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MarketScreener Homepage  >  Equities  >  Nyse  >  Pitney Bowes Inc.    PBI

PITNEY BOWES INC.

(PBI)
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PITNEY BOWES INC /DE/ : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/04/2020 | 05:14pm EST
Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) contains statements that are forward-looking. We want to
caution readers that any forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 (Securities Act) and Section 21E of
the Securities Exchange Act of 1934 (Exchange Act) may change based on various
factors. These forward-looking statements are based on current expectations and
assumptions that are subject to risks and uncertainties, and actual results
could differ materially. Words such as "estimate," "target," "project," "plan,"
"believe," "expect," "anticipate," "intend" and similar expressions may identify
such forward-looking statements. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by law.
Forward-looking statements in this Form 10-Q speak only as of the date hereof,
and forward-looking statements in documents attached that are incorporated by
reference speak only as of the date of those documents.
Although we believe that the expectations reflected in any of our
forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any of our forward-looking
statements. Our future financial condition and results of operations, as well as
any forward-looking statements, are subject to change and to inherent risks and
uncertainties, such as those disclosed or incorporated by reference in our
filings with the Securities and Exchange Commission. In particular, the
uncertainty around the severity, magnitude and duration of the COVID-19 pandemic
(COVID-19), including governments' responses to COVID-19, its continuing impact
on our operations, employees, global supply chain and consumer demand across our
and our clients' businesses as well as any deterioration or instability in
global macroeconomic conditions, could cause our actual results to differ than
those expressed in any forward-looking statement. Other factors which could
cause future financial performance to differ materially from the expectations,
and which may also be exacerbated by COVID-19 or a negative change in the
economy, include, without limitation:
• declining physical mail volumes


• changes in postal regulations, or the financial health of posts, in the

U.S. or other major markets or the loss of, or significant changes to, our

       contractual relationship with the United States Postal Service (USPS)


•      our ability to continue to grow volumes, gain additional economies of
       scale and improve profitability within our Commerce Services group

• the loss of some of our larger clients in our Commerce Services group

• our success at managing customer credit risk

• third-party suppliers' ability to provide products and services required

by our clients

• changes in labor conditions and transportation costs

• capital market disruptions or credit rating downgrades that adversely

impact our ability to access capital markets at reasonable costs

• a breach of security, including a future cyber-attack or other comparable

       event


•      our success in developing and marketing new products and services and
       obtaining regulatory approvals, if required


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

• expenses and potential impact on client relationships resulting from the

October 2019 ransomware attack that affected the Company's operations

• the continued availability and security of key information technology

systems and the cost to comply with information security requirements and

privacy laws

• changes in global political conditions and international trade policies,

including the imposition or expansion of trade tariffs

• our success at managing relationships and costs with outsource providers

of certain functions and operations

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

or changes in foreign currency exchange rates and interest rates

• the United Kingdom's recent exit from the European Union

• intellectual property infringement claims

• the use of the postal system for transmitting harmful biological agents,

illegal substances or other terrorist attacks

• acts of nature



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

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Overview

Financial Results Summary - Three Months Ended March 31:

                                                   Revenue
                                        Three Months Ended March 31,
                     2020         2019      Actual % change     Constant Currency % Change
Business services $ 444,379$ 406,545            9  %                      9  %
Support services    122,015      128,599           (5 )%                     (5 )%
Financing            89,078       97,043           (8 )%                     (8 )%
Equipment sales      76,273       89,787          (15 )%                    (15 )%
Supplies             45,709       50,953          (10 )%                    (10 )%
Rentals              18,814       22,157          (15 )%                    (14 )%
Total revenue     $ 796,268$ 795,084            -  %                      -  %


                                                                            Revenue
                                                                 Three Months Ended March 31,
                                                                                                    Constant
                                                                                                   currency %
                                                      2020          2019        Actual % change      change
Global Ecommerce                                  $  292,323$ 266,254           10  %            10  %
Presort Services                                     140,720       134,847            4  %             4  %
Commerce Services                                    433,043       401,101            8  %             8  %
SendTech Solutions                                   363,225       393,983           (8 )%            (7 )%
Total                                             $  796,268$ 795,084            -  %             -  %


                                    EBIT
                        Three Months Ended March 31,
                      2020          2019        % change

Global Ecommerce $ (29,475 )$ (14,600 ) >(100%) Presort Services 15,695 15,066

           4  %

Commerce Services (13,780 ) 466 >(100%) SendTech Solutions 106,562 122,403 (13 )% Total Segment EBIT $ 92,782$ 122,869 (24 )%




Revenue for the quarter was $796 million and flat compared to the prior year.
Business services revenue for the quarter increased over the prior year, but was
offset by declines in other revenue line items. Commerce Services revenue grew
8% as Global Ecommerce revenue increased 10% due to increased volumes and
Presort revenue increased 4% primarily due to volume growth driven by
acquisitions. These revenue increases were offset by a decline in SendTech
Solutions revenue of 8%. Segment EBIT decreased 24% primarily due to the mix of
business in Global Ecommerce and lower revenue in SendTech Solutions. Refer to
Results of Operations section for further information.
The global spread of COVID-19 and the efforts to contain it have negatively
impacted the U.S. and international economies, decreased demand for a broad
variety of goods and services, created disruptions and shortages in global
supply chains and caused significant volatility in financial markets. Businesses
engaged in mailing and shipping have been designated as an essential service.
Accordingly, our facilities continue to operate and many of our employees
continue to report to work at these facilities. We have taken additional
measures to protect the health and safety of our employees, contractors and the
communities in which we operate. Within our facilities, we are enforcing social
distancing and sanitizing equipment and facilities multiple times a day.
COVID-19 impacted our first quarter financial results in different ways in each
of our businesses. In our SendTech Solutions operations, the global shut-down of
businesses and increase in the number of clients working remotely significantly
impacted our ability to contact and service clients and perform on-site
installations. Through the end of February, global shipments were down slightly
from the prior year. In March, global shipments declined significantly due to
COVID-19, resulting in a significant decrease in equipment sales revenue

                                       29
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compared to the prior year. In Global Ecommerce, we experienced low double-digit
revenue growth through February; however, that growth rate declined to
mid-single-digits in the month of March. The impact on Presort Services revenue
was minimal in the quarter partly due to the timing of volumes already scheduled
to be processed; however, we began to experience declines in mail volumes in
late March. Commerce Services margins were impacted by lower productivity due to
social distancing and higher costs related to sanitizing the equipment and
facilities.
During the quarter, we secured a new five-year $850 million term loan scheduled
to mature in January 2025. The net proceeds from the term loan along with
existing cash were used to purchase under a tender offer $928 million in
principal of certain notes scheduled to mature between 2021 and 2024. We
recognized in other expense a loss of $37 million from the early extinguishment
of debt.
During the first quarter of 2020, our Global Ecommerce reporting unit
experienced weaker than expected performance, in part due to the macroeconomic
conditions resulting from COVID-19, and we recorded a non-cash, pre-tax goodwill
impairment charge of $198 million. See Critical Accounting Estimates for further
details.

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

Outlook

COVID-19 and the resulting significantly weaker global economic conditions have
negatively impacted our results of operations and are expected to continue to
impact our business, results of operations, cash flows and liquidity; however,
the severity and duration of this pandemic is uncertain. Accordingly, we are not
able to reasonably estimate the full extent of the impact on our operating
results, cash flows or financial position for the remainder of the year. From
the onset of COVID-19, we have taken, and will continue to take, proactive steps
to protect the health and safety of our employees, clients, partners and
suppliers. We have business continuity plans in place that are designed to
address various threats and vulnerabilities, including a response to pandemics.
Employees worldwide that have the ability to work remotely are doing so and will
continue to do so until it is no longer required by government authorities. We
have also implemented travel restrictions as appropriate. Within our facilities,
we are enforcing social distancing and sanitizing equipment and facilities
multiple times a day, including during and between shifts. We will continue to
incur additional expenses in connection with our response to COVID-19, including
costs related to the cleaning of equipment and facilities and redirecting mail
and parcels to different facilities within our network. The distancing and
safety measures we are taking will also affect productivity in our facilities.
Our Commerce Services businesses are more demand-driven and it is difficult to
predict how demand and volumes will trend and the impact to productivity
throughout the duration of COVID-19. Within Global Ecommerce, the mix of our
business is resulting in varying impacts on demand. Early in the second quarter,
we are seeing volume growth in domestic delivery and fulfillment as well as
digital volumes. We are experiencing declines in cross-border volumes and expect
the business to be further impacted by higher transportation costs due to the
restrictions on international shipments. In Presort Services, approximately 80%
of mail volumes processed are First Class Mail with the remaining 20% primarily
Marketing Mail. There were declines in mail volumes from the onset of COVID-19
as clients reacted to market demand and looked to reduce costs. We expect lower
volumes of First Class and Marketing Mail, with a more significant decrease in
Marketing Mail volumes; however, we cannot predict the duration and magnitude of
these declines or determine when, or if, volumes will return to normal levels.
Within Global Ecommerce and Presort Services, we are consolidating facilities in
certain markets to reduce costs and improve productivity. Productivity will be
impacted throughout the COVID-19 crisis as we continue to enforce social
distancing measures and follow safety guidelines.
Within SendTech Solutions, approximately two-thirds of revenue is recurring in
nature and materially contributes to our cash flows. Nonrecurring revenues,
primarily equipment sales and to a lesser extent, supplies, will be adversely
impacted by COVID-19 due to declining demand and usage. We are unable to predict
the duration and magnitude of these declines or determine when, or if, demand
and usage will return to normal levels. We are also monitoring cash collections
from our recurring revenue streams; however, at this point it is too early to
determine the impact of any delinquency rates.
Before the onset of COVID-19 and the resulting economic decline, we had taken
steps to reduce and refinance debt and improve liquidity that we believe will
enable us to manage through the current economic downturn. We are taking further
actions to manage cash flows and maintain liquidity, including, but not limited
to, prioritizing our capital expenditures to essential and necessary investments
and reducing targeted loan originations at Wheeler Financial. We estimate that
these actions alone will benefit cash flows by approximately $85 million to $95
million. Refer to the Liquidity and Capital Resources section for further
information.

                                       30
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                             RESULTS OF OPERATIONS
In our Results of Operations discussion, we present and discuss revenue and cost
of revenue at the segment level since our revenue and related costs of revenue
sources are predominantly specific to the segments. Operating and other expenses
are presented and discussed on a consolidated basis as this basis provides a
better understanding of the underlying drivers of change in these expense and
cost line items or they are not allocated to a specific segment.
In our revenue discussion, we may refer to revenue growth on a constant currency
basis. Constant currency measures exclude the impact of changes in currency
exchange rates since the prior period under comparison. We believe that
excluding the impacts of currency exchange rates provides a better understanding
of the underlying revenue performance. Constant currency change is calculated by
converting the current period non-U.S. dollar denominated revenue using the
prior year's exchange rate. Where constant currency measures are not provided,
the actual change and constant currency change are the same.
Management measures segment profitability and performance using segment earnings
before interest and taxes (EBIT). Segment EBIT is calculated by deducting from
segment revenue the related costs and expenses attributable to the segment.
Segment EBIT excludes interest, taxes, general corporate expenses, restructuring
charges, asset impairment charges, goodwill impairment charges and other items
not allocated to a particular business segment. Management believes that it
provides investors a useful measure of operating performance and underlying
trends of the business. Segment EBIT may not be indicative of our overall
consolidated performance and therefore, should be read in conjunction with our
consolidated results of operations.

REVENUE AND SEGMENT EBIT
Global Ecommerce
Global Ecommerce includes the revenue and related expenses from products and
services that enable domestic and cross-border ecommerce transactions, including
shipping, fulfillment and returns.
                                       Revenue                                 Cost of Revenue                     Gross Margin
                             Three Months Ended March 31,               

Three Months Ended March 31, Three Months Ended March 31,

                                                           Constant
                                              Actual %    Currency %
                     2020          2019        change       change           2020             2019             2020               2019

Business services $ 292,323$ 266,254 10 % 10 % $

   265,221     $ 222,635            9.3 %               16.4 %

                              Segment EBIT
                      Three Months Ended March 31,
                                              Actual %
                     2020          2019        change
Segment EBIT      $ (29,475 )$ (14,600 )   >(100%)


Global Ecommerce revenue increased 10% in the first quarter of 2020 with higher
delivery volumes contributing revenue growth of 9 percentage points and
fulfillment services contributing revenue growth of 1 percentage point.
Gross margin decreased to 9.3% from 16.4% in the prior year primarily due to the
continuing shift in the mix of business to lighter weight, lower margin services
and reduced productivity driven by COVID-19.
Segment EBIT for the first quarter of 2020 was a loss of $29 million compared to
a loss of $15 million in the prior year period. The higher loss was primarily
driven by the shift in the mix of business to lighter weight, lower margin
services, incremental costs associated with new facilities that opened during
the fourth quarter of 2019 and lower labor productivity related to social
distancing and safety measures taken in response to COVID-19.











                                       31
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Presort Services
Presort Services includes revenue and related expenses from sortation services
to qualify large volumes of First Class Mail, Marketing Mail and Bound and
Packet Mail (Marketing Mail Flats and Bound Printed Matter) for postal
worksharing discounts.
                                               Revenue                                        Cost of Revenue                  Gross Margin
                                                                                                                         Three Months Ended March
                                    Three Months Ended March 31,                       Three Months Ended March 31,                31,
                                                                          Constant
                                                                         Currency %
                         2020             2019        Actual % change      change           2020             2019         2020            2019
Business services $    140,720$ 134,847            4 %              4 %      $       105,238$ 101,962      25.2 %             24.4 %

                                      Segment EBIT
                              Three Months Ended March 31,
                         2020             2019        Actual % change
Segment EBIT      $     15,695$  15,066            4 %


Presort Services revenue increased 4% in the first quarter of 2020. Acquisitions
contributed a 3% increase while higher revenue per piece contributed a 1%
increase. Volumes increased in the first quarter compared to prior year driven
by higher First Class Mail, Marketing Mail Flats and Bound Printed Matter
volumes from existing clients and from acquisitions, partially offset by lower
Marketing Mail volumes, primarily driven by COVID-19.
Gross margin increased to 25.2% from 24.4% and EBIT increased $0.6 million, or
4%, in the first quarter of 2020. The improvement in gross margin was primarily
due to ongoing productivity actions, which increased Segment EBIT by $3 million.
Segment EBIT also improved $2 million due to lower bad debt expense but was
adversely impacted by $4 million from unrealized losses on certain investment
securities driven by market conditions.

SendTech Solutions
SendTech Solutions includes the revenue and related expenses from sending
technology solutions for physical mailing, digital mailing and shipping,
financing, services, supplies and other applications to help simplify and save
on the sending, tracking and receiving of letters, parcels and flats.
                                        Revenue                                 Cost of Revenue                  Gross Margin
                                                                                                           Three Months Ended March
                             Three Months Ended March 31,               
Three Months Ended March 31,                31,
                                                            Constant
                                               Actual %     Currency
                     2020          2019         change      % change          2020             2019         2020            2019
Business services $  11,336$   5,444     >100%          >100%      $         4,185     $   2,189      63.1 %             59.8 %
Support services    122,015       128,599        (5 )%          (5 )%            39,628        41,764      67.5 %             67.5 %
Financing            89,078        97,043        (8 )%          (8 )%            12,489        11,364      86.0 %             88.3 %
Equipment sales      76,273        89,787       (15 )%         (15 )%            57,348        63,407      24.8 %             29.4 %
Supplies             45,709        50,953       (10 )%         (10 )%            12,240        13,550      73.2 %             73.4 %
Rentals              18,814        22,157       (15 )%         (14 )%             6,378         9,715      66.1 %             56.2 %
Total revenue     $ 363,225$ 393,983        (8 )%          (7 )%   $       132,268$ 141,989      63.6 %             64.0 %

                               Segment EBIT
                       Three Months Ended March 31,
                                               Actual %
                     2020          2019         change
Segment EBIT      $ 106,562$ 122,403       (13 )%






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SendTech Solutions revenue decreased 8% as reported and 7% at constant currency
in the first quarter of 2020 compared to the prior year. Equipment sales and
supplies decreased 15% and 10%, respectively, as the outbreak of COVID-19
significantly impacted our ability to deliver equipment and supplies and perform
on-site installations. Financing revenue decreased 8% primarily driven by a
declining lease portfolio and lower late fees of $1 million. Support services
revenue decreased 5% and rentals revenue decreased 14% at constant currency
primarily driven by a declining meter population. Slightly offsetting these
revenue declines, business services revenue increased $6 million primarily due
to higher revenue from the SendPro Online product.
Gross margin remained relatively flat compared to the prior year. Equipment
sales gross margin for the first quarter 2020 decreased 5 percentage points to
24.8%. Current year margins were adversely impacted approximately 11 percentage
points due to changing mix of product sales and 3 percentage points due to
higher engineering costs. Equipment sales margins in the prior year quarter were
adversely impacted 10 percentage points due to a $9 million charge related to a
SendPro C tablet replacement program. Rentals gross margin increased to 66.1%
from 56.2% primarily due to a $2 million favorable inventory provision
adjustment. Business services increased to 63.1% from 59.8%, primarily driven by
lower costs.
We allocate a portion of our total cost of borrowing to financing interest
expense. In computing financing interest expense, we assume an 8:1 debt to
equity leverage ratio and apply our overall effective interest rate to the
average outstanding finance receivables. The financing gross margin decreased to
86.0% from 88.3% compared to the prior year primarily due to a higher effective
interest rate.
Segment EBIT decreased 13% in first quarter of 2020 compared to the prior year,
primarily due to the decline in revenue and higher current year credit loss
provisions of $10 million due to the current economic recessionary conditions
and outlook caused by COVID-19, partially offset by lower expenses of $10
million from cost savings initiatives.

CONSOLIDATED OPERATING AND OTHER EXPENSES


Selling, general and administrative (SG&A)
SG&A expense of $249 million in the quarter decreased 5% compared to the prior
period, primarily due to lower employee-related costs of $7 million, lower
professional fees of $10 million due to contract renegotiations and lower
marketing expenses of $2 million, partially offset by an increase in the
provision for credit losses of $5 million driven in part by the adoption of a
new accounting standard and the current economic recessionary conditions and
outlook caused by COVID-19.

Research and development (R&D)
R&D expense decreased 4% or $0.5 million in the quarter primarily due to lower
spending.

Restructuring charges
Restructuring charges for the each of the three months ended March 31, 2020 and
2019 were $4 million. See Note 10 to the Condensed Consolidated Financial
Statements for further information.

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

Other expense, net
Other expense, net for the three months ended March 31, 2020 includes a $37
million loss on the early extinguishment of debt, partially offset by an advance
of $4 million against our insurance claim related to the October 2019 ransomware
attack. Other expense for the three months ended March 31, 2019 includes the
loss on Market Exits of $18 million, primarily from the write-off of cumulative
translation adjustments.

Income taxes See Note 13 to the Condensed Consolidated Financial Statements for further information.


Discontinued Operations
Income from discontinued operations for the three months ended March 31, 2020
includes the gain on the sale of the Australia software business, which closed
in January 2020. See Note 4 to the Condensed Consolidated Financial Statements
for further information.


                                       33
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                        LIQUIDITY AND CAPITAL RESOURCES
We are a "Well-Known Seasoned Issuer" within the meaning of Rule 405 under the
Securities Act, which allows us to issue debt securities, preferred stock,
preference stock, common stock, purchase contracts, depositary shares, warrants
and units in an expedited fashion.
At March 31, 2020, we had cash and cash equivalents and short-term investments
of $730 million, of which $144 million was held by our foreign subsidiaries.
Cash held by our foreign subsidiaries is generally used to support the liquidity
needs of those subsidiaries. We believe that existing cash and investments, cash
generated from operations and borrowing capacity under our $500 million
revolving credit facility will be sufficient to support our current cash needs.
Our ability to maintain adequate liquidity for our operations in the future is
dependent upon a number of factors, including our revenue and earnings,
macroeconomic conditions, the length and severity of business disruptions caused
by COVID-19, and our ability to take further cost-savings and cash conservation
measures. At this time, based on our expected impact of COVID-19, we continue to
believe we have the ability to fund our cash needs for the next 12 months. In
April 2020, in light of the current macroeconomic environment, we drew down $100
million under the credit facility as a precautionary measure. At March 31, 2020,
we were in compliance with all covenants. We continuously review our credit
profile through published credit ratings and the credit default swap market. We
also monitor the creditworthiness of those banks acting as derivative
counterparties, depository banks or credit providers.

Cash Flow Summary
Changes in cash and cash equivalents were as follows:
                                                           2020          2019          Change
Net cash (used in) provided by operating activities    $  (66,284 )$  69,728$ (136,012 )
Net cash used in investing activities                     (25,458 )     (34,887 )        9,429
Net cash used in financing activities                    (159,596 )     (63,992 )      (95,604 )
Effect of exchange rate changes on cash and cash
equivalents                                               (10,032 )         794        (10,826 )
Change in cash and cash equivalents                    $ (261,370 )   $ 

(28,357 ) $ (233,013 )



Operating Activities
Cash used in operating activities in the first quarter of 2020 was $66 million
compared to cash provided by operating activities of $70 million in the prior
year. Cash flows from continuing operations decreased $97 million, primarily due
to the timing of payments of accounts payable and interest and lower collections
of accounts and finance receivables. Cash flows from discontinued operations
declined due to taxes related to the gain on the sale of our Software Solutions
business.
Investing Activities
Cash used in investing activities in the first quarter of 2020 of $25 million
consisted primarily of capital expenditures. Cash used in investing activities
in the first quarter of 2019 was $35 million, consisting primarily of capital
expenditures of $28 million and a decline in customer deposits at the PB Bank of
$23 million partially offset by net proceeds of $30 million from investment
activities.
Financing Activities
In the first quarter of 2020, we entered into an $850 million term loan and
received net proceeds of $817 million. We used these proceeds and available cash
to purchase under a tender offer $928 million of certain of our senior notes
scheduled to mature between 2021 and 2024. Cash used in financing activities
also include payments of $33 million for premiums and fees associated with the
tender offer, $9 million of dividend payments and $5 million of scheduled term
loan repayments.
In the first quarter of 2019, cash used in financing activities included $39
million to repurchase 5.6 million shares of common stock, $9 million of
dividends and $13 million to repay term loan debt.

Financings and Capitalization
Interest rates on certain notes are subject to adjustment based on changes in
our credit ratings. In November 2019, Moody's and Standard and Poor's (S&P)
lowered the credit rating of our unsecured notes. As a result, the interest
rates on the October 2021 notes, May 2022 notes and April 2023 notes will
increase 0.50% in the second quarter of 2020.
During the quarter, we secured a five-year $850 million term loan scheduled to
mature January 2025 (the 2025 Term Loan). The 2025 Term Loan bears interest at
LIBOR plus 5.5% and resets monthly. We used the net proceeds plus available cash
to purchase under a tender offer $428 million of the October 2021 notes, $250
million of the May 2022 notes, $125 million of the April 2023 notes and $125
million of the March 2024 notes. We incurred a loss of a $37 million on the
early redemption of debt.

                                       34
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Dividends and Share Repurchases
We paid dividends of $9 million in the quarter. Each quarter, our Board of
Directors considers our recent and projected earnings and other capital needs
and priorities in deciding whether to approve the payment, as well as the
amount, of a dividend. There are no material restrictions on our ability to
declare dividends. In light of COVID-19 and the current macroeconomic
conditions, we expect to continue to pay a quarterly dividend; however, no
assurances can be given.
We did not repurchase any shares of our common stock during the quarter and have
remaining authorization to repurchase up to $16 million of our common shares.

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

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

                                       35

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