equipment sales	Equipment sales	0		0		70,556		70,556						Equipment sales	0		0		43,345		43,345
Rentals	Rentals	0		0		19,737		19,737						Rentals	0		0		18,644		18,644
Total revenue	Total revenue	$	278,995	$	131,483	$	379,647	$	790,125					Total revenue	$	398,453	$	118,127	$	320,912	$	837,492

Timing of revenue recognition from products and services	Timing of revenue recognition from products and services													Timing of revenue recognition from products and services
Products/services transferred at a point in time	Products/services transferred at a point in time	$	0	$	0	$	81,547	$	81,547					Products/services transferred at a point in time	$	0	$	0	$	58,750	$	58,750
Products/services transferred over time	Products/services transferred over time	278,995		131,483		117,230		527,708						Products/services transferred over time	398,453		118,127		114,711		631,291
Total	Total	$	278,995	$	131,483	$	198,777	$	609,255					Total	$	398,453	$	118,127	$	173,461	$	690,041

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


		Nine Months Ended September 30, 2020													Six Months Ended June 30, 2021
		Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue			Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines	Major products/service lines													Major products/service lines
Business services	Business services	$	1,100,757	$	386,552	$	37,014	$	1,524,323	$	0	$	1,524,323	Business services	$	831,515	$	277,745	$	28,216	$	1,137,476	$	0	$	1,137,476
Support services	Support services	0		0		353,320		353,320		0		353,320		Support services	0		0		233,853		233,853		0		233,853
Financing	Financing	0		0		0		0		260,758		260,758		Financing	0		0		0		0		151,265		151,265
Equipment sales	Equipment sales	0		0		49,556		49,556		164,126		213,682		Equipment sales	0		0		41,511		41,511		131,559		173,070
Supplies	Supplies	0		0		118,117		118,117		0		118,117		Supplies	0		0		80,879		80,879		0		80,879
Rentals	Rentals	0		0		0		0		55,458		55,458		Rentals	0		0		0		0		37,857		37,857
Subtotal	Subtotal	1,100,757		386,552		558,007		2,045,316		$	480,342	$	2,525,658	Subtotal	831,515		277,745		384,459		1,493,719		$	320,681	$	1,814,400

Revenue from leasing transactions and financing	Revenue from leasing transactions and financing													Revenue from leasing transactions and financing
Financing	Financing	0		0		260,758		260,758						Financing	0		0		151,265		151,265
Equipment sales	Equipment sales	0		0		164,126		164,126						Equipment sales	0		0		131,559		131,559
Rentals	Rentals	0		0		55,458		55,458						Rentals	0		0		37,857		37,857
Total revenue	Total revenue	$	1,100,757	$	386,552	$	1,038,349	$	2,525,658					Total revenue	$	831,515	$	277,745	$	705,140	$	1,814,400

Timing of revenue recognition from products and services	Timing of revenue recognition from products and services													Timing of revenue recognition from products and services
Products/services transferred at a point in time	Products/services transferred at a point in time	$	0	$	0	$	210,726	$	210,726					Products/services transferred at a point in time	$	0	$	0	$	154,811	$	154,811
Products/services transferred over time	Products/services transferred over time	1,100,757		386,552		347,281		1,834,590						Products/services transferred over time	831,515		277,745		229,648		1,338,908
Total	Total	$	1,100,757	$	386,552	$	558,007	$	2,045,316					Total	$	831,515	$	277,745	$	384,459	$	1,493,719


		Nine Months Ended September 30, 2019													Six Months Ended June 30, 2020
		Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue			Global Ecommerce		Presort Services		SendTech Solutions		Revenue from products and services		Revenue from leasing transactions and financing		Total consolidated revenue
Major products/service lines	Major products/service lines													Major products/service lines
Business services	Business services	$	827,568	$	394,468	$	21,573	$	1,243,609	$	0	$	1,243,609	Business services	$	690,776	$	258,847	$	23,746	$	973,369	$	0	$	973,369
Support services	Support services	0		0		382,578		382,578		0		382,578		Support services	0		0		235,801		235,801		0		235,801
Financing	Financing	0		0		0		0		280,039		280,039		Financing	0		0		0		0		174,540		174,540
Equipment sales	Equipment sales	0		0		59,739		59,739		205,217		264,956		Equipment sales	0		0		31,621		31,621		102,489		134,110
Supplies	Supplies	0		0		142,261		142,261		0		142,261		Supplies	0		0		78,482		78,482		0		78,482
Rentals	Rentals	0		0		0		0		60,339		60,339		Rentals	0		0		0		0		37,458		37,458
Subtotal	Subtotal	827,568		394,468		606,151		1,828,187		$	545,595	$	2,373,782	Subtotal	690,776		258,847		369,650		1,319,273		$	314,487	$	1,633,760

Revenue from leasing transactions and financing	Revenue from leasing transactions and financing													Revenue from leasing transactions and financing
Financing	Financing	0		0		280,039		280,039						Financing	0		0		174,540		174,540
Equipment sales	Equipment sales	0		0		205,217		205,217						Equipment sales	0		0		102,489		102,489
Rentals	Rentals	0		0		60,339		60,339						Rentals	0		0		37,458		37,458
Total revenue	Total revenue	$	827,568	$	394,468	$	1,151,746	$	2,373,782					Total revenue	$	690,776	$	258,847	$	684,137	$	1,633,760

Timing of revenue recognition from products and services	Timing of revenue recognition from products and services													Timing of revenue recognition from products and services
Products/services transferred at a point in time	Products/services transferred at a point in time	$	0	$	0	$	251,214	$	251,214					Products/services transferred at a point in time	$	0	$	0	$	137,124	$	137,124
Products/services transferred over time	Products/services transferred over time	827,568		394,468		354,937		1,576,973						Products/services transferred over time	690,776		258,847		232,526		1,182,149
Total	Total	$	827,568	$	394,468	$	606,151	$	1,828,187					Total	$	690,776	$	258,847	$	369,650	$	1,319,273

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, shipping subscription solutions, fulfillment, delivery and return services and cross-border solutions. Revenue for shipping subscription solutions is recognized ratably over the contract period as the client obtains equal benefit from these services through the period. Revenue for mail processing services, fulfillment, delivery and return services and cross-border solutions is recognized over time asusing an output method based on the number of parcels or mail pieces either processed or delivered, depending on the service type, since that measure best depicts the value of goods and services ~~are provided and revenue for shipping subscription solutions is recognized ratably~~transferred to the client 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 and subscription services for our ~~mailing~~ equipment and ~~professional services for our~~digital mailing and shipping technology solutions. Contract terms range from one to five years, depending on the lease term of ~~the lease contract for~~ the related equipment. Revenue for maintenance and subscription services is recognized ratably over the contract period and revenue for professional services is recognized when services are provided.

Equipment sales, excluding sales-type leases, generally includes the sale of mailing and shipping ~~equipment, excluding sales-type leases.~~equipment. 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 and operating leases, finance income, late fees and investment income, gains and losses at ~~Pitney Bowes~~the Bank.

Advance Billings from Contracts with Customers


		Balance sheet location	September 30, 2020		December 31, 2019		Increase/ (decrease)			Balance sheet location	June 30, 2021		December 31, 2020		Increase/ (decrease)
Advance billings, current	Advance billings, current	Advance billings	$	94,454	$	92,464	$	1,990	Advance billings, current	Advance billings	$	110,812	$	106,498	$	4,314
Advance billings, noncurrent	Advance billings, noncurrent	Other noncurrent liabilities	$	1,117	$	1,245	$	(128)	Advance billings, noncurrent	Other noncurrent liabilities	$	1,304	$	1,277	$	27

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 onfor our equipment and digital mailing ~~equipment.~~and shipping technology solutions. Revenue recognized during the period includes ~~$78~~$92 million of advance billings at the beginning of the period. Advance billings above at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019 also includes $8~~2020 excludes $9 million and $9$8 million, respectively, from leasing transactions.

Future Performance Obligations

Future performance obligations include revenue streams bundled with our leasing contracts, primarily maintenance and subscription services. The transaction prices allocated to future performance obligations will be recognized as follows:

Remainder of 2020 2021 2022-2025 Total
SendTech Solutions $ 73,963 $ 263,673 $ 388,235 $ 725,871


	Remainder of 2021		2022		2023-2026		Total
SendTech Solutions	$	152,778	$	240,694	$	321,288	$	714,760

The ~~table~~amounts above ~~does not include~~exclude 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.~~Sending Technology Solutions (SendTech Solutions). The principal products and services of each reportable segment are as follows:

Global Ecommerce: Includes the revenue and related expenses from ~~products~~domestic parcel services, cross-border solutions and ~~services that facilitate domestic retail and ecommerce shipping solutions, including fulfillment and returns, and global cross-border ecommerce transactions.~~digital delivery services.

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

SendTech Solutions: Includes the revenue and related expenses from physical 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.

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 income (loss).


	Revenue
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Global Ecommerce	$	418,429	$	398,453	$	831,515	$	690,776
Presort Services	134,619		118,127		277,745		258,847
SendTech Solutions	346,155		320,912		705,140		684,137
Total revenue	$	899,203	$	837,492	$	1,814,400	$	1,633,760

Revenue
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Global Ecommerce $ 409,981 $ 278,995 $ 1,100,757 $ 827,568
Presort Services 127,705 131,483 386,552 394,468
Commerce Services 537,686 410,478 1,487,309 1,222,036
SendTech Solutions 354,212 379,647 1,038,349 1,151,746
Total revenue $ 891,898 $ 790,125 $ 2,525,658 $ 2,373,782


	EBIT
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Global Ecommerce	$	(10,831)	$	(18,894)	$	(37,207)	$	(48,369)
Presort Services	16,134		12,582		35,185		28,277
SendTech Solutions	107,121		104,268		221,591		210,830
Total segment EBIT	112,424		97,956		219,569		190,738
Reconciliation of Segment EBIT to net income (loss):
Unallocated corporate expenses	(56,316)		(49,489)		(113,781)		(93,211)
Restructuring charges	(4,844)		(4,922)		(7,733)		(8,739)
Interest expense, net	(36,119)		(38,385)		(73,163)		(76,757)
Gain on sale of equity investment	0		11,908		0		11,908
Goodwill impairment	0		0		0		(198,169)
Loss on debt refinancing	(989)		0		(52,383)		(36,987)
Gain on sale of business	10,201		0		10,201		0
Gain on sale of assets	1,434		0		1,434		0
Transaction costs	0		(349)		0		(641)
(Provision) benefit for income taxes	(4,915)		(17,016)		9,077		(6,986)
Income (loss) from continuing operations	20,876		(297)		(6,779)		(218,844)
(Loss) income from discontinued operations, net of tax	(1,020)		(3,032)		(4,906)		7,032
Net income (loss)	$	19,856	$	(3,329)	$	(11,685)	$	(211,812)

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

EBIT
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Global Ecommerce $ (19,757) $ (21,793) $ (68,126) $ (51,969)
Presort Services 14,481 17,687 42,758 48,215
Commerce Services (5,276) (4,106) (25,368) (3,754)
SendTech Solutions 112,599 130,954 323,429 378,095
Total segment EBIT 107,323 126,848 298,061 374,341
Reconciliation of Segment EBIT to net income (loss):
Unallocated corporate expenses (53,429) (58,277) (146,640) (160,283)
Restructuring charges and asset impairments (3,766) (47,017) (12,505) (56,616)
Interest expense, net (38,801) (39,730) (115,558) (117,758)
Gain on sale of equity investment 0 0 11,908 0
Goodwill impairment 0 0 (198,169) 0
Loss on extinguishment of debt 0 (667) (36,987) (667)
Loss on dispositions 0 0 0 (17,683)
Transaction costs 0 (707) (641) (2,573)
(Provision) benefit for income taxes (554) 24,895 (7,540) 13,351
Income (loss) from continuing operations 10,773 5,345 (208,071) 32,112
Income (loss) from discontinued operations, net of tax 616 (8,470) 7,648 (14,199)
Net income (loss) $ 11,389 $ (3,125) $ (200,423) $ 17,913

During the three and nine months ended September 30, 2020, we received insurance proceeds of $6 million and $15 million, respectively, related to the October 2019 malware attack, a portion of which has been recorded to the business segments and reflected in segment EBIT.

4. Discontinued Operations

Discontinued operations for the quarter ended June 30, 2021 includes a working capital adjustment payment related to the sale of our Software Solutions business. Discontinued operations for the six months ended June 30, 2021 also includes a tax charge related to the sale of our Production Mail business. Discontinued operations for the three months ended June 30, 2020 includes a pension settlement charge related to the sale of our Software Solutions business. Discontinued operations for the six months ended June 30, 2020 also includes the ~~Software Solutions business, sold in December 2019, with~~gain on the ~~exception~~sale of ~~the~~our 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:~~Australia.

Three Months Ended September 30, 2020 Three Months Ended September 30, 2019
Software Solutions Production Mail Total Software Solutions Production Mail Total
Revenue $ 0 $ 0 $ 0 $ 73,620 $ 0 $ 73,620
Earnings from discontinued operations $ 0 $ 0 $ 0 $ 8,633 $ 0 $ 8,633
Gain (loss) on sale 474 0 474 (12,447) (5,710) (18,157)
Income (loss) from discontinued operations before taxes $ 474 $ 0 474 $ (3,814) $ (5,710) (9,524)
Tax benefit (142) (1,054)
Income (loss) from discontinued operations, net of tax $ 616 $ (8,470)

~~PITNEY BOWES INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
Software Solutions Production Mail Total Software Solutions Production Mail Total
Revenue $ 0 $ 0 $ 0 $ 219,144 $ 0 $ 219,144
Earnings (loss) from discontinued operations $ 0 $ 0 $ 0 $ 13,334 $ (663) $ 12,671
Gain (loss) on sale 7,343 (167) 7,176 (14,211) (14,967) (29,178)
Income (loss) from discontinued operations before taxes $ 7,343 $ (167) 7,176 $ (877) $ (15,630) (16,507)
Tax benefit (472) (2,308)
Income (loss) from discontinued operations, net of tax $ 7,648 $ (14,199)

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

5. Earnings per Share (EPS)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Numerator:	Numerator:									Numerator:
Income (loss) from continuing operations	Income (loss) from continuing operations	$	10,773	$	5,345	$	(208,071)	$	32,112	Income (loss) from continuing operations	$	20,876	$	(297)	$	(6,779)	$	(218,844)
Income (loss) from discontinued operations, net of tax		616		(8,470)		7,648		(14,199)
Net income (loss) (numerator for diluted EPS)		11,389		(3,125)		(200,423)		17,913
Less: Preference stock dividend		0		0		0		8
Income (loss) attributable to common stockholders (numerator for basic EPS)		$	11,389	$	(3,125)	$	(200,423)	$	17,905
(Loss) income from discontinued operations, net of tax										(Loss) income from discontinued operations, net of tax	(1,020)		(3,032)		(4,906)		7,032

Net income (loss)										Net income (loss)	$	19,856	$	(3,329)	$	(11,685)	$	(211,812)
Denominator:	Denominator:									Denominator:
Weighted-average shares used in basic EPS	Weighted-average shares used in basic EPS	171,828		170,326		171,388		178,048		Weighted-average shares used in basic EPS	173,970		171,478		173,367		171,167
Dilutive effect of common stock equivalents (1)	Dilutive effect of common stock equivalents (1)	2,876		875		0		1,048		Dilutive effect of common stock equivalents (1)	5,009		0		0		0
Weighted-average shares used in diluted EPS	Weighted-average shares used in diluted EPS	174,704		171,201		171,388		179,096		Weighted-average shares used in diluted EPS	178,979		171,478		173,367		171,167
Basic earnings (loss) per share (2):	Basic earnings (loss) per share (2):									Basic earnings (loss) per share (2):
Continuing operations	Continuing operations	$	0.06	$	0.03	$	(1.21)	$	0.18	Continuing operations	$	0.12	$	0	$	(0.04)	$	(1.28)
Discontinued operations	Discontinued operations	0		(0.05)		0.04		(0.08)		Discontinued operations	(0.01)		(0.02)		(0.03)		0.04
Net income (loss)	Net income (loss)	$	0.07	$	(0.02)	$	(1.17)	$	0.10	Net income (loss)	$	0.11	$	(0.02)	$	(0.07)	$	(1.24)
Diluted earnings (loss) per share (2):	Diluted earnings (loss) per share (2):									Diluted earnings (loss) per share (2):
Continuing operations	Continuing operations	$	0.06	$	0.03	$	(1.21)	$	0.18	Continuing operations	$	0.12	$	0	$	(0.04)	$	(1.28)
Discontinued operations	Discontinued operations	0		(0.05)		0.04		(0.08)		Discontinued operations	(0.01)		(0.02)		(0.03)		0.04
Net income (loss)	Net income (loss)	$	0.07	$	(0.02)	$	(1.17)	$	0.10	Net income (loss)	$	0.11	$	(0.02)	$	(0.07)	$	(1.24)

Common stock equivalents excluded from calculation of diluted earnings per share because their impact would be anti-dilutive:	Common stock equivalents excluded from calculation of diluted earnings per share because their impact would be anti-dilutive:	14,828		16,182		15,855		16,166		Common stock equivalents excluded from calculation of diluted earnings per share because their impact would be anti-dilutive:	6,451		19,963		6,451		18,297

(1) ~~Dilutive effect of~~Due to the net loss for the three months ended June 30, 2020 and the six months ended June 30, 2021 and 2020, common stock equivalents ~~for the nine months ended September 30, 2020 was 1,604 shares; however, this amount was not included in~~of 1,019, 5,382 and 1,190, respectively, were also excluded from the calculation of diluted earnings per share as the impact would have been anti-dilutive.

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

6. Inventories

Inventories are stated at the lower of cost or market. Cost is determined on the last-in, first-out (LIFO) basis, the first-in, first-out (FIFO) basis or average cost. Inventories consisted of the following:


	June 30, 2021		December 31, 2020
Raw materials	$	17,833	$	16,570
Supplies and service parts	25,073		24,061
Finished products	30,267		30,849
Inventory at FIFO cost	73,173		71,480
Excess of FIFO cost over LIFO cost	(5,635)		(5,635)
Total inventory, net	$	67,538	$	65,845

1413

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:

September 30,
2020 December 31,
2019
Raw materials $ 16,174 $ 13,514
Supplies and service parts 22,628 21,840
Finished products 31,957 36,969
Inventory at FIFO cost 70,759 72,323
Excess of FIFO cost over LIFO cost (3,785) (4,072)
Total inventory, net $ 66,974 $ 68,251

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 and are generally due monthly; however, clients may rollover outstanding balances. Interest is recognized on loan receivables using the effective interest method. Annual fees are recognized ratably over the annual period covered and client acquisition costs are expensed as incurred.

Finance receivables consisted of the following:


		September 30, 2020						December 31, 2019							June 30, 2021						December 31, 2020
		North America		International		Total		North America		International		Total			North America		International		Total		North America		International		Total
Sales-type lease receivables	Sales-type lease receivables													Sales-type lease receivables
Gross finance receivables	Gross finance receivables	$	981,475	$	201,590	$	1,183,065	$	1,055,852	$	224,202	$	1,280,054	Gross finance receivables	$	974,109	$	195,085	$	1,169,194	$	994,985	$	211,944	$	1,206,929
Unguaranteed residual values	Unguaranteed residual values	37,191		11,609		48,800		41,934		11,789		53,723		Unguaranteed residual values	37,576		11,681		49,257		36,405		12,140		48,545
Unearned income	Unearned income	(270,499)		(58,811)		(329,310)		(319,281)		(65,888)		(385,169)		Unearned income	(262,058)		(60,825)		(322,883)		(275,359)		(61,686)		(337,045)
Allowance for credit losses	Allowance for credit losses	(25,886)		(4,902)		(30,788)		(10,920)		(2,085)		(13,005)		Allowance for credit losses	(23,352)		(5,362)		(28,714)		(22,917)		(6,006)		(28,923)
Net investment in sales-type lease receivables	Net investment in sales-type lease receivables	722,281		149,486		871,767		767,585		168,018		935,603		Net investment in sales-type lease receivables	726,275		140,579		866,854		733,114		156,392		889,506
Loan receivables	Loan receivables													Loan receivables
Loan receivables	Loan receivables	259,832		22,377		282,209		298,247		27,926		326,173		Loan receivables	257,766		23,692		281,458		268,690		22,092		290,782
Allowance for credit losses	Allowance for credit losses	(6,792)		(488)		(7,280)		(5,906)		(740)		(6,646)		Allowance for credit losses	(6,436)		(416)		(6,852)		(6,484)		(462)		(6,946)
Net investment in loan receivables	Net investment in loan receivables	253,040		21,889		274,929		292,341		27,186		319,527		Net investment in loan receivables	251,330		23,276		274,606		262,206		21,630		283,836
Net investment in finance receivables	Net investment in finance receivables	$	975,321	$	171,375	$	1,146,696	$	1,059,926	$	195,204	$	1,255,130	Net investment in finance receivables	$	977,605	$	163,855	$	1,141,460	$	995,320	$	178,022	$	1,173,342

Maturities of gross sales-type lease receivables and gross loan receivables at June 30, 2021 were as follows:


	Sales-type Lease Receivables						Loan Receivables
	North America		International		Total		North America		International		Total
Remaining for year ending December 31, 2021	$	202,304	$	34,907	$	237,211	$	203,523	$	23,692	$	227,215
Year ending December 31, 2022	331,782		69,397		401,179		16,556		0		16,556
Year ending December 31, 2023	228,869		46,650		275,519		10,797		0		10,797
Year ending December 31, 2024	131,795		26,584		158,379		13,140		0		13,140
Year ending December 31, 2025	62,734		12,918		75,652		11,449		0		11,449
Thereafter	16,625		4,629		21,254		2,301		0		2,301
Total	$	974,109	$	195,085	$	1,169,194	$	257,766	$	23,692	$	281,458

1514

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 September 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 $ 114,724 $ 35,721 $ 150,445 $ 215,593 $ 22,377 $ 237,970
Year ending December 31, 2021 359,198 75,057 434,255 13,314 0 13,314
Year ending December 31, 2022 259,729 49,422 309,151 11,507 0 11,507
Year ending December 31, 2023 155,254 27,279 182,533 6,394 0 6,394
Year ending December 31, 2024 77,034 11,000 88,034 7,023 0 7,023
Thereafter 15,536 3,111 18,647 6,001 0 6,001
Total $ 981,475 $ 201,590 $ 1,183,065 $ 259,832 $ 22,377 $ 282,209

Aging of Receivables

The aging of gross finance receivables was as follows:


		September 30, 2020											June 30, 2021
		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	Past due amounts 0 - 90 days	$	961,346	$	199,565	$	254,802	$	22,096	$	1,437,809	Past due amounts 0 - 90 days	$	962,059	$	193,747	$	253,061	$	23,486	$	1,432,353
Past due amounts > 90 days	Past due amounts > 90 days	20,129		2,025		5,030		281		27,465		Past due amounts > 90 days	12,050		1,338		4,705		206		18,299
Total	Total	$	981,475	$	201,590	$	259,832	$	22,377	$	1,465,274	Total	$	974,109	$	195,085	$	257,766	$	23,692	$	1,450,652
Past due amounts > 90 days	Past due amounts > 90 days											Past due amounts > 90 days
Still accruing interest	Still accruing interest	$	3,365	$	699	$	1,461	$	58	$	5,583	Still accruing interest	$	2,449	$	275	$	0	$	0	$	2,724
Not accruing interest	Not accruing interest	16,764		1,326		3,569		223		21,882		Not accruing interest	9,601		1,063		4,705		206		15,575
Total	Total	$	20,129	$	2,025	$	5,030	$	281	$	27,465	Total	$	12,050	$	1,338	$	4,705	$	206	$	18,299

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 days 22,940 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 interest 18,105 2,302 2,152 108 22,667
Total $ 22,940 $ 3,383 $ 4,246 $ 229 $ 30,798


	December 31, 2020
	Sales-type Lease Receivables				Loan Receivables
	North America		International		North America		International		Total
Past due amounts 0 - 90 days	$	972,266	$	208,968	$	264,484	$	21,932	$	1,467,650
Past due amounts > 90 days	22,719		2,976		4,206		160		30,061
Total	$	994,985	$	211,944	$	268,690	$	22,092	$	1,497,711
Past due amounts > 90 days
Still accruing interest	$	5,128	$	463	$	1,797	$	59	$	7,447
Not accruing interest	17,591		2,513		2,409		101		22,614
Total	$	22,719	$	2,976	$	4,206	$	160	$	30,061

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~~management forecasts and ~~current~~independent economic ~~outlook.~~forecasts. Credit losses are estimated at the portfolio level based on asset type and geographic market. Historical loss experience ~~was~~is 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 at September 30, 2020 considers the current economic conditions 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. ~~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.

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
													North America		International		North America		International		Total
Balance at January 1, 2021												Balance at January 1, 2021	$	22,917	$	6,006	$	6,484	$	462	$	35,869

Amounts charged to expense												Amounts charged to expense	1,127		(81)		1,477		(23)		2,500
Write-offs												Write-offs	(2,226)		(631)		(3,392)		(29)		(6,278)
Recoveries												Recoveries	1,500		146		1,862		1		3,509
Other												Other	34		(78)		5		5		(34)
Balance at June 30, 2021												Balance at June 30, 2021	$	23,352	$	5,362	$	6,436	$	416	$	35,566

		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	Balance at December 31, 2019	$	10,920	$	2,085	$	5,906	$	740	$	19,651	Balance at December 31, 2019	$	10,920	$	2,085	$	5,906	$	740	$	19,651
Cumulative effect of accounting change	Cumulative effect of accounting change	9,271		1,750		(1,116)		(402)		9,503		Cumulative effect of accounting change	9,271		1,750		(1,116)		(402)		9,503
Amounts charged to expense	Amounts charged to expense	10,009		1,314		6,792		429		18,544		Amounts charged to expense	9,025		1,257		4,758		208		15,248
Write-offs	Write-offs	(5,950)		(548)		(7,370)		(343)		(14,211)		Write-offs	(3,536)		(386)		(4,542)		(297)		(8,761)
Recoveries	Recoveries	1,488		91		2,399		1		3,979		Recoveries	946		44		1,386		1		2,377
Currency impact		148		210		181		63		602
Balance at September 30, 2020		$	25,886	$	4,902	$	6,792	$	488	$	38,068

		Sales-type Lease Receivables				Loan Receivables
		North America		International		North America		International		Total
Balance at January 1, 2019		$	10,253	$	2,355	$	6,777	$	837	$	20,222
Amounts charged to expense		4,587		801		3,547		440		9,375
Write-offs		(5,153)		(842)		(6,882)		(608)		(13,485)
Recoveries		1,286		157		2,746		9		4,198
Currency impact		199		(254)		(172)		41		(186)
Balance at September 30, 2019		$	11,172	$	2,217	$	6,016	$	719	$	20,124
Other												Other	(23)		(7)		90		36		96
Balance at June 30, 2020												Balance at June 30, 2020	$	26,603	$	4,743	$	6,482	$	286	$	38,114

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 to ensure 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 proprietary 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~~We stratify the third party's credit scores of our clients into low, medium and high-risk accounts. Due to timing and other issues, our entire portfolio may not ~~scored. Absence~~be scored at period end. We report these amounts as "Not Scored"; however, absence of a score is not indicative of the credit quality of the account. The ~~degree~~third-party credit score is used to predict the payment behaviors of ~~risk (low, medium, high), as defined by~~our clients and the ~~third party, refers to the relative risk~~probability that an account ~~may~~will become ~~delinquent in~~greater than 90 days past due during the ~~next 12 months.~~subsequent 12-month period.

•Low risk accounts are companies with very good credit scores and ~~are considered to approximate the top 30%~~a predicted delinquency rate of ~~all commercial borrowers.~~less than 5%.

•Medium risk accounts are companies with average to good credit scores and ~~are considered to approximate the middle 40% of all commercial borrowers.~~a predicted delinquency rate between 5% and 10%.

•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.~~delinquent. The predicted delinquency rate would be greater than 10%.

1716

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.~~class as of June 30, 2021 and December 30, 2020.


		Sales Type Lease Receivables												Loan Receivables					Total			Sales Type Lease Receivables																			Loan Receivables					Total
		2020		2019		2018		2017		2016		Prior						2021					2020				2019			2018			2017			Prior
Low	Low	$	187,763	$	230,942	$	178,224	$	101,307	$	37,346	$	15,488			$	185,709					$	936,779	Low	$	145,875		$	218,083		$	189,322		$	127,968		$	55,954		$	25,132				$	191,571				$	953,905
Medium	Medium	39,810		58,779		42,501		24,903		10,491		3,924		59,422					239,830		Medium	27,370				44,107			43,995			29,079			15,255			5,737			51,877					217,420
High	High	5,752		6,219		4,722		2,605		1,344		184		4,617					25,443		High	2,866				5,405			4,959			2,952			1,475			1,335			4,610					23,602
Not Scored	Not Scored	55,694		79,125		53,395		28,611		12,207		1,729		32,461					263,222		Not Scored	47,676				64,035			59,108			33,966			13,581			3,959			33,400					255,725
Total	Total	$	289,019	$	375,065	$	278,842	$	157,426	$	61,388	$	21,325	$	282,209				$	1,465,274	Total	$	223,787			$	331,630		$	297,384		$	193,965		$	86,265		$	36,163		$	281,458				$	1,450,652

																						Sales Type Lease Receivables																			Loan Receivables					Total
																						2020				2019			2018			2017			2016			Prior
Low																					Low	$	256,573			$	228,344		$	165,244		$	87,346		$	30,518		$	12,249				$	192,971				$	973,245
Medium																					Medium	50,785				49,946			37,168			21,388			6,470			2,375			61,625					229,757
High																					High	6,182				5,396			3,782			1,974			1,051			143			4,518					23,046
Not Scored																					Not Scored	80,854				77,362			48,704			24,291			7,813			971			31,668					271,663
Total																					Total	$	394,394			$	361,048		$	254,898		$	134,999		$	45,852		$	15,738		$	290,782				$	1,497,711

The majority of the Not Scored amounts above is within 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~~as 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. All other credit applications are manually reviewed by obtaining client financial information, credit reports and other available financial information.

Lease Income

Lease income from sales-type leases was as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Profit recognized at commencement (1)	Profit recognized at commencement (1)	$	29,169	$	39,326	$	80,349	$	112,422	Profit recognized at commencement (1)	$	32,057	$	21,271	$	64,365	$	51,179
Interest income	Interest income	33,654		56,522		101,969		174,045		Interest income	47,770		52,277		96,266		106,083
Total lease income from sales-type leases	Total lease income from sales-type leases	$	62,823	$	95,848	$	182,318	$	286,467	Total lease income from sales-type leases	$	79,827	$	73,548	$	160,631	$	157,262

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

The disclosure of total lease income from sales-type leases for the three and six months ended June 30, 2020 has been revised from $55 million to $74 million and from $119 million to $157 million, respectively. The revision did not have any impact on our Condensed Consolidated Statements of Operations.

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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~~2021	$	~~17,351~~
~~Year ending December 31, 2021~~	~~36,396~~19,276
Year ending December 31, 2022	~~13,688~~22,961
Year ending December 31, 2023	~~7,172~~13,010
Year ending December 31, 2024	~~2,100~~9,968
Year ending December 31, 2025	3,760
Thereafter	~~399~~196
Total	$	~~77,106~~69,171

~~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 ~~Other Assets~~Goodwill

Intangible Assets

Intangible assets consisted of the following:


		September 30, 2020						December 31, 2019							June 30, 2021						December 31, 2020
		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	Customer relationships	$	268,195	$	(108,338)	$	159,857	$	265,665	$	(88,550)	$	177,115	Customer relationships	$	268,188	$	(128,247)	$	139,941	$	268,199	$	(115,010)	$	153,189
Software & technology	Software & technology	31,600		(23,969)		7,631		31,600		(19,999)		11,601		Software & technology	19,000		(14,249)		4,751		19,000		(12,350)		6,650
Trademarks & other		13,324		(13,319)		5		13,324		(11,400)		1,924

Total intangible assets	Total intangible assets	$	313,119	$	(145,626)	$	167,493	$	310,589	$	(119,949)	$	190,640	Total intangible assets	$	287,188	$	(142,496)	$	144,692	$	287,199	$	(127,360)	$	159,839

Amortization expense for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 was $8 million and $9 million, ~~respectively, and amortization~~respectively. Amortization expense for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 ~~and 2019~~ was ~~$26~~$15 million and ~~$27~~$18 million, respectively.

Future amortization expense as of ~~September~~June 30, ~~2020~~2021 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~~2021	$	~~7,683~~
~~Year ending December 31, 2021~~	~~30,265~~15,147
Year ending December 31, 2022	29,315
Year ending December 31, 2023	26,465
Year ending December 31, 2024	26,465
Year ending December 31, 2025	19,805
Thereafter	~~47,300~~27,495
Total	$	~~167,493~~144,692

Goodwill

Changes in the carrying value of goodwill, by reporting segment, are shown in the table below.


		December 31, 2019		Impairment		Acquisition		Currency impact		September 30, 2020			Gross value before accumulated impairment		Accumulated impairment		December 31, 2020		Disposition		Currency impact		June 30, 2021
Global Ecommerce	Global Ecommerce	$	609,431	$	(198,169)	$	0	$	0	$	411,262	Global Ecommerce	$	609,431	$	(198,169)	$	411,262	$	(16,200)	$	0	$	395,062
Presort Services	Presort Services	212,529		0		8,463		0		220,992		Presort Services	220,992		0		220,992		0		0		220,992
Commerce Services		821,960		(198,169)		8,463		0		632,254
SendTech Solutions	SendTech Solutions	502,219		0		0		7,671		509,890		SendTech Solutions	520,031		0		520,031		0		(5,921)		514,110
Total goodwill	Total goodwill	$	1,324,179	$	(198,169)	$	8,463	$	7,671	$	1,142,144	Total goodwill	$	1,350,454	$	(198,169)	$	1,152,285	$	(16,200)	$	(5,921)	$	1,130,164

In the first quarter of 2020, we determined that the estimated fair value of the Global Ecommerce reporting unit was less than its carrying value and recorded a non-cash, pre-tax goodwill impairment charge of $198 million.

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, due in part to the deteriorating macroeconomic conditions and uncertainty brought on by COVID-19, causing 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 that are inherently subject to significant uncertainties. These estimates and assumptions 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

1918

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

~~goodwill impairment charge and could result in an additional impairment charge in the future. These estimates and assumptions are considered Level 3 inputs under the fair value hierarchy.~~

~~Other Assets~~

~~Other assets at September 30, 2020 and December 31, 2019 includes long-term investments of $426 million and $289 million, respectively.~~

InDuring the second quarter, we sold a U.K. based software consultancy business ("Tacit") acquired as part of ~~2020, we surrendered certain company owned life insurance policies and~~our 2017 acquisition of Newgistics. We received net 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, in the second quarter of 2020, we sold our interest in an equity investment for $12$28 million and recognized a pre-tax gain of ~~$12 million.~~

$10 million (after-tax gain of $4 million), which included a goodwill allocation of $16 million attributable to Tacit.

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.


		September 30, 2020									June 30, 2021
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Investment securities	Investment securities									Investment securities
Money market funds	Money market funds	$	116,806	$	440,493	$	0	$	557,299	Money market funds	$	49,696	$	362,892	$	0	$	412,588
Equity securities	Equity securities	0		22,555		0		22,555		Equity securities	0		30,115		0		30,115
Commingled fixed income securities	Commingled fixed income securities	1,720		19,537		0		21,257		Commingled fixed income securities	1,706		19,325		0		21,031
Government and related securities	Government and related securities	17,408		18,601		0		36,009		Government and related securities	26,052		25,974		0		52,026
Corporate debt securities	Corporate debt securities	0		82,959		0		82,959		Corporate debt securities	0		67,674		0		67,674
Mortgage-backed / asset-backed securities	Mortgage-backed / asset-backed securities	0		275,352		0		275,352		Mortgage-backed / asset-backed securities	0		206,520		0		206,520
Derivatives	Derivatives									Derivatives

Interest rate swap										Interest rate swap	0		445		0		445
Foreign exchange contracts	Foreign exchange contracts	0		2,603		0		2,603		Foreign exchange contracts	0		438		0		438
Total assets	Total assets	$	135,934	$	862,100	$	0	$	998,034	Total assets	$	77,454	$	713,383	$	0	$	790,837
Liabilities:	Liabilities:									Liabilities:
Derivatives	Derivatives									Derivatives
Interest rate swaps		$	0	$	(2,908)	$	0	$	(2,908)

Foreign exchange contracts	Foreign exchange contracts	0		(1,086)		0		(1,086)		Foreign exchange contracts	$	0	$	(1,722)	$	0	$	(1,722)
Total liabilities	Total liabilities	$	0	$	(3,994)	$	0	$	(3,994)	Total liabilities	$	0	$	(1,722)	$	0	$	(1,722)

2019

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


		December 31, 2019									December 31, 2020
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Investment securities	Investment securities									Investment securities
Money market funds	Money market funds	$	161,441	$	240,364	$	0	$	401,805	Money market funds	$	73,228	$	434,791	$	0	$	508,019
Equity securities	Equity securities	0		21,979		0		21,979		Equity securities	0		26,583		0		26,583
Commingled fixed income securities	Commingled fixed income securities	1,656		18,404		0		20,060		Commingled fixed income securities	1,722		19,669		0		21,391
Government and related securities	Government and related securities	64,572		17,478		0		82,050		Government and related securities	16,776		16,757		0		33,533
Corporate debt securities	Corporate debt securities	0		72,149		0		72,149		Corporate debt securities	0		71,433		0		71,433
Mortgage-backed / asset-backed securities	Mortgage-backed / asset-backed securities	0		66,339		0		66,339		Mortgage-backed / asset-backed securities	0		220,678		0		220,678
Derivatives	Derivatives									Derivatives

Foreign exchange contracts	Foreign exchange contracts	0		3,256		0		3,256		Foreign exchange contracts	0		3,776		0		3,776
Total assets	Total assets	$	227,669	$	439,969	$	0	$	667,638	Total assets	$	91,726	$	793,687	$	0	$	885,413
Liabilities:	Liabilities:									Liabilities:
Derivatives	Derivatives									Derivatives

Interest rate swap										Interest rate swap	$	0	$	(2,163)	$	0	$	(2,163)
Foreign exchange contracts	Foreign exchange contracts	$	0	$	(1,402)	$	0	$	(1,402)	Foreign exchange contracts	0		(1,960)		0		(1,960)
Total liabilities	Total liabilities	$	0	$	(1,402)	$	0	$	(1,402)	Total liabilities	$	0	$	(4,123)	$	0	$	(4,123)

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~~within 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.

2120

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 securities are predominantly held at ~~our wholly owned subsidiary,~~ the Pitney Bowes Bank (the PB Bank). The PB Bank provides financing solutions to clients that rent or lease postage meters and purchase postage related supplies. The PB Bank also manages and invests excess undeployed deposits in bond investments.Bank. 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)~~loss (AOCL), and changes in fair value due to credit conditions recorded in earnings. There were no unrealized losses due to credit losses charged to earnings through ~~September~~the six months ended June 30, ~~2020.~~2021.

Available-for-sale securities consisted of the following:


		September 30, 2020									June 30, 2021
		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value			Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Government and related securities	Government and related securities	$	35,018	$	144	$	(719)	$	34,443	Government and related securities	$	51,055	$	107	$	(636)	$	50,526
Corporate debt securities	Corporate debt securities	84,457		422		(1,920)		82,959		Corporate debt securities	69,475		357		(2,158)		67,674
Commingled fixed income securities	Commingled fixed income securities	1,699		21		0		1,720		Commingled fixed income securities	1,716		0		(10)		1,706
Mortgage-backed / asset-backed securities	Mortgage-backed / asset-backed securities	276,880		476		(2,004)		275,352		Mortgage-backed / asset-backed securities	210,012		247		(3,739)		206,520
Total	Total	$	398,054	$	1,063	$	(4,643)	$	394,474	Total	$	332,258	$	711	$	(6,543)	$	326,426


		December 31, 2019									December 31, 2020
		Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value			Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Government and related securities	Government and related securities	$	80,732	$	1,358	$	(114)	$	81,976	Government and related securities	$	31,882	$	157	$	(78)	$	31,961
Corporate debt securities	Corporate debt securities	70,426		2,009		(286)		72,149		Corporate debt securities	71,174		614		(355)		71,433
Commingled fixed income securities	Commingled fixed income securities	1,675		0		(19)		1,656		Commingled fixed income securities	1,706		16		0		1,722
Mortgage-backed / asset-backed securities	Mortgage-backed / asset-backed securities	65,679		960		(300)		66,339		Mortgage-backed / asset-backed securities	220,659		734		(715)		220,678
Total	Total	$	218,512	$	4,327	$	(719)	$	222,120	Total	$	325,421	$	1,521	$	(1,148)	$	325,794

Investment securities in a loss position were as follows:


		September 30, 2020				December 31, 2019					June 30, 2021				December 31, 2020
		Fair Value		Gross unrealized losses		Fair Value		Gross unrealized losses			Fair Value		Gross unrealized losses		Fair Value		Gross unrealized losses
Less than 12 continuous months	Less than 12 continuous months	$	314,145	$	4,543	$	52,521	$	583	Less than 12 continuous months	$	287,161	$	6,483	$	132,267	$	1,072
Greater than 12 continuous months	Greater than 12 continuous months	3,157		100		9,227		136		Greater than 12 continuous months	2,016		60		2,369		76
Total	Total	$	317,302	$	4,643	$	61,748	$	719	Total	$	289,177	$	6,543	$	134,636	$	1,148

At ~~September~~June 30, ~~2020, approximately 30%~~2021, 33% of ~~total~~the securities in the investment portfolio were in a ~~net~~ loss position. We believe our allowance for credit losses on available-for-sale investment securities is adequate as our investments are primarily in highly liquid U.S. government and agency securities, high grade corporate bonds and municipal bonds. The majority of our mortgage-backed securities are either guaranteed or supported by the U.S. Government. We have not recognized an impairment on 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~~we receive the stated principal and interest at maturity.

2221

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 ~~September~~June 30, ~~2020~~2021 were as follows:


		Amortized cost		Estimated fair value			Amortized cost		Estimated fair value
Within 1 year	Within 1 year	$	19,299	$	19,379	Within 1 year	$	13,147	$	13,149
After 1 year through 5 years	After 1 year through 5 years	9,354		9,553		After 1 year through 5 years	21,318		21,261
After 5 years through 10 years	After 5 years through 10 years	54,448		53,476		After 5 years through 10 years	60,188		58,612
After 10 years	After 10 years	314,953		312,066		After 10 years	237,605		233,404
Total	Total	$	398,054	$	394,474	Total	$	332,258	$	326,426

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.

Held-to-Maturity Securities

Held-to-maturity securities at ~~September~~June 30, ~~2020~~2021 were not material and at December 31, ~~2019,~~2020 include ~~$25~~$75 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~~approximated 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~~AOCL 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 ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had outstanding contracts associated with these anticipated transactions with notional amounts of $9less than $1 million and $7$8 million, respectively. Amounts included in ~~AOCI~~AOCL at ~~September~~June 30, ~~2020~~2021 will be recognized in earnings within the next 12 months.

Interest Rate Swaps

In May 2021, we terminated our $500 million aggregate notional amount of interest rate swap agreements. We ~~have~~received $2 million that was recorded in AOCL and will be recognized ratably in income through 2024. We concurrently entered into new interest rate swap agreements with an aggregate notional amount of ~~$500~~$200 million ~~that are~~and designated these instruments as cash flow 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.~~AOCL.

2322

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	Designation of Derivatives	Balance Sheet Location	September 30, 2020		December 31, 2019		Designation of Derivatives	Balance Sheet Location	June 30, 2021		December 31, 2020
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments						Derivatives designated as hedging instruments
Foreign exchange contracts	Foreign exchange contracts	Other current assets and prepayments	$	15	$	207	Foreign exchange contracts	Other current assets and prepayments	$	60	$	96
		Accounts payable and accrued liabilities	(154)		(56)			Accounts payable and accrued liabilities	(41)		(112)

Interest rate swaps	Interest rate swaps	Other noncurrent liabilities	(2,908)		0		Interest rate swaps	Other assets (Other noncurrent liabilities)	445		(2,163)

Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments						Derivatives not designated as hedging instruments
Foreign exchange contracts	Foreign exchange contracts	Other current assets and prepayments	2,588		3,049		Foreign exchange contracts	Other current assets and prepayments	378		3,680
		Accounts payable and accrued liabilities	(932)		(1,346)			Accounts payable and accrued liabilities	(1,681)		(1,848)

		Total derivative assets	$	2,603	$	3,256		Total derivative assets	$	883	$	3,776
		Total derivative liabilities	(3,994)		(1,402)			Total derivative liabilities	(1,722)		(4,123)
		Total net derivative (liability) asset	$	(1,391)	$	1,854		Total net derivative liability	$	(839)	$	(347)

Results of cash flow hedging relationships were as follows:


		Three Months Ended September 30,																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 Gain (Loss) Recognized in AOCL (Effective Portion)								Location of Gain (Loss) (Effective Portion)		Gain (Loss) Reclassified from AOCL to Earnings (Effective Portion)
Derivative Instrument	Derivative Instrument	2020		2019			2020			2019		Derivative Instrument				2021				2020							2021			2020
Foreign exchange contracts	Foreign exchange contracts	$	(80)	$	156		Revenue			$	(104)			$	(98)		Foreign exchange contracts			$	(54)			$	(121)		Revenue			$	118			$	(64)
						Cost of sales		(6)				54														Cost of sales		(47)				32
Interest rate swap	Interest rate swap	(1,303)		0		Interest expense		0				0		Interest rate swap				(3,672)				(1,605)				Interest expense		0				0
		$	(1,383)	$	156			$	(110)			$	(44)					$	(3,726)			$	(1,726)					$	71			$	(32)

		Nine Months Ended September 30,																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 Gain (Loss) Recognized in AOCI (Effective Portion)								Location of Gain (Loss) (Effective Portion)		Gain (Loss) Reclassified from AOCI to Earnings (Effective Portion)
Derivative Instrument	Derivative Instrument	2020		2019			2020			2019		Derivative Instrument				2021				2020							2021			2020
Foreign exchange contracts	Foreign exchange contracts	$	(361)	$	181		Revenue			$	(107)			$	(23)		Foreign exchange contracts			$	174			$	(281)		Revenue			$	244			$	(3)
						Cost of sales		36				99														Cost of sales		(105)				42
Interest rate swap	Interest rate swap	(2,908)		0		Interest expense		0				0		Interest rate swap				2,608				(1,605)				Interest expense		0				0
		$	(3,269)	$	181			$	(71)			$	76					$	2,782			$	(1,886)					$	139			$	39

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. All outstanding contracts at ~~September~~June 30, ~~2020~~2021 mature within 12 months.

2423

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 September 30,						Three Months Ended June 30,
			Derivative Gain (Loss) Recognized in Earnings						Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument	Derivatives Instrument	Location of Derivative Gain (Loss)	2020		2019		Derivatives Instrument	Location of Derivative Gain (Loss)	2021		2020
Foreign exchange contracts	Foreign exchange contracts	Selling, general and administrative expense	$	891	$	(11,385)	Foreign exchange contracts	Selling, general and administrative expense	$	514	$	1,200

			Nine Months Ended September 30,						Six Months Ended June 30,
			Derivative Gain (Loss) Recognized in Earnings						Derivative Gain (Loss) Recognized in Earnings
Derivatives Instrument	Derivatives Instrument	Location of Derivative Gain (Loss)	2020		2019		Derivatives Instrument	Location of Derivative Gain (Loss)	2021		2020
Foreign exchange contracts	Foreign exchange contracts	Selling, general and administrative expense	$	(2,776)	$	(6,181)	Foreign exchange contracts	Selling, general and administrative expense	$	1,067	$	(3,667)

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:


		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Carrying value	Carrying value	$	2,595,221	$	2,739,722	Carrying value	$	2,427,713	$	2,564,393
Fair value	Fair value	$	2,426,516	$	2,572,794	Fair value	$	2,482,619	$	2,479,895

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, net 8,748 1,108 9,856
Cash payments (14,714) (1,155) (15,869)
Balance at September 30, 2020 $ 5,971 $ 22 $ 5,993
Balance at January 1, 2019 $ 13,641 $ 1,808 $ 15,449
Expenses, net 12,498 845 13,343
Cash payments (16,362) (2,483) (18,845)
Balance at September 30, 2019 $ 9,777 $ 170 $ 9,947


	Severance and other exit costs
Balance at January 1, 2021	$	10,063
Expenses, net	7,733
Cash payments	(8,825)
Noncash activity	(541)
Balance at June 30, 2021	$	8,430

Balance at January 1, 2020	$	12,006
Expenses, net	8,739
Cash payments	(11,365)
Noncash activity	(1,836)
Balance at June 30, 2020	$	7,544

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 nine months ended September 30, 2020 includes $3 million of non-cash charges related to pension settlements and facilities abandonment. Restructuring charges and asset impairments for the nine months ended September 30, 2019 includes $43 million of non-cash charges primarily due to the impairment of capitalized software costs related to the development of a new enterprise resource planning (ERP) system in our international markets.

2524

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

11. Debt

Total debt consisted of the following:


		Interest rate	September 30, 2020		December 31, 2019			Interest rate	June 30, 2021		December 31, 2020
Notes due October 2021	Notes due October 2021	4.625%	$	170,253	$	600,000	Notes due October 2021	4.875%	$	0	$	152,588
Notes due May 2022	Notes due May 2022	5.375%	148,792		400,000		Notes due May 2022	5.625%	72,447		148,792
Notes due April 2023	Notes due April 2023	5.70%	271,000		400,000		Notes due April 2023	6.20%	93,394		271,000
Notes due March 2024	Notes due March 2024	4.625%	374,000		500,000		Notes due March 2024	4.625%	260,826		374,000
Notes due March 2027							Notes due March 2027	6.875%	400,000		0
Notes due March 2029							Notes due March 2029	7.25%	350,000		0
Notes due January 2037	Notes due January 2037	5.25%	35,841		35,841		Notes due January 2037	5.25%	35,841		35,841
Notes due March 2043	Notes due March 2043	6.70%	425,000		425,000		Notes due March 2043	6.70%	425,000		425,000
Term loan due November 2024		Variable	385,000		400,000
Term loan due March 2026							Term loan due March 2026	LIBOR + 1.75%	380,000		380,000
Term loan due January 2025	Term loan due January 2025	Variable	828,750		0		Term loan due January 2025	LIBOR + 5.5%	0		818,125

Term loan due March 2028							Term loan due March 2028	LIBOR + 4.0%	448,875		0
Other debt	Other debt		5,000		5,108		Other debt		4,295		4,900
Principal amount	Principal amount		2,643,636		2,765,949		Principal amount		2,470,678		2,610,246
Less: unamortized costs, net	Less: unamortized costs, net		48,415		26,227		Less: unamortized costs, net		42,965		45,853
Total debt	Total debt		2,595,221		2,739,722		Total debt		2,427,713		2,564,393
Less: current portion long-term debt	Less: current portion long-term debt		63,509		20,108		Less: current portion long-term debt		97,015		216,032
Long-term debt	Long-term debt		$	2,531,712	$	2,719,614	Long-term debt		$	2,330,698	$	2,348,361

~~Interest rates on certain notes are subject to adjustment based on changes in our credit ratings. As~~In 2021, we issued a ~~result~~$400 million 6.875% unsecured note due March 2027 and a $350 million 7.25% unsecured note due March 2029. We also entered into a new seven-year $450 million secured term loan maturing March 2028. We redeemed the remaining $153 million balance 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~~under a tender offer, redeemed an aggregate $363 million of the May 2022 notes, ~~increased 0.75% in the second quarter of 2020. Further, the interest rates on the October 2021 notes and~~ April 2023 notes ~~will increase an additional 0.25% in~~and March 2024 notes. We also repaid the ~~fourth quarter~~remaining $818 million balance of ~~2020.~~

~~In February 2020, we secured a~~ ~~five-year $850 million~~our term loan ~~maturing~~that was scheduled to mature in January ~~2025 (the 2025 Term Loan).~~2025. A $52 million pre-tax loss was incurred on the refinancing of debt.

We also amended our $500 million secured revolving credit facility and our $380 million secured term loan to extend their maturities from November 2024 to March 2026. The ~~2025 Term Loan bears~~credit agreement that governs the revolving credit facility and term loans contains financial and non-financial covenants. At June 30, 2021, we were in compliance with all covenants and there were 0 outstanding borrowings under the revolving credit facility.

In May 2021, we terminated our existing $500 million interest ~~at LIBOR plus 5.5%~~rate swap agreements and ~~resets monthly. We have~~entered into new 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.~~$200 million. Under the terms of the new swap agreements, we pay fixed-rate interest of ~~0.4443%~~0.56% 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~~At June 30, 2021, the interest rate of the ~~October 2021 notes, $250 million of~~2028 Term Loan was 4.1% and 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~~interest rate on the ~~early redemption of debt.~~2026 Term Loan was 1.9%.

~~During the first nine months of 2020, we repaid $36 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. At September 30, 2020, we were in compliance with all covenants. In September 2020, we repaid the $100 million under the credit facility that we drew down in April 2020. At September 30, 2020 and December 31, 2019, there were 0 outstanding borrowings under this facility.

2625

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) ~~cost~~ were as follows:


		Defined Benefit Pension Plans								Nonpension Postretirement Benefit Plans					Defined Benefit Pension Plans								Nonpension Postretirement Benefit Plans
		United States				Foreign									United States				Foreign
		Three Months Ended				Three Months Ended				Three Months Ended					Three Months Ended				Three Months Ended				Three Months Ended
		September 30,				September 30,				September 30,					June 30,				June 30,				June 30,
		2020		2019		2020		2019		2020		2019			2021		2020		2021		2020		2021		2020
Service cost	Service cost	$	16	$	20	$	422	$	385	$	229	$	242	Service cost	$	105	$	27	$	314	$	399	$	226	$	217
Interest cost	Interest cost	12,719		15,792		3,548		4,435		1,255		1,646		Interest cost	10,744		13,179		3,007		3,407		964		1,242
Expected return on plan assets	Expected return on plan assets	(20,932)		(23,182)		(8,297)		(8,340)		0		0		Expected return on plan assets	(19,478)		(21,303)		(8,107)		(7,969)		0		0
Amortization of transition credit	Amortization of transition credit	0		0		(1)		(2)		0		0		Amortization of transition credit	0		0		0		(1)		0		0
Amortization of prior service (credit) cost	Amortization of prior service (credit) cost	(15)		(15)		62		58		93		80		Amortization of prior service (credit) cost	(15)		(15)		68		59		33		94
Amortization of net actuarial loss	Amortization of net actuarial loss	7,972		6,537		2,092		1,543		926		507		Amortization of net actuarial loss	9,639		8,197		2,380		2,005		1,077		738
Settlement	Settlement	75		1,477		833		0		0		0		Settlement	314		612		0		3,190		0		0
Net periodic benefit (income) cost		$	(165)	$	629	$	(1,341)	$	(1,921)	$	2,503	$	2,475
Net periodic benefit cost (income)														Net periodic benefit cost (income)	$	1,309	$	697	$	(2,338)	$	1,090	$	2,300	$	2,291
Contributions to benefit plans	Contributions to benefit plans	$	2,061	$	3,350	$	445	$	652	$	2,422	$	4,628	Contributions to benefit plans	$	1,845	$	1,969	$	328	$	580	$	3,380	$	3,616

		Defined Benefit Pension Plans								Nonpension Postretirement Benefit Plans					Defined Benefit Pension Plans								Nonpension Postretirement Benefit Plans
		United States				Foreign									United States				Foreign
		Nine Months Ended				Nine Months Ended				Nine Months Ended					Six Months Ended				Six Months Ended				Six Months Ended
		September 30,				September 30,				September 30,					June 30,				June 30,				June 30,
		2020		2019		2020		2019		2020		2019			2021		2020		2021		2020		2021		2020
Service cost	Service cost	$	69	$	62	$	1,220	$	1,157	$	663	$	725	Service cost	$	131	$	53	$	709	$	798	$	450	$	434
Interest cost	Interest cost	39,077		47,378		10,473		13,231		3,742		4,937		Interest cost	21,489		26,358		5,968		6,925		1,925		2,487
Expected return on plan assets	Expected return on plan assets	(63,539)		(69,545)		(24,474)		(25,609)		0		0		Expected return on plan assets	(38,956)		(42,607)		(16,091)		(16,177)		0		0
Amortization of transition credit	Amortization of transition credit	0		0		(3)		(5)		0		0		Amortization of transition credit	0		0		0		(2)		0		0
Amortization of prior service (credit) cost	Amortization of prior service (credit) cost	(45)		(45)		182		181		280		241		Amortization of prior service (credit) cost	(30)		(30)		135		120		65		187
Amortization of net actuarial loss	Amortization of net actuarial loss	24,367		19,610		6,156		4,727		2,400		1,521		Amortization of net actuarial loss	19,277		16,395		4,725		4,064		2,155		1,474
Settlement	Settlement	1,076		2,278		4,023		397		0		0		Settlement	314		1,001		0		3,190		0		0
Net periodic benefit cost (income)	Net periodic benefit cost (income)	$	1,005	$	(262)	$	(2,423)	$	(5,921)	$	7,085	$	7,424	Net periodic benefit cost (income)	$	2,225	$	1,170	$	(4,554)	$	(1,082)	$	4,595	$	4,582
Contributions to benefit plans	Contributions to benefit plans	$	5,959	$	7,401	$	9,013	$	9,740	$	10,493	$	13,841	Contributions to benefit plans	$	2,860	$	3,898	$	9,024	$	8,568	$	6,900	$	8,071

2726

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 ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was ~~4.9%~~19.1% and ~~(3.8)%~~57.2%, respectively, and includes a $3tax benefit of $5 million ~~benefit, which is primarily~~ due to ~~regulations enacted into law during~~tax legislation in the ~~quarter.~~U.K. and a tax charge of $6 million on the pre-tax gain of $10 million from the sale of Tacit as the tax basis was lower than the book basis. The effective tax rate for the ~~nine~~six months ended ~~September~~June 30, 2021 also includes benefits of $3 million from an affiliate reorganization and $2 million from the vesting of restricted stock, partially offset by a charge of $1 million for the write-off of deferred tax assets associated with the expiration of out-of-the-money stock options.

The effective tax rate for the three and six months ended June 30, 2020 ~~also~~was 101.8% and (3.3)%, respectively, and includes a $12 million charge for the surrender of company owned life insurance ~~policies (see Note 8),~~policies. The effective tax rate for the six months ended 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, a benefit of $1$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~~out-of-the-money stock options and the vesting of restricted stock.

The effective tax rate for the three and nine months ended September 30, 2019 was 127.3% and (71.2)%, respectively, and includes a benefit of $23 million from the release of a foreign valuation allowance. The effective tax rate for the nine months ended September 30, 2019 also includes a $2 million tax on the $18 million book loss incurred from the disposition of operations in certain international markets, primarily due to nondeductible basis differences as well as a benefit of $6 million from the resolution of certain tax examinations.

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%~~15% 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~~post-2014 U.S. state and local tax returns are still subject to ~~examination. In~~examination, with some states in appeals from 2011. For our significant non-U.S. jurisdictions, Canada ~~the examination of our tax filings prior to 2015 are~~is closed to ~~audit. Other significant jurisdictions include~~examination through 2014, France ~~(closed~~is closed through ~~2013),~~2013, Germany ~~(closed~~is closed through ~~2016)~~2016 and the U.K. ~~(closed~~is closed through ~~2017).~~2018. We also have other less significant tax filings currently subject to examination.

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, as of June 30, 2021, 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 September 30, 2020.~~flows. 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 2 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.

WeAt June 30, 2021, we have entered into ~~3 equipment~~ leases ~~for our Commerce Services operations that will commence in the fourth quarter~~ with aggregate lease payments of approximately $38 million and terms ranging from seven to ~~nine years. Aggregate lease payments for the three leases will approximate $30 million.~~ten years, that have not commenced.

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, 2021	$	323,338	$	15,269	$	5,161,029	$	(847,538)	$	(4,632,935)	$	19,163

Net income	—		—		19,856		—		—		19,856
Other comprehensive income	—		—		—		16,235		—		16,235
Dividends paid ($0.05 per common share)	—		—		(8,700)		—		—		(8,700)
Issuance of common stock	—		(16,423)		—		—		16,182		(241)


Stock-based compensation expense	—		7,057		—		—		—		7,057

Balance at June 30, 2021	$	323,338	$	5,903	$	5,172,185	$	(831,303)	$	(4,616,753)	$	53,370

PITNEY BOWES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


	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


	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Total equity
Balance at January 1, 2021	$	323,338	$	68,502	$	5,201,195	$	(839,131)	$	(4,687,509)	$	66,395

Net loss	—		—		(11,685)		—		—		(11,685)
Other comprehensive income	—		—		—		7,828		—		7,828
Dividends paid ($0.10 per common share)	—		—		(17,325)		—		—		(17,325)
Issuance of common stock	—		(74,877)		—		—		70,756		(4,121)


Stock-based compensation expense	—		12,278		—		—		—		12,278

Balance at June 30, 2021	$	323,338	$	5,903	$	5,172,185	$	(831,303)	$	(4,616,753)	$	53,370


	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	—		—		(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)

~~15. Stockholders’ Equity~~16. Accumulated Other Comprehensive Loss

Reclassifications out of AOCL were as follows:


	Gain (Loss) Reclassified from AOCL
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Cash flow hedges
Revenue	$	118	$	(64)	$	244	$	(3)
Cost of sales	(47)		32		(105)		42
Interest expense, net	(96)		0		(96)		0
Total before tax	(25)		(32)		43		39
Income tax provision	(6)		(8)		11		10
Net of tax	$	(19)	$	(24)	$	32	$	29

Available-for-sale securities
Financing revenue	$	1	$	3,233	$	0	$	3,517
Selling, general and administrative expense	217		0		259		0
Total before tax	218		3,233		259		3,517
Income tax provision	55		805		65		876
Net of tax	$	163	$	2,428	$	194	$	2,641

Pension and postretirement benefit plans
Transition credit	$	0	$	1	$	0	$	2
Prior service costs	(86)		(138)		(170)		(277)
Actuarial losses	(13,096)		(10,940)		(26,157)		(21,933)
Settlement	(314)		(3,802)		(314)		(4,191)
Total before tax	(13,496)		(14,879)		(26,641)		(26,399)
Income tax benefit	(3,303)		(3,502)		(6,511)		(6,152)
Net of tax	$	(10,193)	$	(11,377)	$	(20,130)	$	(20,247)

Changes in ~~stockholders’ equity~~AOCL were as follows:

Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Total equity
Balance at July 1, 2020 $ 323,338 $ 68,498 $ 5,188,119 $ (836,262) $ (4,699,113) $ 44,580
Net income — — 11,389 — — 11,389
Other comprehensive income — — — 22,690 — 22,690
Dividends paid ($0.05 per common share) — — (8,594) — — (8,594)
Issuance of common stock — (9,272) — — 10,046 774
Stock-based compensation expense — 8,286 — — — 8,286
Balance at September 30, 2020 $ 323,338 $ 67,512 $ 5,190,914 $ (813,572) $ (4,689,067) $ 79,125


	Cash flow hedges		Available for sale securities		Pension and postretirement benefit plans		Foreign currency adjustments		Total
Balance at January 1, 2021	$	(1,411)	$	402	$	(851,063)	$	12,941	$	(839,131)
Other comprehensive income (loss) before reclassifications (1)	3,456		(4,783)		0		(10,749)		(12,076)
Reclassifications into earnings (1)	(32)		(194)		20,130		0		19,904
Net other comprehensive income (loss)	3,424		(4,977)		20,130		(10,749)		7,828
Balance at June 30, 2021	$	2,013	$	(4,575)	$	(830,933)	$	2,192	$	(831,303)

Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive loss Treasury stock Total equity
Balance at July 1, 2019 $ 323,338 $ 105,341 $ 5,282,374 $ (907,678) $ (4,750,403) $ 52,972
Net loss — — (3,125) — — (3,125)
Other comprehensive loss — — — (18,774) — (18,774)
Dividends paid ($0.05 per common share) — — (8,508) — — (8,508)
Issuance of common stock — (10,146) — — 11,291 1,145
Conversion to common stock — (246) — — 246 0
Stock-based compensation expense — 6,702 — — — 6,702
Repurchase of common stock — — — — (5,000) (5,000)
Balance at September 30, 2019 $ 323,338 $ 101,651 $ 5,270,741 $ (926,452) $ (4,743,866) $ 25,412


	Cash 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)
Other comprehensive (loss) income before reclassifications (1)	(1,416)		5,356		0		(17,636)		(13,696)
Reclassifications into earnings (1)	(29)		(2,641)		20,247		0		17,577
Net other comprehensive (loss) income	(1,445)		2,715		20,247		(17,636)		3,881
Balance at June 30, 2020	$	(1,108)	$	5,564	$	(798,771)	$	(41,947)	$	(836,262)

(1)

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 — — (200,423) — — (200,423)
Other comprehensive income — — — 26,571 — 26,571
Dividends paid ($0.15 per common share) — — (25,693) — — (25,693)
Issuance of common stock — (46,472) — — 45,710 (762)
Stock-based compensation expense — 15,236 — — — 15,236
Balance at September 30, 2020 $ 323,338 $ 67,512 $ 5,190,914 $ (813,572) $ (4,689,067) $ 79,125
Amounts are net of tax.

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 — — — — 17,913 — — 17,913
Other comprehensive income — — — — — 22,509 — 22,509
Dividends paid ($0.15 per common share) — — — — (26,854) — — (26,854)
Issuance of common stock — — — (32,877) — — 32,289 (588)
Conversion to common stock — (130) — (2,804) — — 2,934 0
Redemption of preferred/preference stock (1) (266) — (10) — — — (277)
Stock-based compensation expense — — — 15,867 — — — 15,867
Repurchase of common stock — — — — — — (105,000) (105,000)
Balance at September 30, 2019 $ 0 $ 0 $ 323,338 $ 101,651 $ 5,270,741 $ (926,452) $ (4,743,866) $ 25,412
17. Supplemental Financial Statement Information

Activity in the allowance for credit losses on accounts receivables for the six months ended June 30, 2021 and 2020 is presented below. See Note 7 for additional information pertaining to our finance receivables.


	Balance at beginning of year		Cumulative effect of accounting change		Amounts charged to expense		Write-offs, recoveries and other		Balance at end of period		Accounts and other receivables		Other assets
June 30, 2021	$	35,344	$	0	$	2,488	$	(7,085)	$	30,747	$	13,959	$	16,788
June 30, 2020	$	17,830	$	15,336	$	12,692	$	(13,384)	$	32,474	$	32,474	$	0

~~16. Accumulated Other Comprehensive Loss (AOCL)~~

~~Reclassifications out of AOCL were as follows:~~

Gain (Loss) Reclassified from AOCL
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
Cash flow hedges
Revenue $ (104) $ (98) $ (107) $ (23)
Cost of sales (6) 54 36 99
Total before tax (110) (44) (71) 76
Income tax (benefit) provision (27) (11) (18) 19
Net of tax $ (83) $ (33) $ (53) $ 57
Available-for-sale securities
Financing revenue $ 6,490 $ 146 $ 10,060 $ 42
Selling, general and administrative expense 263 0 210 0
Total before tax 6,753 146 10,270 42
Income tax provision 1,681 37 2,557 11
Net of tax $ 5,072 $ 109 $ 7,713 $ 31
Pension and postretirement benefit plans
Transition credit $ 1 $ 2 $ 3 $ 5
Prior service costs (140) (123) (417) (377)
Actuarial losses (10,990) (8,587) (32,923) (25,858)
Settlement (908) (1,477) (5,099) (2,675)
Total before tax (12,037) (10,185) (38,436) (28,905)
Income tax benefit (2,875) (2,633) (9,027) (7,406)
Net of tax $ (9,162) $ (7,552) $ (29,409) $ (21,499)

~~PITNEY BOWES INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~Changes in AOCL were as follows:~~

Cash 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)
Other comprehensive (loss) income before reclassifications (1)
(2,455) 2,237 0 5,040 4,822
Reclassifications into earnings (1)
53 (7,713) 29,409 0 21,749
Net other comprehensive (loss) income (2,402) (5,476) 29,409 5,040 26,571
Balance at September 30, 2020 $ (2,065) $ (2,627) $ (789,609) $ (19,271) $ (813,572)

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 (loss) before reclassifications (1)
135 7,547 0 (6,584) 1,098
Reclassifications into earnings (1)
(57) (31) 21,499 0 21,411
Net other comprehensive income (loss) 78 7,516 21,499 (6,584) 22,509
Balance at September 30, 2019 $ 269 $ 4,455 $ (824,962) $ (106,214) $ (926,452)

~~(1)~~ ~~Amounts are net of tax.~~

~~17. Other (income) expense~~

Other (income) expense consisted of the following:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Loss on extinguishment of debt		$	0	$	667	$	36,987	$	667
Loss on debt refinancing										Loss on debt refinancing	$	989	$	0	$	52,383	$	36,987
Insurance proceeds	Insurance proceeds	(6,325)		0		(15,292)		0		Insurance proceeds	(3,000)		(5,467)		(3,000)		(8,967)
Gain on sale of equity investment	Gain on sale of equity investment	0		0		(11,908)		0		Gain on sale of equity investment	0		(11,908)		0		(11,908)
Loss on sale of business		0		0		0		17,683
Gain on sale of business										Gain on sale of business	(10,201)		0		(10,201)		0
Gain on sale of assets										Gain on sale of assets	(1,434)		0		(1,434)		0
Other (income) expense	Other (income) expense	$	(6,325)	$	667	$	9,787	$	18,350	Other (income) expense	$	(13,646)	$	(17,375)	$	37,748	$	16,112

Supplemental cash flow information is as follows:


	Six Months Ended June 30,
	2021		2020

Cash interest paid	$	58,501	$	82,732
Cash income tax payments, net of refunds	$	2,180	$	12,176
Finance leased assets obtained in exchange for new lease obligations	$	19,568	$	2,756

3130

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~~Forward-looking statements are based on current expectations and assumptions, ~~that~~which we believe are reasonable; however, such statements are subject to risks and uncertainties, and actual results could differ ~~materially.~~materially from those projected or assumed in any of our forward-looking statements. 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~~Our results 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~~operations, 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, we continue to navigate the ~~uncertainty around the severity, magnitude and duration~~impacts of the COVID-19 pandemic (COVID-19), including ~~governments' responses to COVID-19,~~ its ~~continuing impact~~effects on ~~our operations, employees,~~ the ~~availability~~cost and ~~cost~~availability of labor and transportation and global supply chain and 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.chains. 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 operations ~~or the~~and financial health of posts in the U.S. or other major markets, or ~~the loss of, or significant~~ changes to the broader postal or shipping ~~industry~~markets

•the loss of, or significant changes into, our contractual relationships with the United States Postal Service (USPS) or USPS' performance under those contracts

•our ability to continue to grow and manage volumes, gain additional economies of scale and improve profitability within our ~~Commerce~~Global Ecommerce and Presort Services ~~group~~segments

•changes in labor and transportation availability and costs

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

•competitive factors, including pricing pressures, technological developments and the introduction of new products and services by competitors

•the loss of some of our larger clients in our ~~Commerce~~Global Ecommerce and Presort Services ~~group~~segments

•expenses and potential impacts resulting from a breach of security, including cyber-attacks or other comparable events

•~~changes in labor conditions and transportation costs~~

•our success at managing customer credit risk

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

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

•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~~

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

•changes in international trade policies, including the imposition or expansion of trade tariffs

•changes in tax laws, rulings or regulations, including the impact of potential U.S. tax reform

•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

•increased environmental and climate change requirements or other developments in these areas

•the United Kingdom's 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

•impact of acts of nature on the services and solutions we offer

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~~2020 Annual Report, as supplemented by Part II, Item 1A in this Quarterly Report on Form 10-Q.

3231

Overview

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

Revenue
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 Actual % change Constant Currency % Change 2020 2019 Actual % change Constant Currency % change
Business services $ 550,954 $ 419,101 31 % 31 % $ 1,524,323 $ 1,243,609 23 % 23 %
Support services 117,519 126,274 (7) % (7) % 353,320 382,578 (8) % (8) %
Financing 86,218 90,577 (5) % (5) % 260,758 280,039 (7) % (7) %
Equipment sales 79,572 89,618 (11) % (12) % 213,682 264,956 (19) % (19) %
Supplies 39,635 44,818 (12) % (13) % 118,117 142,261 (17) % (17) %
Rentals 18,000 19,737 (9) % (9) % 55,458 60,339 (8) % (8) %
Total revenue $ 891,898 $ 790,125 13 % 13 % $ 2,525,658 $ 2,373,782 6 % 7 %

Revenue
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 Actual % change Constant currency % change 2020 2019 Actual % change Constant currency % change
Global Ecommerce $ 409,981 $ 278,995 47 % 47 % $ 1,100,757 $ 827,568 33 % 33 %
Presort Services 127,705 131,483 (3) % (3) % 386,552 394,468 (2) % (2) %
Commerce Services 537,686 410,478 31 % 31 % 1,487,309 1,222,036 22 % 22 %
SendTech Solutions 354,212 379,647 (7) % (7) % 1,038,349 1,151,746 (10) % (10) %
Total $ 891,898 $ 790,125 13 % 13 % $ 2,525,658 $ 2,373,782 6 % 7 %

EBIT
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 % change 2020 2019 % change
Global Ecommerce $ (19,757) $ (21,793) 9 % $ (68,126) $ (51,969) (31) %
Presort Services 14,481 17,687 (18) % 42,758 48,215 (11) %
Commerce Services (5,276) (4,106) (28) % (25,368) (3,754) >(100%)
SendTech Solutions 112,599 130,954 (14) % 323,429 378,095 (14) %
Total Segment EBIT $ 107,323 $ 126,848 (15) % $ 298,061 $ 374,341 (20) %


	Revenue
	Three Months Ended June 30,								Six Months Ended June 30,
	2021		2020		Actual % change		Constant Currency % Change		2021		2020		Actual % change		Constant Currency % change
Business services	$	567,022	$	528,990	7	%	6	%	$	1,137,476	$	973,369	17	%	16	%
Support services	115,156		113,786		1	%	(1)	%	233,853		235,801		(1)	%	(2)	%
Financing	73,453		85,462		(14)	%	(16)	%	151,265		174,540		(13)	%	(15)	%
Equipment sales	86,267		57,837		49	%	46	%	173,070		134,110		29	%	27	%
Supplies	38,655		32,773		18	%	14	%	80,879		78,482		3	%	—	%
Rentals	18,650		18,644		—	%	(2)	%	37,857		37,458		1	%	(1)	%
Total revenue	$	899,203	$	837,492	7	%	6	%	$	1,814,400	$	1,633,760	11	%	10	%

Revenue increased 13% in the quarter and 6% as reported and 7% at constant currency for the first nine months of 2020, due to higher business services revenue, driven by significantly higher volumes in our Global Ecommerce segment. This growth more than offset declines in all other revenue line items that resulted in part from the continuing impacts of COVID-19. Within our business segments, Global Ecommerce revenue grew 47% in the quarter and 33% for the year-to-date period due to increased volumes and Presort Services revenue declined 3% in the quarter and 2% for the year-to-date period due to lower First Class and Marketing Mail volumes. SendTech Solutions revenue declined 7% in the quarter and 10% for the year-to-date period, primarily due to lower equipment sales and supplies revenue. Segment EBIT in the quarter declined 15% primarily due to lower revenue in SendTech Solutions. Segment EBIT for the year-to-date period decreased 20% primarily due to a decline in SendTech Solutions from lower revenue and higher EBIT loss in Global Ecommerce due to higher labor costs, continuing investments in our facilities and costs attributed to COVID-19. Segment EBIT for the year-to-date period also declined due to higher credit loss provision largely attributable to COVID-19. Refer to Results of Operations section for further information.

Global Ecommerce EBIT margins improved in the quarter compared to the prior year quarter due to the increase in revenue, partly offset by investments to support growth and incremental costs associated with COVID-19. Global Ecommerce EBIT margins for the year-to-date period were flat compared to the prior year. Presort Services EBIT margins declined slightly in the quarter and year-to-date periods compared to the prior year due to lower volumes. SendTech Solutions EBIT margins declined in the quarter and year-to-date periods compared to the prior year due to declines in revenue, partially offset by lower operating expenses from cost savings initiatives.


	Revenue
	Three Months Ended June 30,								Six Months Ended June 30,
	2021		2020		Actual % change		Constant currency % change		2021		2020		Actual % change		Constant currency % change
Global Ecommerce	$	418,429	$	398,453	5	%	3	%	$	831,515	$	690,776	20	%	19	%
Presort Services	134,619		118,127		14	%	14	%	277,745		258,847		7	%	7	%
SendTech Solutions	346,155		320,912		8	%	6	%	705,140		684,137		3	%	1	%
Total	$	899,203	$	837,492	7	%	6	%	$	1,814,400	$	1,633,760	11	%	10	%


	EBIT
	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		% change		2021		2020		% change
Global Ecommerce	$	(10,831)	$	(18,894)	43	%	$	(37,207)	$	(48,369)	23	%
Presort Services	16,134		12,582		28	%	35,185		28,277		24	%
SendTech Solutions	107,121		104,268		3	%	221,591		210,830		5	%
Total Segment EBIT	$	112,424	$	97,956	15	%	$	219,569	$	190,738	15	%

~~Impacts~~Beginning primarily in the second quarter of 2020, COVID-19

The global spread of COVID-19 and the efforts to contain it are adversely affecting global economies, impacting demand for a broad variety of goods and services and creating disruptions and shortages in supply chains. We have implemented measures in our facilities to protect the health and safety of our employees and contractors, including staggering shifts and breaks to enhance social distancing, providing personal protection equipment, conducting temperature checks and sanitizing equipment and facilities multiple times a day. Employees that have the ability to work remotely are doing so and corporate and local management continue to assess conditions to determine when, and how, these employees should return to their office locations.

~~COVID-19 has~~ impacted our financial results in different ways in each of our businesses. Global Ecommerce ~~has seen~~experienced a significant increase in volumes and revenue due to the demand for ecommerce ~~solutions~~solutions; however, the increase in ~~the current environment.~~volumes resulted in higher postal costs driven by capacity constraints and higher labor and transportation costs due to increased demand and competition for these resources. Presort Services ~~on the other hand, has~~ experienced a decline ~~in volumes,~~ in both First Class and Marketing Mail ~~due to~~and higher labor costs. Global Ecommerce and Presort Services also incurred additional costs and experienced lower ~~market demand and changing client behaviors. However, volumes in the third quarter improved over the second quarter. As~~productivity as a result of the health and safety measures implemented in ~~all our Commerce Services facilities, we have incurred additional costs and reduced productivity.~~

their facilities. In SendTech Solutions, the ~~global shut-down of businesses and~~ increase in the number of clients working remotely ~~at the onset of COVID-19 significantly~~ adversely impacted demand for and usage of our mailing equipment and supplies, and our ability to perform on-site service and installations. ~~We saw improving trends~~

Revenue increased 7% as reported and 6% at constant currency in the second quarter of 2021 compared to the prior year, primarily driven by higher business services revenue, equipment sales and supplies ~~revenues~~revenue, partially offset by lower financing income. Business services revenue increased 7% as ~~we exited the second quarter,~~reported and ~~third quarter equipment~~6% at constant currency driven by a 14% increase in Presort Services revenue due to higher Marketing Mail and First Class mail volumes, and a 5% increase (3% at constant currency) in Global Ecommerce due to higher cross-border volumes. Equipment sales increased 49% (46% at constant currency) and supplies ~~revenues~~ increased 18% (14% at constant currency) primarily due to the impacts of COVID-19 on the prior year quarter. The decline in financing income is primarily due to a declining financing portfolio.

Segment EBIT in the quarter increased 15% as all segments reported improvements over the ~~second~~prior year. Global Ecommerce EBIT improved 43% primarily due to higher revenue and lower operating expense, primarily due to higher credit loss provision and costs in

the prior year due to COVID-19. Presort Services EBIT increased 28% and SendTech Solutions EBIT improved 3% over the prior year quarter ~~2020. As businesses continue~~primarily due to ~~operate remotely,~~higher revenue. Refer to Results of Operations section for further information.

During the quarter, we ~~are~~ also ~~seeing improvement~~received proceeds of $28 million and recognized a pre-tax gain of $10 million recognized in other (income) expense from the sale of a U.K. based software consultancy business ("Tacit") acquired as part of our ~~cloud-enabled shipping and mailing solutions.~~2017 acquisition of Newgistics.

Outlook

The ~~duration~~impacts of COVID-19 on our business, operations and financial performance remain uncertain, especially in light of new variants of COVID-19 and increased cases in certain parts of the country and world. Supply chain issues continue to pose challenges. Specifically, the global semiconductor chip shortage may adversely affect our needed supply for SendTech equipment for the remainder of 2021. The extent of that impact will depend upon the duration and severity of the shortage, as well as our success in mitigating against its ~~impact on~~impact. Accordingly, there are some unique factors not within our control that could affect our business ~~remains unpredictable. The steps~~and current outlook for 2021. However, we ~~took to reduce and refinance our debt at the end of 2019 and beginning of 2020 have~~believe we are well positioned us to ~~manage through~~navigate the current ~~economic conditions. We~~conditions and will continue to take proactive steps to manage our ~~cash flows~~operations and ~~liquidity, including, by prioritizing~~related financial impacts.

Despite some of these ongoing uncertainties, we do not expect the global economy or our individual businesses to be affected to the same extent in 2021 as in 2020. Within Global Ecommerce, we anticipate revenue growth in 2021, although not at the growth rates experienced in 2020. We expect margin and ~~timing~~profit improvements in 2021 from pricing initiatives and operational improvements within our ~~capital investments as well as by tight management of our working capital. We will continue~~facilities and network designed to ~~take proactive measures to protect the health~~drive efficiencies and ~~safety of our employees, clients, partners and suppliers;~~increase productivity; however, ~~these safety measures will result in additional expenses and reduced productivity.~~

~~COVID-19 has accelerated the market~~we also expect continued growth of ~~ecommerce resulting in significant increases in volumes in our Global Ecommerce segment that we anticipate will continue into~~ the ~~fourth quarter. The industry-wide increase in ecommerce volumes has resulted in higher demand~~market's need for transportation services and ~~increased competition for labor and pushed our facilities to full capacity, resulting in higher costs. We expect increased competition and higher demand for~~ labor to continue as we enter the peak holiday season. To expand capacity, provide further efficiencies and improve per unit costs, we invested in three new facilities and upgraded an existing facility, which are expected to be operational in advance of the peak holiday season. We also implemented peak pricing due to the dramatic surge in volumes.

Ingenerate increased costs. Within Presort Services, ~~the improvement in First Class Mail~~we expect continued growth throughout 2021 and ~~Marketing Mail volumes we saw in the third quarter relative to the second quarter is anticipated to continue in the fourth quarter. Higher demand~~margin improvements from productivity initiatives, increased automation and ~~increased competition for labor is also impacting Presort Services creating staffing challenges~~facilities consolidation and higher costs, which we anticipate will continue into the fourth quarter. While currently a small part of total volumes and revenue, Marketing Mail Flats and Bound Printed Matter volumes grew 37% in the third quarter and we anticipate these volumes will continue to grow.

optimization. Within SendTech Solutions, ~~approximately two-thirds of~~we expect revenue ~~is recurring in nature and materially contributes~~ to our cash flows. Nonrecurring revenues, primarily equipment sales and to a lesser extent, supplies, are expected to continue to be impacted by COVID-19 due to declining demand and usage. We saw improving trends in both equipment sales and supplies revenues in the third quarter relative to the second quarter and would expect this to continue as businesses re-open; however, a resurgence of COVID-19 cases could adversely impact these revenues in the fourth quarter. As a result of clients working remotely and the necessity of alternate solutions, we are seeing an improvementdecline, but growth in our cloud-enabled shipping ~~and mailing~~ solutions and ~~expect this shift in market preference to continue as clients realize the value~~sales of our ~~digital capabilities. We continue~~multi-purpose devices to ~~monitor cash collections from our recurring~~partially offset these declines. On a consolidated basis, we expect revenue ~~streams. Delinquency rates moderated during~~growth in the ~~third quarter~~low to mid-single digit range in 2021 compared to the second quarter and we are starting to see positive changes in customer payment behaviors. There are no assurances that this improvement in delinquency rates and payment behaviors will continue, or that the impacts of COVID-19 will not result in higher client bankruptcies or account write-offs.2020.

3433

RESULTS OF OPERATIONS

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 investors with 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~~domestic parcel services, cross-border solutions and ~~services that enable domestic and cross-border ecommerce transactions, including shipping, fulfillment and returns.~~digital delivery services.


		Revenue								Cost of Revenue				Gross Margin					Revenue								Cost of Revenue				Gross Margin
		Three Months Ended September 30,								Three Months Ended September 30,				Three Months Ended September 30,					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			2021		2020		Actual % change		Constant Currency % change		2021		2020		2021		2020
Business services	Business services	$	409,981	$	278,995	47	%	47	%	$	379,409	$	240,447	7.5	%	13.8	%	Business services	$	418,429	$	398,453	5	%	3	%	$	373,347	$	355,861	10.8	%	10.7	%

		Segment EBIT																	Segment EBIT
		Three Months Ended September 30,																	Three Months Ended June 30,
		2020		2019		Actual % change													2021		2020		Actual % change
Segment EBIT	Segment EBIT	$	(19,757)	$	(21,793)	9	%											Segment EBIT	$	(10,831)	$	(18,894)	43	%

Global Ecommerce revenue increased ~~47%~~5% as reported and 3% at constant currency in the ~~third~~second quarter of ~~2020~~2021 compared to the prior year period due to ~~continued~~ volume growth ~~across all platforms primarily driven~~in cross-border contributing revenue of 12%, partially offset by ~~the market shift to ecommerce solutions in part due to COVID-19. An increase in~~lower revenue contribution of domestic parcel delivery volumes ~~contributed revenue growth~~and digital delivery volumes of ~~36%~~6% and 3%, ~~higher cross-border volumes contributed revenue growth of 7%~~respectively.

Total gross margin increased $2 million and ~~higher returns volumes contributed revenue growth of 5%.~~

~~Gross~~gross margin ~~decreased~~percentage remained flat compared to ~~7.5% from 13.8% in~~ the prior year primarily due ~~primarily~~ to ~~investments to support growth, incremental COVID-19 related costs~~the increase in revenue partially offset by higher transportation and ~~a shift in the mix of business.~~postal costs.

Segment EBIT for the ~~third~~second quarter of ~~2020~~2021 was a loss of ~~$20~~$11 million compared to a loss of ~~$22~~$19 million in the prior year period. The ~~decline~~reduction in loss was primarily driven by the increase in gross margin ~~reduced EBIT by $8~~of $2 million ~~compared to~~and a $6 million credit loss charge in the prior ~~year; but was more than offset by lower operating expenses of $6 million and net insurance proceeds of $3 million.~~year associated with COVID-19.


		Revenue								Cost of Revenue				Gross Margin					Revenue								Cost of Revenue				Gross Margin
		Nine Months Ended September 30,								Nine Months Ended September 30,				Nine Months Ended September 30,					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			2021		2020		Actual % change		Constant Currency % change		2021		2020		2021		2020
Business services	Business services	$	1,100,757	$	827,568	33	%	33	%	$	1,000,490	$	702,073	9.1	%	15.2	%	Business services	$	831,515	$	690,776	20	%	19	%	$	757,655	$	621,082	8.9	%	10.1	%

		Segment EBIT																	Segment EBIT
		Nine Months Ended September 30,																	Six Months Ended June 30,
		2020		2019		Actual % change													2021		2020		Actual % change
Segment EBIT	Segment EBIT	$	(68,126)	$	(51,969)	(31)	%											Segment EBIT	$	(37,207)	$	(48,369)	23	%

3534

Global Ecommerce revenue increased ~~33%~~20% as reported and 19% at constant currency in the first ~~nine~~six months of ~~2020~~2021 compared to the prior year period due to an increase in cross-border volumes and domestic parcel delivery volumes each contributing to revenue growth of 13% and 6%, respectively.

Total gross margin increased $4 million due to higher ~~volumes~~revenue, but the gross margin percentage declined to 8.9% from 10.1% primarily ~~attributable~~due to ~~increased demand driven by COVID-19. Domestic parcel delivery volumes contributed revenue growth of 30%~~higher transportation, postal and ~~increased cross-border volumes contributed growth of 3%.~~

~~Gross margin decreased to 9.1% from 15.2% in the prior year due primarily to investments to support growth, incremental COVID-19 related costs and a shift in the mix of business.~~labor costs.

Segment EBIT for the ~~nine~~first six months ~~ended September 2020~~of 2021 was a loss of ~~$68~~$37 million compared to a loss of ~~$52~~$48 million in the prior year period. The ~~decline~~reduction in loss was driven by the increase in gross margin ~~reduced EBIT by $25~~and $7 million ~~compared to the prior year; but was partially offset by~~in lower operating expenses, ~~of $4 million and net insurance proceeds of $4 million.~~including lower credit loss provision.

Presort Services

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


		Revenue								Cost of Revenue				Gross Margin					Revenue								Cost of Revenue				Gross Margin
		Three Months Ended September 30,								Three Months Ended September 30,				Three Months Ended September 30,					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			2021		2020		Actual % change		Constant Currency % change		2021		2020		2021		2020
Business services	Business services	$	127,705	$	131,483	(3)	%	(3)	%	$	97,810	$	96,438	23.4	%	26.7	%	Business services	$	134,619	$	118,127	14	%	14	%	$	103,175	$	93,542	23.4	%	20.8	%

		Segment EBIT																	Segment EBIT
		Three Months Ended September 30,																	Three Months Ended June 30,
		2020		2019		Actual % change													2021		2020		Actual % change
Segment EBIT	Segment EBIT	$	14,481	$	17,687	(18)	%											Segment EBIT	$	16,134	$	12,582	28	%

Presort Services revenue ~~decreased 3%~~increased 14% in the ~~third~~second quarter of ~~2020~~2021 compared to the prior year period. Marketing Mail volumes and First Class Mail volumes each contributed revenue growth of 7% primarily due to the impact of COVID-19 on the prior year period.

Gross margin increased to 23.4% from 20.8% primarily due to the increase in revenue, partially offset by higher labor costs driven by wage increases to address the increase in competition for labor resources.

Segment EBIT increased $4 million or 28% in the second quarter of 2021, due to a $7 million increase in gross margin partially offset by $3 million of insurance proceeds related to a malware attack received in the prior year.


	Revenue								Cost of Revenue				Gross Margin
	Six Months Ended June 30,								Six Months Ended June 30,				Six Months Ended June 30,
	2021		2020		Actual % change		Constant Currency % change		2021		2020		2021		2020
Business services	$	277,745	$	258,847	7	%	7	%	$	212,174	$	198,781	23.6	%	23.2	%

	Segment EBIT
	Six Months Ended June 30,
	2021		2020		Actual % change
Segment EBIT	$	35,185	$	28,277	24	%

Presort Services revenue increased 7% in the first six months of 2021 compared to the prior year period primarily due ~~to a reduction in~~higher volumes of Marketing Mail and First Class Mail, ~~driven primarily by COVID-19. The~~which contributed revenue ~~decrease was comprised~~growth of ~~a decline of 5% from lower organic volumes partially offset by an increase of 2% from current year acquisitions.~~

~~Gross margin decreased to 23.4% from 26.7%~~4% and 3%, respectively primarily due to the ~~decline in revenue~~impact of COVID-19 on the prior year period.

Gross margin increased $6 million and ~~incremental COVID-19 related costs. Segment EBIT declined 18% in the third quarter of 2020,~~gross margin percentage increased slightly to 23.6% from 23.2% primarily due to the ~~decline~~increase in ~~gross margin, partially offset by lower consulting fees and travel expenses of $1 million and insurance proceeds of $1 million.~~

Revenue Cost of Revenue Gross Margin
Nine Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30,
2020 2019 Actual % change Constant Currency % change 2020 2019 2020 2019
Business services $ 386,552 $ 394,468 (2) % (2) % $ 296,591 $ 295,440 23.3 % 25.1 %
Segment EBIT
Nine Months Ended September 30,
2020 2019 Actual % change
Segment EBIT $ 42,758 $ 48,215 (11) %

Presort Services revenue decreased 2% in the first nine months of 2020 compared to the prior year period due to lower volumes of Marketing Mail and First Class Mail, driven by COVID-19. Revenue declined 5% due to lower organic volumes but benefited 3% from acquisitions.

Gross margin decreased to 23.3% from 25.1% due to lower revenue and the incremental costs associated with COVID-19. Segment EBIT declined 11%, in the first nine months of 2020, due to the decline in gross margin that adversely impacted EBIT by $9 million, partially offset by $4 million of insurance proceeds.

revenue.

3635

Segment EBIT increased $7 million or 24% in the first six months of 2021, primarily due to the increase in gross margin of $6 million and lower operating expenses of $1 million.

SendTech Solutions

SendTech Solutions includes the revenue and related expenses from physical 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					Revenue								Cost of Revenue				Gross Margin
		Three Months Ended September 30,								Three Months Ended September 30,				Three Months Ended September 30,					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			2021		2020		Actual % change		Constant Currency % change		2021		2020		2021		2020
Business services	Business services	$	13,268	$	8,623	54	%	56	%	$	5,666	$	1,376	57.3	%	84.0	%	Business services	$	13,974	$	12,410	13	%	12	%	$	6,247	$	4,856	55.3	%	60.9	%
Support services	Support services	117,519		126,274		(7)	%	(7)	%	36,832		40,376		68.7	%	68.0	%	Support services	115,156		113,786		1	%	(1)	%	37,095		36,196		67.8	%	68.2	%
Financing	Financing	86,218		90,577		(5)	%	(5)	%	11,626		11,026		86.5	%	87.8	%	Financing	73,453		85,462		(14)	%	(16)	%	11,773		11,939		84.0	%	86.0	%
Equipment sales	Equipment sales	79,572		89,618		(11)	%	(12)	%	59,685		59,601		25.0	%	33.5	%	Equipment sales	86,267		57,837		49	%	46	%	61,503		47,866		28.7	%	17.2	%
Supplies	Supplies	39,635		44,818		(12)	%	(13)	%	10,132		12,225		74.4	%	72.7	%	Supplies	38,655		32,773		18	%	14	%	10,467		8,377		72.9	%	74.4	%
Rentals	Rentals	18,000		19,737		(9)	%	(9)	%	6,055		5,089		66.4	%	74.2	%	Rentals	18,650		18,644		—	%	(2)	%	6,013		6,021		67.8	%	67.7	%
Total revenue	Total revenue	$	354,212	$	379,647	(7)	%	(7)	%	$	129,996	$	129,693	63.3	%	65.8	%	Total revenue	$	346,155	$	320,912	8	%	6	%	$	133,098	$	115,255	61.5	%	64.1	%

		Segment EBIT																	Segment EBIT
		Three Months Ended September 30,																	Three Months Ended June 30,
		2020		2019		Actual % change													2021		2020		Actual % change
Segment EBIT	Segment EBIT	$	112,599	$	130,954	(14)	%											Segment EBIT	$	107,121	$	104,268	3	%

SendTech Solutions revenue ~~decreased 7%~~increased 8% as reported and 6% at constant currency in the ~~third~~second quarter of ~~2020~~2021 compared to the prior year. Equipment sales ~~decreased 11%~~increased 49% as reported and 46% at constant currency and supplies revenue increased 18% as reported and 14% at constant currency primarily due to the effect on the prior year from COVID-19 that impacted our ability to contact and service clients and perform on-site installations and reduced usage and demand for supplies. Business services revenue increased 13% as reported and 12% at constant currency ~~as COVID-19 continues~~primarily due to ~~impact~~an increased use of our ~~ability to perform on-site installations. This decrease was~~shipping products. These increases were partially offset by ~~an increase~~a decline in ~~sales~~financing income of ~~self-install products due to the current remote environment. Supplies revenue declined 12%~~14% as reported and ~~13%~~16% at constant currency ~~driven by reduced usage and demand exacerbated from COVID-19. Support services revenue decreased 7% driven by a declining meter population. Financing revenue decreased 5%~~ primarily driven by a declining ~~lease~~financing portfolio. ~~Financing revenue~~

Gross margin for the second quarter ~~also includes $6~~of 2021 decreased to 61.5% from 64.1% in the prior year period. Equipment sales gross margin increased to 28.7% from 17.2% primarily due to the increase in revenue. Supplies gross margin decreased to 72.9% from 74.4% primarily due to product mix.

Segment EBIT increased $3 million or 3% in the second quarter of ~~gains from~~2021 compared to the ~~sale~~prior year, primarily driven by the increase in gross margin of ~~investment securities. Business services~~$7 million, partially offset by higher operating expenses of $4 million.



	Revenue								Cost of Revenue				Gross Margin
	Six Months Ended June 30,								Six Months Ended June 30,				Six Months Ended June 30,
	2021		2020		Actual % change		Constant Currency % change		2021		2020		2021		2020
Business services	$	28,216	$	23,746	19	%	19	%	$	12,315	$	9,042	56.4	%	61.9	%
Support services	233,853		235,801		(1)	%	(2)	%	73,323		75,823		68.6	%	67.8	%
Financing	151,265		174,540		(13)	%	(15)	%	23,659		24,428		84.4	%	86.0	%
Equipment sales	173,070		134,110		29	%	27	%	123,293		105,214		28.8	%	21.5	%
Supplies	80,879		78,482		3	%	—	%	21,678		20,619		73.2	%	73.7	%
Rentals	37,857		37,458		1	%	(1)	%	12,460		12,400		67.1	%	66.9	%
Total revenue	$	705,140	$	684,137	3	%	1	%	$	266,728	$	247,526	62.2	%	63.8	%

	Segment EBIT
	Six Months Ended June 30,
	2021		2020		Actual % change
Segment EBIT	$	221,591	$	210,830	5	%

SendTech Solutions revenue increased ~~$5 million, or 56%~~3% as reported and 1% at constant currency in the first six months of 2021 compared to the prior year. Equipment sales increased 29% as reported and 27% at constant currency and supplies revenue increased 3% as reported and was flat at constant currency primarily due to ~~additional~~the effect on the prior year from COVID-19 that impacted our ability to contact and service clients ~~using~~and perform on-site installations and reduced usage and demand for supplies. Business services revenue increased 19% primarily due to an increased use of our shipping products. These increases were partially offset by declines in financing income and support services revenue. Financing income decreased 13% as reported and 15% at constant currency primarily driven by a declining financing portfolio and support services revenue decreased 1% as reported and 2% at constant currency primarily due to the declining meter population.

Gross margin for the ~~third quarter~~first six months of ~~2020~~2021 decreased to ~~63.3%~~62.2% from ~~65.8%~~63.8% compared to the prior year period. Business services gross margin decreased to 56.4% from 61.9% primarily driven by a shift to lower margin products and financing income margin decreased to 84.4% from 86% due to rising interest rates. Equipment sales gross margin increased to 28.8% from 21.5% primarily due the increase in revenue.

Segment EBIT increased $11 million or 5% in the first six months of 2021 compared to the prior year, primarily driven by a $10 million credit loss charge in the prior year associated with COVID-19.

UNALLOCATED CORPORATE EXPENSES

The majority of our SG&A expense is recorded directly or allocated to our reportable segments. Those expenses not recorded directly or allocated to our reportable segments are reported as unallocated corporate expenses. Unallocated corporate expenses primarily represents corporate administrative functions such as finance, marketing, human resources, legal, information technology and innovation.


	Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		Actual % change		2021		2020		Actual % change
Unallocated corporate expenses	$	56,316	$	49,489	14	%	$	113,781	$	93,211	22	%

The increase in unallocated corporate expenses in the quarter compared to the prior year period was driven primarily ~~due to a decline in equipment sales gross margin~~by higher employee-related expenses of ~~9 percentage points to 25%, primarily due to~~$10 million partially offset by lower revenue and the mix of product sales due in part to delays in scheduling and performing on-site installations of our higher end products. Support services gross margin increased slightly to 68.7% from 68% in the prior period; however, lower revenue resulted in a decrease on gross profitprofessional fees of $5 million. ~~Rentals gross margin decreased to 66.4% from 74.2% primarily due to higher meter scrap costs relative to~~The increase in unallocated corporate expenses for the ~~prior year.~~

~~We allocate a portion~~first six months 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.

~~Segment EBIT decreased 14% in the third quarter of 2020~~2021 compared to the prior year ~~driven by the decline in revenue partially offset by lower~~was primarily due to higher employee-related expenses of $7$18 million, ~~from cost savings initiatives, including professional fees~~insurance costs of $4$2 million and marketing expenses of $1 million.

Revenue Cost of Revenue Gross Margin
Nine Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30,
2020 2019 Actual % change Constant Currency % change 2020 2019 2020 2019
Business services $ 37,014 $ 21,573 72 % 74 % $ 14,708 $ 5,368 60.3 % 75.1 %
Support services 353,320 382,578 (8) % (8) % 112,656 122,777 68.1 % 67.9 %
Financing 260,758 280,039 (7) % (7) % 36,054 33,433 86.2 % 88.1 %
Equipment sales 213,682 264,956 (19) % (19) % 164,899 181,494 22.8 % 31.5 %
Supplies 118,117 142,261 (17) % (17) % 30,751 37,533 74.0 % 73.6 %
Rentals 55,458 60,339 (8) % (8) % 18,455 23,223 66.7 % 61.5 %
Total revenue $ 1,038,349 $ 1,151,746 (10) % (10) % $ 377,523 $ 403,828 63.6 % 64.9 %
Segment EBIT
Nine Months Ended September 30,
2020 2019 Actual % change
Segment EBIT $ 323,429 $ 378,095 (14) %

SendTech Solutions revenue decreased 10% in the first nine months of 2020 compared to the prior year. Equipment sales and supplies decreased 19% and 17%, respectively, as the impacts of COVID-19 impacted our ability to perform on-site installations and reduced usage and demand for supplies. Both support services and rentals revenue decreased 8%, primarily driven by a declining meter population. Financing revenue decreased 7%, primarily driven by a declining lease portfolio and was partially offset by $10 million of gains from the sale of investment securities. Business services revenue increased $15 million, or 74% at constant currency, primarily due to additional clients using our shipping products.

Gross margin for the first nine months of 2020 was 63.6% compared to 65.2% in the prior year period. Equipment sales gross margin decreased 9 percentage points to 22.8%, primarily due to lower revenue. Equipment sales margin in the prior year period includes a $9 million charge related to a SendPro C tablet replacement program. Financing gross margin decreased to 86.2% from 88.1% compared to the prior year primarily due to a higher effective interest rate.

Segment EBIT decreased 14% in first nine months of 2020 compared to the prior year, primarily due to the decline in revenue and higher credit loss provision of $10 million due to the current economic recessionary conditions and outlook caused by COVID-19, partially offset by lower expenses of $40 million from cost savings initiatives, including lower professional fees of $12 million, lower marketing expenses of $8 million, lower research and development costs of $7 million and lower travel expenses of $3 million.

CONSOLIDATED ~~OPERATING AND OTHER~~ EXPENSES

Selling, general and administrative (SG&A)

SG&A expense of ~~$239~~$236 million in the quarter ~~decreased 6%~~increased 1% compared to the prior period, primarily due ~~to lower~~higher employee-related expenses of ~~$11~~$18 million and higher insurance costs of $3 million, partially offset by lower professional fees of $10 million and lower ~~travel~~provision for credit losses of $4$11 million. SG&A expense of ~~$721~~$474 million infor the first ~~nine~~six months of ~~2020~~2021 decreased 5%2% compared to the prior year period, primarily due to lower credit loss provision of $23 million and professional fees of $15 million, partially offset by higher employee-related expenses of ~~$14 million, lower professional fees of $12 million, lower travel related expenses of $7 million and lower marketing expenses of $4~~$29 million.

Research and development (R&D)

R&D expense ~~decreased 25%~~increased 48%, or $4 million in the second quarter of 2021 and increased 14%, or $3 million ~~and $10 million,~~ in ~~both~~ the ~~third quarter of 2020 and~~ first ~~nine~~six months of ~~2020, respectively,~~2021 compared to the prior year ~~periods,~~period, primarily due to ~~lower~~a shift in the mix of projects as well as the timing of project ~~spending and cost savings initiatives.~~spending.

Restructuring charges

Restructuring charges primarily includes costs for employee severance and ~~asset impairments~~

~~Restructuring charges and asset impairments for the three and nine months ended September 30, 2020 were $4 million and $13 million, respectively.~~facility closures. See Note 10 to the Condensed Consolidated Financial Statements for further information.

Other (income) expense

~~Goodwill impairment~~

~~We recorded~~Other income of $14 million in the second quarter of 2021 includes a ~~non-cash, pre-tax goodwill impairment charge~~$10 million gain from the sale of ~~$198~~Tacit, $3 million ~~associated with our Global Ecommerce reporting unit~~of insurance proceeds, a $1 million gain from an asset sale and a $1 million loss on the early repayment of debt. Other expense of $38 million for the first six months of 2021 also includes a $51 million loss on debt refinancing recognized in the first ~~quarter of 2020.~~quarter. See ~~Critical Accounting Estimates~~Note 17 to the Condensed Consolidated Financial Statements for further information.

~~Other (income) expense~~

Other income for the three months ended September 30, 2020 includes $6 million of insurance proceeds related to the 2019 malware attack. Other expense for the nine months ended September 30, 2020 includes a $37 million loss on the early extinguishment of debt, partially offset by $15 million of insurance proceeds and a $12 million gain on the sale of an equity investment.

INCOME TAXES AND DISCONTINUED OPERATIONS

Income taxes

The effective tax ~~provision~~rate for the three and six months ended ~~September~~June 30, ~~2020~~2021 was 19.1% and 57.2%, respectively, and includes a $3tax benefit of $5 million ~~benefit, which is primarily~~ due to ~~regulations enacted into law during~~tax legislation in the quarter. The tax provision for the nine months ended September 30, 2020 also includes a $12 million charge for the surrender of company owned life insurance policies for which no gain or loss was recognizedU.K. and a ~~benefit~~tax charge of $2$6 million on the ~~$198~~pre-tax gain of $10 million ~~goodwill impairment charge as~~from the ~~majority~~sale of ~~this charge is nondeductible.~~Tacit. See Note 13 to the Condensed Consolidated Financial Statements for further information.

Discontinued Operations

Discontinued operations for the quarter ended June 30, 2021 includes a working capital adjustment payment related to the sale of our 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. (Income) loss from discontinuedbusiness. Discontinued operations for the ~~three and nine~~six months ended ~~September~~June 30, ~~2020 primarily~~2021 also includes ~~the net gain on~~a tax charge related to the sale of ~~the Australia software~~our Production Mail business. ~~See Note 4 to the Condensed Consolidated Financial Statements for further information.~~

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LIQUIDITY AND CAPITAL RESOURCES

At ~~September~~June 30, ~~2020,~~2021, we had cash, cash equivalents and short-term investments of ~~$820~~$814 million. This includes ~~$185~~$211 million held at our foreign subsidiaries used to support the liquidity needs of those subsidiaries. Our 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 fund our cash needs for the next 12 months.

Cash Flow Summary

Changes in cash and cash equivalents were as follows:


		2020		2019		Change			2021		2020		Change
Net cash provided by operating activities	Net cash provided by operating activities	$	190,624	$	182,284	$	8,340	Net cash provided by operating activities	$	144,729	$	86,422	$	58,307
Net cash used in investing activities	Net cash used in investing activities	(95,735)		(201,681)		105,946		Net cash used in investing activities	(68,034)		(76,489)		8,455
Net cash used in financing activities	Net cash used in financing activities	(217,372)		(327,192)		109,820		Net cash used in financing activities	(199,024)		(62,267)		(136,757)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	(2,782)		(5,822)		3,040		Effect of exchange rate changes on cash and cash equivalents	349		(9,211)		9,560
Change in cash and cash equivalents	Change in cash and cash equivalents	$	(125,265)	$	(352,411)	$	227,146	Change in cash and cash equivalents	$	(121,980)	$	(61,545)	$	(60,435)

Operating Activities

Cash provided by operating activities ~~of $191~~was $145 million for the six months ended June 30, 2021 compared to $86 million in the ~~first nine months of 2020 increased $8 million compared to the~~ prior ~~year. Cash flows from continuing operations was $229 million through September 30, 2020 compared to $166 million through September 30, 2019.~~year period. The increase of ~~$63~~$58 million ~~was~~is primarily due to ~~working capital changes including finance receivables and income taxes. This was partially offset by a decrease in cash flows from discontinued operations~~higher collections of ~~$54 million primarily due to taxes paid related to the gain on the sale of our Software Solutions business in 2020.~~receivables.

Investing Activities

Cash used in investing activities infor the ~~first nine~~six months ended June 30, 2021 improved $8 million compared to the prior year period. Net cash from investing activities benefited $58 million from investment activities due to the timing of ~~2020 of $96 million includes $81 million in capital expenditures~~purchases and ~~$82 million of net investment purchases,~~maturities, but was partially offset by ~~$58~~higher capital expenditures of $24 million as we prioritized and limited our capital expenditures in 2020 in connection with COVID-19.

Cash flows from investing activities in 2021 were also negatively impacted by lower proceeds from asset, business and other invest sales of $29 million. Cash flows from investing activities in 2021 include net proceeds of $28 million from the sale of Tacit and $2 million for other asset sales, whereas cash flows from investing activities in 2020 included proceeds of $46 million from the surrender of ~~COLI~~company-owned life insurance policies ~~($46 million)~~ and $12 million from the sale of an equity ~~investment ($12 million) and higher customer deposits at the Pitney Bowes Bank of $19 million.~~investment.

Financing Activities

Cash used in financing activities for the six months ended June 30, 2021 was $199 million compared to $62 million in the ~~first nine months~~prior year period. The increase of ~~2020 was $217~~$137 million ~~and includes the~~is primarily due to higher net ~~repayment~~repayments of debt of ~~$156~~$112 million, ~~payments of $33 million for~~higher premiums and fees ~~associated with the early extinguishment~~to extinguish debt of ~~debt~~$14 million and ~~$26 million~~lower cash from customer deposits at PB Bank of ~~dividend payments. See Financings and Capitalization below for additional information.~~$7 million.

Financings and Capitalization

~~In the first quarter of 2020,~~During 2021, we ~~secured~~issued a ~~five-year, $850~~$400 million 6.875% unsecured note due March 2027 and a $350 million 7.25% unsecured note due March 2029. We also entered into a new seven-year $450 million secured 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.~~ maturing March 2028.

We ~~used~~redeemed the ~~net proceeds plus available cash to purchase under a tender offer $428~~remaining $153 million balance of the October 2021 notes ~~$250~~and, under a tender offer, redeemed an aggregate $363 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~~also repaid the remaining $818 million balance of ~~$37 million on the early redemption of debt. During the first nine months of 2020, we repaid $36 million of principal related to~~ our term ~~loans.~~loan that was scheduled to mature in January 2025.

We ~~have a~~also amended our $500 million secured revolving credit facility ~~that expires in~~and our $380 million secured term loan to extend their maturities from November 2024 to March 2026. The credit agreement that governs the revolving credit facility and term loans contains financial and non-financial covenants. ~~We drew down $100 million under the credit facility in April 2020 as a precautionary measure, but repaid this borrowing in September 2020.~~ At ~~September~~June 30, ~~2020,~~2021, we were in compliance with all ~~covenants.~~covenants and there were no outstanding borrowings under the revolving credit facility.

~~Interest rates on certain notes are subject to adjustment based on changes in~~In May 2021, we terminated our ~~credit ratings. As a result~~existing $500 million interest rate swap agreements and entered into new interest rate swap agreements with an aggregate notional amount of ~~credit rating downgrades in November 2019 and May 2020,~~$200 million. Under the terms of the swap agreements, we pay fixed-rate interest ~~rates on the October 2021 notes and April 2023 notes will increase an additional 0.25% in the fourth quarter~~ of ~~2020.~~

4039

~~Dividends~~0.56% and ~~Share Repurchases~~receive variable-rate interest based on one-month LIBOR. The variable interest rate under the term loans and the swaps reset monthly.

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. 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 first nine months of 2020. We have remaining authorization to repurchase up to $16 million of our common stock.~~

Contractual Obligations and Off-Balance Sheet Arrangements

WeAt June 30, 2021, we have entered into ~~three equipment~~ leases ~~for our Commerce Services operations that will commence in the fourth quarter~~ with aggregate lease payments of approximately $38 million and terms ranging from seven to ~~nine years. Aggregate lease payments for the three leases will approximate $30 million.~~ten years, that have not commenced.

At ~~September~~June 30, ~~2020, we had~~2021, there are 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, causing us to evaluate the Global Ecommerce goodwill for impairment.

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~~2020 Annual Report.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the disclosures made in our ~~2019~~2020 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 as of the end of the period covered by this report. 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 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 effectiveness.

It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals. Notwithstanding this caution, the CEO and CFO have reasonable assurance that the disclosure controls and procedures were effective as of ~~September~~June 30, ~~2020.~~2021.

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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~~2020 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's, businesses' and individuals’ actions in response to the pandemic; an acceleration of the decline in 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 COVID-19 could exacerbate the impact on our business, operations and financial performance. It is also uncertain the extent to which 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 segments. 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 segment 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, at times, the demand for, products purchased in our Global Ecommerce cross-border offerings.~~

•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 extended safety protocols, including sanitizing facilities and equipment multiple times a day and incremental costs that may be required to hire temporary labor or redirect volumes to other facilities.

•The sudden and significant increase in volumes in Global Ecommerce due to COVID-19 may create capacity issues, causing a potential decline in productivity, increased labor costs, difficulty in hiring sufficient employees to operate the facilities for maximum throughput, and other facility costs, especially during the peak holiday season.

•We could experience further increases in delinquencies in collections and 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 impacts and uncertainties of the pandemic, our suppliers and third-party service providers may not be able 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 duration or resurgence of COVID-19 could adversely impact our earnings or cash flows, which could result in additional credit rating 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 nine months ended September 30, 2020~~purposes and ~~maintain~~currently have Board authorization to repurchase up to $16 million of our common stock. There were no repurchases of our common stock during the first six months of 2021.

4441

Item 6: Exhibits


Exhibit Number	Exhibit Number	Description	Exhibit Number in this Form 10-Q	Exhibit Number	Description	Exhibit Number in this Form 10-Q

3(i)(a)	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(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	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	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				4.1	Indenture, dated March 19, 2021, among Pitney Bowes Inc., the guarantors party thereto and Truist Bank, as trustee, with respect to Pitney Bowes Inc.'s 6.875% Senior Notes due 2027. (incorporate by reference to Exhibit 4.1 to the Form 8-K filed with the Commission on March 23, 2021)	4.1
4.2				4.2	Indenture, dated March 19, 2021, among Pitney Bowes Inc., the guarantors party thereto and Truist Bank, as trustee, with respect to Pitney Bowes Inc.'s 7.250% Senior Notes due 2029. (incorporate by reference to Exhibit 4.1 to the Form 8-K filed with the Commission on March 23, 2021)	4.2
10.1				10.1	First Amendment, dated as of March 19, 2021, among Pitney Bowes Inc., the subsidiaries of Pitney Bowes Inc. party thereto, 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 March 23, 2021)	10.1
10.2				10.2	First Refinancing Agreement, dated as of March 19, 2021, among Pitney Bowes Inc., the subsidiaries of Pitney Bowes Inc. party thereto and JPMorgan Chase Bank, N.A., as administrative agent and refinancing tranche B term lender. (incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the Commission on March 23, 2021)	10.2
31.1	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	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	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	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	32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350	32.1	32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350	32.1
32.2	32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350	32.2	32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350	32.2
101.SCH	101.SCH	Inline XBRL Taxonomy Extension Schema Document		101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document		101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF	101.DEF	Inline XBRL Taxonomy Definition Linkbase Document		101.DEF	Inline XBRL Taxonomy Definition Linkbase Document
101.LAB	101.LAB	Inline XBRL Taxonomy Label Linkbase Document		101.LAB	Inline XBRL Taxonomy Label Linkbase Document
101.PRE	101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document		101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document
104	104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, formatted in Inline XBRL. (included as Exhibit 101).		104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, 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.

4542

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:	~~November 2, 2020~~August 3, 2021

		/s/ ~~Stanley J. Sutula III~~Ana Maria Chadwick

		~~Stanley J. Sutula III~~Ana Maria Chadwick
		Executive Vice President and Chief Financial Officer

		(Duly Authorized Officer and Principal Financial Officer)

		/s/ Joseph R. Catapano

		Joseph R. Catapano
		Vice President and Chief Accounting Officer
		(Duly Authorized Officer and Principal Accounting Officer)

4643


	Remainder of 2020		2021		2022-2025		Total
SendTech Solutions	$	73,963	$	263,673	$	388,235	$	725,871


	Three Months Ended September 30, 2020						Three Months Ended September 30, 2019
	Software Solutions		Production Mail		Total		Software Solutions		Production Mail		Total
Revenue	$	0	$	0	$	0	$	73,620	$	0	$	73,620

Earnings from discontinued operations	$	0	$	0	$	0	$	8,633	$	0	$	8,633
Gain (loss) on sale	474		0		474		(12,447)		(5,710)		(18,157)

Income (loss) from discontinued operations before taxes	$	474	$	0	474		$	(3,814)	$	(5,710)	(9,524)
Tax benefit					(142)						(1,054)
Income (loss) from discontinued operations, net of tax					$	616					$	(8,470)


	Severance and benefits costs		Other exit costs		Total
Balance at January 1, 2020	$	11,937	$	69	$	12,006
Expenses, net	8,748		1,108		9,856
Cash payments	(14,714)		(1,155)		(15,869)
Balance at September 30, 2020	$	5,971	$	22	$	5,993

Balance at January 1, 2019	$	13,641	$	1,808	$	15,449
Expenses, net	12,498		845		13,343
Cash payments	(16,362)		(2,483)		(18,845)
Balance at September 30, 2019	$	9,777	$	170	$	9,947


	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	—		—		—		—		17,913		—		—		17,913
Other comprehensive income	—		—		—		—		—		22,509		—		22,509
Dividends paid ($0.15 per common share)	—		—		—		—		(26,854)		—		—		(26,854)
Issuance of common stock	—		—		—		(32,877)		—		—		32,289		(588)
Conversion to common stock	—		(130)		—		(2,804)		—		—		2,934		0
Redemption of preferred/preference stock	(1)		(266)		—		(10)		—		—		—		(277)
Stock-based compensation expense	—		—		—		15,867		—		—		—		15,867
Repurchase of common stock	—		—		—		—		—		—		(105,000)		(105,000)
Balance at September 30, 2019	$	0	$	0	$	323,338	$	101,651	$	5,270,741	$	(926,452)	$	(4,743,866)	$	25,412