Pitney Bowes Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021; filed February 22, 2022. The filing is an annual report rather than a standalone quarterly filing. Pitney Bowes provides shipping, mailing, logistics, technology and financing services through Global Ecommerce, Presort Services and SendTech Solutions.
Financial performance
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $3.674 billion | $3.554 billion | Up 3% |
| Income from continuing operations | $3.5 million | $(190.5) million | Improved |
| Net income | $(1.4) million | $(180.4) million | Improved |
| Basic EPS | $(0.01) | $(1.05) | Improved |
| Cash flow from operations | $301.5 million | $302.0 million | Essentially flat |
| Capital expenditures | $184.0 million | $105.0 million | Up $79.1 million |
| Total debt principal | $2.365 billion | $2.610 billion | Down $245.7 million |
Segment results:
- Global Ecommerce: Revenue of $1.703 billion, up 5%; segment EBIT loss of $98.7 million versus a loss of $82.9 million. Gross margin declined to 7.3% from 8.5%.
- Presort Services: Revenue of $573.5 million, up 10%; segment EBIT of $79.7 million, up 43%. Gross margin improved to 24.8% from 22.8%.
- SendTech Solutions: Revenue of $1.398 billion, down 1%; segment EBIT of $429.4 million, down 3%. Gross margin declined to 61.4% from 63.3%.
Consolidated results included $19.0 million of restructuring and asset impairment charges, a $56.2 million pretax loss on debt refinancing, a $10.0 million gain on the sale of a business, and a $4.9 million loss from discontinued operations. No goodwill impairment was recorded in 2021, compared with a $198.2 million charge in 2020.
Cash, liquidity and debt
- Cash, cash equivalents and short-term investments totaled $746.9 million at year-end, including $162 million held by foreign subsidiaries.
- Cash and cash equivalents declined to $732.5 million from $921.5 million, primarily because of investing and financing outflows.
- The company maintains a $500 million secured revolving credit facility; there were no outstanding borrowings at December 31, 2021, and all covenants were satisfied.
- Debt refinancing included $400 million of 6.875% notes due 2027, $350 million of 7.25% notes due 2029 and a $450 million secured term loan due 2028. Approximately 74% of debt was fixed-rate, including swaps.
- Contractual cash requirements totaled approximately $3.0 billion, including $2.365 billion of debt maturities, $286 million of lease obligations, $240 million of purchase obligations and $104 million of retiree medical payments.
- Management stated that available cash, operating cash flow and borrowing capacity should fund cash needs for the next 12 months. Required debt repayments over the next 12 months were $24.7 million.
Material changes and management outlook
- Business services revenue increased 7%, led by higher Presort mail volumes, pricing actions and cross-border ecommerce growth.
- Global Ecommerce profitability weakened because of lower domestic parcel volumes, a $14 million unfavorable vendor price adjustment and higher transportation, postal and labor costs.
- Presort benefited from higher volumes, pricing, five-digit sortation investments and productivity improvements, although labor and transportation costs increased by $16 million and $6 million, respectively.
- SendTech revenue pressure reflected lower financing and support-services revenue, partly offset by higher equipment sales. Financing revenue fell 14%, primarily because of lower lease extensions, lower fee income and the absence of a prior-year investment-security gain.
- Management expects 2022 consolidated revenue growth in the low- to mid-single-digit range. It expects Global Ecommerce and Presort Services margins and profits to improve through pricing, productivity, automation and network efficiencies, while SendTech Solutions revenue is expected to decline but cloud-enabled shipping solutions and margins are expected to remain strong.
- Management expects near-term margin pressure as the portfolio shifts toward higher-growth, lower-margin shipping and digital services, with longer-term improvement dependent on scale and cost efficiencies.
Risks, contingencies and unusual items
- COVID-19, supply-chain disruptions, labor shortages, inflation, transportation costs and changing consumer and retail behavior remain significant uncertainties.
- Key structural risks include declining physical mail volumes, USPS financial and operational changes, postal regulation, intense competition, customer concentration in Global Ecommerce, cybersecurity incidents, data privacy requirements and foreign-exchange volatility.
- The company depends on third-party suppliers, transportation providers and cloud-based systems; disruptions could increase costs or impair service levels.
- Global Ecommerce goodwill was $395 million at year-end. Its fair value exceeded carrying value in the 2021 impairment test, but the assessment depends on revenue growth, operating income and discount-rate assumptions.
- Legal proceedings are described as routine, and management believes material losses are not reasonably possible, although litigation outcomes are inherently uncertain.
- The company sold and leased back its Shelton, Connecticut facility in February 2022, receiving net proceeds of $51 million and expecting a pretax gain of $14 million.
- The company adopted FIFO inventory accounting retrospectively in 2021, increasing opening 2019 inventory and retained earnings by approximately $4 million and $3 million net of tax, respectively.
Investor verification checklist
- Reconcile reported revenue growth with segment volume, pricing, foreign-exchange and customer-mix trends.
- Assess whether Global Ecommerce can achieve the projected margin improvement despite labor, transportation and postal costs.
- Review debt maturities, refinancing costs, variable-rate exposure and compliance with credit-facility covenants.
- Evaluate liquidity after capital expenditures, dividends, lease payments, pension contributions and required debt repayments.
- Review the sensitivity of the $395 million Global Ecommerce goodwill balance to changes in growth, profitability, inflation and discount rates.
- Monitor USPS relationships, postal regulation, physical mail declines and the performance of major Global Ecommerce customers.
- Verify the impact of the Shelton sale-leaseback, the CrescoData acquisition and any remaining restructuring obligations.