Document and Entity Information
| Document and Entity Information (USD $) | ||
| 3 Months Ended
Mar. 31, 2010 | Dec. 31, 2009
| |
| Document and Entity Information | ||
| Document Type | 10-Q | |
| Document Period End Date | 2010-03-31 | |
| Amendment Flag | false | |
| Entity Registrant Name | PITNEY BOWES INC /DE/ | |
| Entity Central Index Key | 0000078814 | |
| Entity Current Reporting Status | Yes | |
| Entity Voluntary Filers | No | |
| Current Fiscal Year End Date | --12-31 | |
| Entity Filer Category | Large Accelerated Filer | |
| Entity Well Known Seasoned Issuer | Yes | |
| Entity Public Float | $4,552,929,763 | |
| Document Fiscal Year Focus | 2,010 | |
| Document Fiscal Period Focus | Q1 | |
| Entity Common Stock Shares Outstanding | 207,528,336 |
Condensed Consolidated Statemen
| Condensed Consolidated Statement of Income (Unaudited) (USD $) | |||||||||||||||||||
| In Thousands, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | |||||||||||||||||
| Revenue: | |||||||||||||||||||
| Equipment sales | $239,936 | $231,825 | |||||||||||||||||
| Supplies | 85,277 | 88,029 | |||||||||||||||||
| Software | 83,129 | 79,726 | |||||||||||||||||
| Rentals | 155,437 | 168,130 | |||||||||||||||||
| Financing | 162,775 | 182,798 | |||||||||||||||||
| Support services | 180,034 | 174,347 | |||||||||||||||||
| Business services | 441,645 | 454,729 | |||||||||||||||||
| Total revenue | 1,348,233 | 1,379,584 | |||||||||||||||||
| Cost and expenses: | |||||||||||||||||||
| Cost of equipment sales | 106,402 | 104,064 | |||||||||||||||||
| Cost of supplies | 25,365 | 23,341 | |||||||||||||||||
| Cost of software | 20,591 | 19,497 | |||||||||||||||||
| Cost of rentals | 37,071 | 35,851 | |||||||||||||||||
| Financing interest expense | 21,938 | 24,452 | |||||||||||||||||
| Cost of support services | 114,606 | 117,347 | |||||||||||||||||
| Cost of business services | 330,472 | 353,044 | |||||||||||||||||
| Selling, general and administrative | 443,297 | 450,391 | |||||||||||||||||
| Research and development | 40,865 | 46,949 | |||||||||||||||||
| Restructuring charges and asset impairments | 20,722 | 0 | |||||||||||||||||
| Other interest expense | 27,658 | 27,751 | |||||||||||||||||
| Interest income | (762) | (1,552) | |||||||||||||||||
| Total costs and expenses | 1,188,225 | 1,201,135 | |||||||||||||||||
| Income from continuing operations before income taxes | 160,008 | 178,449 | |||||||||||||||||
| Provision for income taxes | 73,245 | 72,149 | |||||||||||||||||
| Income from continuing operations | 86,763 | 106,300 | |||||||||||||||||
| (Loss) gain from discontinued operations, net of income tax | (3,130) | 2,623 | |||||||||||||||||
| Net income before attribution of noncontrolling interests | 83,633 | 108,923 | |||||||||||||||||
| Less: Preferred stock dividends of subsidiaries attributable to noncontrolling interests | 4,594 | 4,521 | |||||||||||||||||
| Pitney Bowes Inc. net income | 79,039 | 104,402 | |||||||||||||||||
| Amounts attributable to Pitney Bowes Inc. common stockholders: | |||||||||||||||||||
| Income from continuing operations | 82,169 | 101,779 | |||||||||||||||||
| (Loss) gain from discontinued operations | (3,130) | 2,623 | |||||||||||||||||
| Pitney Bowes Inc. net income | $79,039 | $104,402 | |||||||||||||||||
| Basic earnings per share of common stock attributable to Pitney Bowes Inc. common stockholders: | |||||||||||||||||||
| Continuing operations | 0.4 | 0.49 | |||||||||||||||||
| Discontinued operations | -0.02 | 0.01 | |||||||||||||||||
| Net income | 0.38 | [1] | 0.51 | [1] | |||||||||||||||
| Diluted earnings per share of common stock attributable to Pitney Bowes Inc. common stockholders: | |||||||||||||||||||
| Continuing operations | 0.4 | 0.49 | |||||||||||||||||
| Discontinued operations | -0.02 | 0.01 | |||||||||||||||||
| Net income | 0.38 | 0.5 | |||||||||||||||||
| Dividends declared per share of common stock | 0.365 | 0.36 | |||||||||||||||||
| [1]The sum of the earnings per share amounts may not equal the totals above due to rounding. | |||||||||||||||||||
Condensed Consolidated Balance
| Condensed Consolidated Balance Sheet (Unaudited) (USD $) | ||
| In Thousands | 3 Months Ended
Mar. 31, 2010 | Dec. 31, 2009
|
| Current assets: | ||
| Cash and cash equivalents | $476,940 | $412,737 |
| Short-term investments | 19,211 | 14,682 |
| Accounts receivable | ||
| Accounts receivable, gross | 804,929 | 859,633 |
| Allowance for doubtful accounts receivables | (39,491) | (42,781) |
| Accounts receivable, net | 765,438 | 816,852 |
| Finance receivables | ||
| Finance receivables | 1,380,606 | 1,417,708 |
| Allowance for credit losses | (44,578) | (46,790) |
| Finance receivables, net | 1,336,028 | 1,370,918 |
| Inventories | 162,070 | 156,502 |
| Current income taxes | 82,095 | 101,248 |
| Other current assets and prepayments | 101,014 | 98,297 |
| Total current assets | 2,942,796 | 2,971,236 |
| Property, plant and equipment, net | 488,245 | 514,904 |
| Rental property and equipment, net | 344,363 | 360,207 |
| Long-term finance receivables | ||
| Finance receivables | 1,331,847 | 1,380,810 |
| Allowance for credit losses | (24,177) | (25,368) |
| Finance receivables, net | 1,307,670 | 1,355,442 |
| Investment in leveraged leases | 242,666 | 233,359 |
| Goodwill | 2,254,115 | 2,286,904 |
| Intangible assets, net | 294,014 | 316,417 |
| Non-current income taxes | 108,023 | 108,260 |
| Other assets | 386,457 | 387,182 |
| Total assets | 8,368,349 | 8,533,911 |
| Current liabilities: | ||
| Accounts payable and accrued liabilities | 1,661,467 | 1,748,254 |
| Current income taxes | 155,871 | 144,385 |
| Notes payable and current portion of long-term obligations | 103,533 | 226,022 |
| Advance billings | 482,849 | 447,786 |
| Total current liabilities | 2,403,720 | 2,566,447 |
| Deferred taxes on income | 313,991 | 293,459 |
| Tax uncertainties and other income tax liabilities | 533,775 | 525,253 |
| Long-term debt | 4,215,728 | 4,213,640 |
| Other non-current liabilities | 610,424 | 625,079 |
| Total liabilities | 8,077,638 | 8,223,878 |
| Noncontrolling interests (Preferred stockholders' equity in subsidiaries) | 296,370 | 296,370 |
| Commitments and contingencies (See Note 17) | - | |
| Stockholders' (deficit) equity: | ||
| Cumulative preferred stock, $50 par value, 4% convertible | 4 | 4 |
| Cumulative preference stock, no par value, $2.12 convertible | 841 | 868 |
| Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued) | 323,338 | 323,338 |
| Additional paid-in capital | 246,922 | 256,133 |
| Retained earnings | 4,309,185 | 4,305,794 |
| Accumulated other comprehensive loss | (483,232) | (457,378) |
| Treasury stock, at cost (116,004,935 and 116,140,084 shares, respectively) | (4,402,717) | (4,415,096) |
| Total Pitney Bowes Inc. stockholders' (deficit) equity | (5,659) | 13,663 |
| Total liabilities, noncontrolling interests and stockholders' (deficit) equity | $8,368,349 | $8,533,911 |
1_Condensed Consolidated Balanc
| Condensed Consolidated Balance Sheet (Parenthetical) (Unaudited) (USD $) | ||
| 3 Months Ended
Mar. 31, 2010 | Dec. 31, 2009
| |
| CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | ||
| Preferred stock par value | $50 | |
| Preferred stock conversion dollar value | 4% | |
| Preference stock par value | no par value | |
| Preference stock conversion dollar value | 2.12 | |
| Common stock, par value | $1 | |
| Common stock, shares authorized | 480,000,000 | |
| Common stock, shares issued | 323,337,912 | |
| Treasury stock, shares | 116,004,935 | 116,140,084 |
2_Condensed Consolidated Statem
| Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
| In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
| Cash flows from operating activities: | ||
| Net income before attribution of noncontrolling interests | $83,633 | $108,923 |
| Restructuring charges, net of tax | 13,527 | 0 |
| Restructuring payments | (27,720) | (32,701) |
| Payments for settlement of derivative instruments | 0 | (20,281) |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 79,701 | 87,386 |
| Stock-based compensation | 5,055 | 5,270 |
| Changes in operating assets and liabilities, excluding effects of acquisitions: | ||
| (Increase) decrease in accounts receivable | 60,369 | 72,768 |
| (Increase) decrease in finance receivables | 74,205 | 102,248 |
| (Increase) decrease in inventories | (7,152) | (11,499) |
| (Increase) decrease in prepaid, deferred expense and other assets | (5,151) | (2,540) |
| Increase (decrease) in accounts payable and accrued liabilities | (56,894) | (141,542) |
| Increase (decrease) in current and non-current income taxes | 57,312 | 58,561 |
| Increase (decrease) in advance billings | 21,694 | 44,192 |
| Increase (decrease) in other operating capital, net | 7,569 | 5,686 |
| Net cash provided by operating activities | 306,148 | 276,471 |
| Cash flows from investing activities: | ||
| Short-term and other investments | 242 | 6,397 |
| Capital expenditures | (28,367) | (47,776) |
| Net investment in external financing | (1,400) | 764 |
| Reserve account deposits | (11,221) | (21,675) |
| Net cash used in investing activities | (40,746) | (62,290) |
| Cash flows from financing activities: | ||
| Decrease in notes payable, net | (121,994) | (384,650) |
| Proceeds from long-term obligations | 0 | 297,513 |
| Proceeds from issuance of common stock | 2,992 | 2,279 |
| Dividends paid to common stockholders | (75,649) | (74,297) |
| Dividends paid to noncontrolling interests | (4,594) | (4,521) |
| Net cash used in financing activities | (199,245) | (163,676) |
| Effect of exchange rate changes on cash and cash equivalents | (1,954) | (3,959) |
| Increase in cash and cash equivalents | 64,203 | 46,546 |
| Cash and cash equivalents at beginning of period | 412,737 | 376,671 |
| Cash and cash equivalents at end of period | 476,940 | 423,217 |
| Cash interest paid | 72,788 | 72,749 |
| Cash income taxes paid, net | $24,820 | $9,374 |
Basis of presentation
| Basis of presentation | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Basis of Presentation | 1. Basis of Presentation The terms "we", "us", and "our" are used in this report to refer collectively to Pitney Bowes Inc. and its subsidiaries. The accompanying unaudited Condensed Consolidated Financial Statements of Pitney Bowes Inc. 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, 2009 Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In our opinion, all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly our financial position at March 31, 2010 and December 31, 2009, our results of operations for the three months ended March 31, 2010 and 2009 and our cash flows for the three months ended March 31, 2010 and 2009 have been included. Operating results for the three months ended March 31, 2010 are not necessarily indicative of the results that may be expected for any other interim period or the year ending December 31, 2010. These statements should be read in conjunction with the financial statements and notes thereto included in our 2009 Annual Report to Stockholders on Form 10-K. Certain prior year amounts have been reclassified to conform with the current period presentation. |
Nature of Operations
| Nature of Operations | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Nature of Operations | 2. Nature of Operations We are the largest provider of mail processing equipment and integrated mail solutions in the world. We offer a full suite of equipment, supplies, software and services for end-to-end mailstream solutions which enable our customers to optimize the flow of physical and electronic mail, documents and packages across their operations. We conduct our business activities in seven reporting segments within two business groups: Mailstream Solutions and Mailstream Services. See Note 6 to the Condensed Consolidated Financial Statements for details of our reporting segments and a description of their activities. |
Recent Accounting Pronouncement
| Recent Accounting Pronouncements | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Recent Accounting Pronouncements | 3. Recent Accounting Pronouncements Revenue Recognition In September 2009, new guidance was introduced addressing the accounting for revenue arrangements with multiple elements and certain revenue arrangements that include software. This will allow companies to allocate consideration in a multiple element arrangement in a way that better reflects the economics of the transaction and will result in the elimination of the residual method. In addition, tangible products that have software components that are "essential to the functionality" of the tangible product will be scoped out of the software revenue guidance. The new guidance will also result in more expansive disclosures. The new guidance will be effective on January 1, 2011, with early adoption permitted. We are currently evaluating the impact of adopting the new guidance. |
Discontinued Operations
| Discontinued Operations | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Discontinued Operations | 4. Discontinued Operations The following table shows selected financial information included in discontinued operations for the three months ended March 31, 2010 and 2009, respectively: Three Months Ended March 31, 2010 2009 Pre-tax income $ - $ 9,773 Tax provision (3,130) (7,150) (Loss) gain from discontinued operations, net of tax $ (3,130) $ 2,623 The net loss for the three months ended March 31, 2010 relates to the accrual of interest on uncertain tax positions. The net gain for the three months ended March 31, 2009 relates to $9.8 million pre-tax income ($6.0 million net of tax) for a bankruptcy settlement, which was partially offset by the accrual of interest on uncertain tax positions. We received a bankruptcy settlement for unsecured claims pertaining to the leasing of certain aircraft. These leasing transactions were originally executed by our former Capital Services business, which was sold in 2006. At the time of the Capital Services sale, we retained the rights to the bankruptcy claims. Since these claims were attributable to our former Capital Services business, we recorded the gain on this settlement in discontinued operations. |
Earnings per Share
| Earnings per Share | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Earnings per Share | 5. Earnings per Share A reconciliation of the basic and diluted earnings per share computations for the three months ended March 31, 2010 and 2009 is as follows: 2010 2009 Income Weighted Average Shares Per Share Income Weighted Average Shares Per Share Pitney Bowes Inc. net income $ 79,039 $ 104,402 Less: Preferred stock dividends - - Preference stock dividends (17) (19) Basic earnings per share $ 79,022 207,333 $ 0.38 $ 104,383 206,255 $ 0.51 Effect of dilutive securities: Data for basic earnings per share $ 79,022 207,333 $ 104,383 206,255 Preferred stock - 2 - 3 Preference stock 17 525 19 596 Stock options and stock purchase plans - 22 - - Other stock plans - 22 - 4 Diluted earnings per share $ 79,039 207,904 $ 0.38 $ 104,402 206,858 $ 0.50 Basic earnings per share of common stock attributable to Pitney Bowes Inc. common stockholders: Per Share Per Share Continuing operations $ 0.40 $ 0.49 Discontinued operations (0.02) 0.01 Net income $ 0.38 $ 0.51 Diluted earnings per share of common stock attributable to Pitney Bowes Inc. common stockholders: Per Share Per Share Continuing operations $ 0.40 $ 0.49 Discontinued operations (0.02) 0.01 Net income $ 0.38 $ 0.50 Note: The sum of the earnings per share amounts may not equal the totals above due to rounding. Approximately 5.2 million and 6.9 million common stock equivalent shares for the three months ended March 31, 2010 and 2009, respectively, issuable upon the exercise of stock options were excluded from the above computations because the exercise prices of such options were greater than the average market price of the common stock and therefore the impact of these shares was anti-dilutive. On February 8, 2010, we made our annual stock compensation grant which consisted of approximately 1.7 million stock options and 0.8 million restricted stock units. |
Segment Information
| Segment Information | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Segment Information | 6. Segment Information We conduct our business activities in seven reporting segments within two business groups, Mailstream Solutions and Mailstream Services. The principal products and services of each of our reporting segments are as follows: Mailstream Solutions: U.S. Mailing: Includes the U.S. revenue and related expenses from the sale, rental and financing of our mail finishing, mail creation, shipping equipment and software; supplies; support and other professional services; and payment solutions. International Mailing: Includes the non-U.S. revenue and related expenses from the sale, rental and financing of our mail finishing, mail creation, shipping equipment and software; supplies; support and other professional services; and payment solutions. Production Mail: Includes the worldwide revenue and related expenses from the sale, financing, support and other professional services of our high-speed, production mail systems and sorting equipment. Software: Includes the worldwide revenue and related expenses from the sale and support services of non-equipment-based mailing, customer communication and location intelligence software. Mailstream Services: Management Services: Includes worldwide facilities management services; secure mail services; reprographic, document management services; and litigation support and eDiscovery services. Mail Services: Includes presort mail services and cross-border mail services. Marketing Services: Includes direct marketing services for targeted customers. Earnings before interest and taxes ("EBIT"), a non-GAAP measure, is useful to management in demonstrating the operational profitability of the segments by excluding interest and taxes, which are generally managed across the entire company on a consolidated basis. EBIT is determined by deducting from revenue the related costs and expenses attributable to the segment. Segment EBIT also excludes general corporate expenses, restructuring charges and asset impairments. As a result of certain organizational changes made during the third quarter of 2009, we have reclassified certain 2009 amounts to conform to the revised presentation. The amounts reclassified did not have a material impact to our segment disclosures. Revenue and EBIT by business segment for the three months ended March 31, 2010 and 2009 are as follows: Three Months Ended March 31, 2010 2009 Revenue: U.S. Mailing $ 477,041 $ 516,017 International Mailing 235,303 237,312 Production Mail 124,776 109,429 Software 79,373 75,375 Mailstream Solutions 916,493 938,133 Management Services 254,616 266,502 Mail Services 145,102 141,251 Marketing Services 32,022 33,698 Mailstream Services 431,740 441,451 Total revenue $ 1,348,233 $ 1,379,584 Three Months Ended March 31, 2010 2009 EBIT: (1) U.S. Mailing $ 171,137 $ 190,628 International Mailing 36,981 30,939 Production Mail 10,914 5,067 Software 4,332 2,604 Mailstream Solutions 223,364 229,238 Management Services 20,092 13,637 Mail Services 24,320 18,575 Mar |
Inventories
| Inventories | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Inventories | 7. Inventories Inventories are composed of the following: March 31, December 31, 2010 2009 Raw materials and work in process $ 42,105 $ 36,331 Supplies and service parts 69,098 69,506 Finished products 50,867 50,665 Total $ 162,070 $ 156,502 |
Fixed Assets
| Fixed Assets | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Fixed Assets | 8. Fixed Assets March 31, December 31, 2010 2009 Property, plant and equipment $ 1,812,796 $ 1,820,797 Accumulated depreciation (1,324,551) (1,305,893) Property, plant and equipment, net $ 488,245 $ 514,904 Rental property and equipment $ 704,989 $ 728,537 Accumulated depreciation (360,626) (368,330) Rental property and equipment, net $ 344,363 $ 360,207 Depreciation expense was $63.3 million and $70.0 million for the three months ended March 31, 2010 and 2009, respectively. |
Intangible Assets and Goodwill
| Intangible Assets and Goodwill | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Intangible Assets and Goodwill | 9. Intangible Assets and Goodwill Intangible assets are composed of the following: March 31, 2010 December 31, 2009 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 421,696 $ (204,949) $ 216,747 $ 428,888 $ (197,497) $ 231,391 Supplier relationships 29,000 (14,017) 14,983 29,000 (13,292) 15,708 Software technology 162,638 (107,862) 54,776 164,211 (103,388) 60,823 Trademarks trade names 35,121 (28,070) 7,051 35,855 (27,898) 7,957 Non-compete agreements 7,679 (7,222) 457 7,753 (7,215) 538 Total intangible assets $ 656,134 $ (362,120) $ 294,014 $ 665,707 $ (349,290) $ 316,417 Amortization expense for intangible assets for the three months ended March 31, 2010 and 2009 was $16.4 million and $17.4 million, respectively. The estimated future amortization expense related to intangible assets is as follows: Amount Remaining for year ended December 31, 2010 $ 43,000 Year ended December 31, 2011 54,000 Year ended December 31, 2012 48,000 Year ended December 31, 2013 42,000 Year ended December 31, 2014 37,000 Thereafter 70,014 Total $ 294,014 Changes in the carrying amount of goodwill by business segment for the three months ended March 31, 2010 are as follows: Balance at December 31, 2009 Acquired during the period Other (1) Balance at March 31, 2010 U.S. Mailing $ 218,567 $ - $ (75) $ 218,492 International Mailing 342,549 - (15,765) 326,784 Production Mail 137,366 - (2,691) 134,675 Software 633,938 - (6,718) 627,220 Mailstream Solutions 1,332,420 - (25,249) 1,307,171 Management Services 500,055 - (7,190) 492,865 Mail Services 259,632 - (350) 259,282 Marketing Services 194,797 - - 194,797 Mailstream Services 954,484 - (7,540) 946,944 Total $ 2,286,904 $ - $ (32,789) $ 2,254,115 (1) "Other" primarily includes foreign currency translation adjustments. |
Long-term Debt
| Long-term Debt | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Long-term Debt | 10. Long-term Debt On September 15, 2009, we repaid the 8.55% notes with a $150 million face value at their maturity. The repayment of these notes was funded through cash generated from operations and issuance of commercial paper. On June 29, 2009, we entered into an interest rate swap for an aggregate notional amount of $100 million to effectively convert our interest payments on a portion of the $400 million, 4.625% fixed rate notes due in 2012, into variable interest rates. The variable rates payable are based on one month LIBOR plus 249 basis points. In July 2009, we entered into three additional interest rate swaps for an aggregate notional amount of $300 million to effectively convert our interest payments on the remainder of the $400 million, 4.625% fixed rate notes due in 2012, into variable interest rates. The variable rates payable are based on one month LIBOR plus 248 basis points for $100 million notional amount and one month LIBOR plus 250 basis points for $200 million notional amount. On March 2, 2009, we issued $300 million of 10-year fixed-rate notes with a coupon rate of 6.25%. The interest is paid semi-annually beginning September 15, 2009. The notes mature on March 15, 2019. We simultaneously unwound four forward starting swap agreements (forward swaps) used to hedge the interest rate risk associated with the forecasted issuance of the fixed-rate debt. The unwind of the derivatives resulted in a loss (and cash payment) of $20.3 million which was recorded to other comprehensive income, net of tax, and will be amortized to net interest expense over the 10-year term of the notes. The proceeds from these notes were used for general corporate purposes, including the repayment of commercial paper. |
Noncontrolling Interests
| Noncontrolling Interests (Preferred Stockholders' Equity in Subsidiaries) | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Noncontrolling Interests (Preferred Stockholders' Equity in Subsidiaries) | 11. Noncontrolling Interests (Preferred Stockholders' Equity in Subsidiaries) At January 1, 2009, Pitney Bowes International Holdings, Inc. ("PBIH"), a subsidiary of the Company, had 3,750,000 shares outstanding or $375 million of variable term voting preferred stock owned by certain outside institutional investors. These preferred shares were entitled as a group to 25% of the combined voting power of all classes of capital stock of PBIH. All outstanding common stock of PBIH, representing the remaining 75% of the combined voting power of all classes of capital stock, was owned directly or indirectly by Pitney Bowes Inc. The preferred stock, $.01 par value, was entitled to cumulative dividends at rates set at auction. The weighted average dividend rate was 4.8% for the variable term voting preferred stock for the three months ended March 31, 2009. During 2009, PBIH issued 300,000 shares, or $300 million, of perpetual voting preferred stock to certain outside institutional investors. These preferred shares are entitled as a group to 25% of the combined voting power of all classes of capital stock of PBIH. All outstanding common stock of PBIH, representing the remaining 75% of the combined voting power of all classes of capital stock, is owned directly or indirectly by Pitney Bowes Inc. The preferred stock is entitled to cumulative dividends at a rate of 6.125% for a period of 7 years after which it becomes callable and, if it remains outstanding, will yield a dividend that increases by 150% every six months thereafter. During 2009, PBIH redeemed $375 million of its existing variable term voting preferred stock. The redemption was funded by a combination of the issuance of the $300 million perpetual voting preferred stock, cash flows from operations and the issuance of commercial paper. Preferred dividends are reported in the Condensed Consolidated Statements of Income as Preferred stock dividends of subsidiaries attributable to noncontrolling interests. Preferred dividends totaled $4.6 million and $4.5 million for the three months ended March 31, 2010 and 2009, respectively. No dividends were in arrears at March 31, 2010 or December 31, 2009. A rollforward of noncontrolling interests is as follows: Beginning balance at January 1, 2009 $ 374,165 Movements: Share issuances (1) 296,370 Share redemptions (374,165) Ending balance at December 31, 2009 and March 31, 2010 $ 296,370 (1) Net of issuance costs of $3.6 million. |
Comprehensive Income
| Comprehensive Income | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Comprehensive Income | 12. Comprehensive Income Comprehensive income for the three months ended March 31, 2010 and 2009 are as follows: Three Months Ended March 31, 2010 2009 Pitney Bowes Inc. net income $ 79,039 $ 104,402 Other comprehensive income, net of tax: Foreign currency translation adjustments (33,343) (59,430) Net unrealized gain on derivatives 320 6,350 Net unrealized gain (loss) on investment securities 144 (79) Amortization of pension and postretirement costs 7,025 4,595 Comprehensive income $ 53,185 $ 55,838 |
Restructuring Charges and Asset
| Restructuring Charges and Asset Impairments | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Restructuring Charges and Asset Impairments | 13. Restructuring Charges and Asset Impairments We recorded pre-tax restructuring charges and asset impairments of $20.7 million for the three months ended March 31, 2010. 2009 Program In 2009, we announced that we are undertaking a series of initiatives that are designed to transform and enhance the way we operate as a global company. In order to enhance our responsiveness to changing market conditions, we are executing a strategic transformation program designed to create improved processes and systems to further enable us to invest in future growth in areas such as our global customer interactions and product development processes. This program is expected to continue into 2012 and will result in the reduction of up to 10 percent of the positions in the company. We expect the total pre-tax cost of this program will be in the range of $250 million to $350 million primarily related to severance and benefit costs incurred in connection with such workforce reductions. Most of the total pre-tax costs will be cash-related charges. Currently, we are targeting annualized benefits by 2012, net of system and related investments, in the range of at least $150 million to $200 million on a pre-tax basis. These costs and the related benefits will be recognized as different actions are approved and implemented. During the three months ended March 31, 2010, we recorded pre-tax restructuring charges of $20.7 million, of which $10.8 million related to severance and benefit costs, $9.3 million related to other exit costs and $0.7 million related to asset impairments associated with this program. As of March 31, 2010, approximately 900 employee terminations have occurred under this program. The majority of the liability at March 31, 2010 is expected to be paid during the next twelve months from cash generated from operations. Pre-tax restructuring reserves at March 31, 2010 for the restructuring actions taken in connection with the 2009 program are composed of the following: Balance at December 31, 2009 Expenses Cash payments Non-cash charges Balance at March 31, 2010 Severance and benefit costs $ 45,895 $ 10,754 $ (12,213) $ - $ 44,436 Asset impairments - 652 - (652) - Other exit costs 6,807 9,316 (6,558) - 9,565 Total $ 52,702 $ 20,722 $ (18,771) $ (652) $ 54,001 2007 Program We announced a program in November 2007 to lower our cost structure, accelerate efforts to improve operational efficiencies, and transition our product line. The program included charges primarily associated with older equipment that we had stopped selling upon transition to the new generation of fully digital, networked, and remotely-downloadable equipment. As of March 31, 2010, approximately 3,000 employee terminations have occurred under this program. The majority of the liability at March 31, 2010 is expected to be paid during the next nine months from cash generated from operations. Pre-tax restructuring reserves at March 31, 2010 for the restructuring program announced in November 2007 are composed of the following: Balance at December 31, 2009 Expenses Cash payments Non-cash charges Balanc |
Pensions and Other Benefit Prog
| Pensions and Other Benefit Programs | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Pensions and Other Benefit Programs | 14. Pensions and Other Benefit Programs Defined Benefit Pension Plans The components of net periodic benefit cost for defined benefit pension plans for the three months ended March 31, 2010 and 2009 are as follows: United States Foreign Three Months Ended March 31, Three Months Ended March 31, 2010 2009 2010 2009 Service cost $ 5,717 $ 7,340 $ 1,775 $ 1,592 Interest cost 22,796 24,224 6,929 5,792 Expected return on plan assets (31,035) (30,151) (7,238) (6,256) Amortization of transition credit - - (2) (2) Amortization of prior service (credit) cost (632) (596) 69 103 Amortization of net loss 8,072 7,027 2,543 580 Settlement 2,881 - - - Net periodic benefit cost $ 7,799 $ 7,844 $ 4,076 $ 1,809 As we previously disclosed in our Consolidated Financial Statements for the year ended December 31, 2009, we expect to contribute up to $20 million to each of our U.S. and foreign pension plans during 2010. We will reassess our funding alternatives as the year progresses. At March 31, 2010, $13.7 million and $2.8 million of contributions have been made to the U.S. and foreign pension plans, respectively. Nonpension Postretirement Benefit Plans The components of net periodic benefit cost for nonpension postretirement benefit plans for the three months ended March 31, 2010 and 2009 are as follows: Three Months Ended March 31, 2010 2009 Service cost $ 930 $ 802 Interest cost 3,398 3,562 Amortization of prior service credit (628) (620) Amortization of net loss 1,663 946 Net periodic benefit cost $ 5,363 $ 4,690 For the three months ended March 31, 2010 and 2009, we made $7.4 million and $8.0 million of contributions representing benefit payments, respectively. |
Income Taxes
| Income Taxes | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Income Taxes | 15. Income Taxes The effective tax rate for the three months ended March 31, 2010 and 2009 was 45.8% and 40.4%, respectively. The effective tax rate for 2010 included $9.1 million of tax charges related to the write-off of deferred tax assets as a result of the recent health care reform legislation in the U.S. This legislation, signed in March 2010, includes a provision eliminating the tax deduction for retiree health care costs to the extent of federal subsidies received by companies that provide retiree prescription drug benefits equivalent to Medicare Part D coverage. The tax rates for 2010 and 2009 included $8.6 million and $11.1 million, respectively, of tax charges related to the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock units previously granted to our employees. These write-offs of deferred tax assets will not require us to pay any taxes. We regularly assess the likelihood of tax adjustments in each of the tax jurisdictions in which we have operations and account for the related financial statement implications. Tax reserves have been established which we believe to be appropriate given the possibility of tax adjustments. Determining the appropriate level of tax reserves requires us to exercise judgment regarding the uncertain application of tax law. The amount of reserves is adjusted when information becomes available or when an event occurs indicating a change in the reserve is appropriate. Future changes in tax reserve requirements could have a material impact on our results of operations. We are continually under examination by tax authorities in the United States, other countries and local jurisdictions in which we have operations. The years under examination vary by jurisdiction. The current IRS exam of tax years 2001-2004 is estimated to be completed within the next two years and the examination of years 2005-2008 has commenced. In connection with the 2001-2004 exam, we have received notices of proposed adjustments to our filed returns. Tax reserves have been established which we believe to be appropriate given the possibility of tax adjustments. We are also disputing a formal request from the IRS in the form of a civil summons to provide certain Company workpapers. We believe that certain documents being sought should not be produced because they are privileged. A variety of post-1999 tax years remain subject to examination by other tax authorities, including the U.K., Canada, France, Germany and various U.S. states. Tax reserves have been established which we believe to be appropriate given the possibility of tax adjustments. However, the resolution of such matters could have a material impact on our results of operations, financial position and cash flows. |
Fair Value Measurements
| Fair Value Measurements | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Fair Value Measurements | 16. Fair Value Measurements The fair value measurement guidance established a fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of the fair value hierarchy are as follows: Level 1 Unadjusted quoted prices in active markets for identical assets and liabilities. Examples of Level 1 assets include money market securities and U.S. Treasury securities. Level 2 Observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities; quoted prices in markets that trade infrequently; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Examples of Level 2 assets and liabilities include derivative contracts whose values are determined using a model with inputs that are observable in the market or can be derived from or corroborated by observable market data, such as mortgage-backed securities, asset backed securities, U.S. agency securities, and corporate notes and bonds. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability. These inputs may be derived with internally developed methodologies that result in management's best estimate of fair value. The following tables show, by level within the fair value hierarchy, our financial assets and liabilities that are accounted for at fair value on a recurring basis at March 31, 2010 and December 31, 2009, respectively. As required by the fair value measurements guidance, 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 their placement within the fair value hierarchy levels. Recurring Fair Value Measurements at March 31, 2010 by Level Level 1 Level 2 Level 3 Total Assets: Investment securities Money market funds / commercial paper $ 266,595 $ 3,152 $ - $ 269,747 Equity securities - 21,702 - 21,702 Debt securities - U.S. and foreign governments, agencies and municipalities 51,048 33,296 - 84,344 Debt securities - corporate - 12,366 - 12,366 Asset-backed securities - 196 - 196 Mortgage-backed securities - 19,296 - 19,296 Derivatives Interest rate swaps - 15,831 - 15,831 Foreign exchange contracts - 2,159 - 2,159 Total assets $ 317,643 $ 107,998 $ - $ 425,641 Liabilities: Derivatives Foreign exchange contracts $ - $ 5,034 $ - $ 5,034 Total liabilities $ - $ 5,034 $ - $ 5,034 Recurring Fair Value Measurements at December 31, 2009 by Level Level 1 Level 2 Level 3 Total Assets: Investment securities Money market funds / commercial paper $ 225,581 $ - $ - $ 225,581 Equity securities - 21,027 - 21,027 Debt securities - U.S. and foreign governments, agencies and municipalities 53,173 28,754 - 81, |
Commitments and Contingencies
| Commitments and Contingencies | |
| 3 Months Ended
Mar. 31, 2010 | |
| Notes to condensed consolidated financial statements | |
| Commitments and Contingencies | 17. 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 customers; 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. Our wholly-owned subsidiary, Imagitas, Inc., was a defendant in ten purported class actions filed in six different states. These lawsuits have been coordinated in the United States District Court for the Middle District of Florida, In re: Imagitas, Driver's Privacy Protection Act Litigation (Coordinated, May 28, 2007). Each of these lawsuits alleged that the Imagitas DriverSource program violated the federal Drivers Privacy Protection Act (DPPA). Under the DriverSource program, Imagitas entered into contracts with state governments to mail out automobile registration renewal materials along with third party advertisements, without revealing the personal information of any state resident to any advertiser. The DriverSource program assisted the state in performing its governmental function of delivering these mailings and funding the costs of them. The plaintiffs in these actions were seeking statutory damages under the DPPA. On April 9, 2008, the District Court granted Imagitas' motion for summary judgment in one of the coordinated cases, Rine, et al. v. Imagitas, Inc. (United States District Court, Middle District of Florida, filed August 1, 2006). On July 30, 2008, the District Court issued a final judgment in the Rine lawsuit and stayed all of the other cases filed against Imagitas pending an appellate decision in Rine. On August 27, 2008, the Rine plaintiffs filed an appeal of the District Court's decision in the United States Court of Appeals, Eleventh Judicial Circuit (the "Circuit Court"). On December 21, 2009, the Circuit Court affirmed the District Court decision. On February 22, 2010, the Circuit Court denied the Rine plaintiffs petition for rehearing en banc. The Rine plaintiffs ability to pursue further review of this decision has expired. With respect to the remaining stayed cases, the District Court has requested that the parties provide status reports and a proposed schedule for the remaining proceedings. We expect to prevail in the lawsuits against Imagitas; however, as litigation is inherently unpredictable, there can be no assurance in this regard. If the plaintiffs do prevail, the results may have a material effect on our financial position, future results of operations or cash flows, including, for example, our ability to offer certain types of goods or services in the future. On October 28, 2009, the Company and certain of our current and former officers, were named as defendants in NECA-IBEW Health Welfare Fund v. Pitney Bowes Inc. et al., a class action lawsuit filed in the U.S. District Court for the District of Connecticut. The complaint asserts claim |