Pitney Bowes 2014 Annual Report Download - page 89

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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share amounts)
79
or interim period. However, due to the impact of this error on the 2014 annual consolidated financial statements, the accompanying
Consolidated Balance Sheet and Consolidated Statements of Stockholders' Equity (Deficit) have been revised for the earliest period
presented to increase opening retained earnings by $17 million and decrease our tax liabilities.
In August 2012, the United States Court of Appeals for the Third Circuit overturned a prior Tax Court decision and ruled in favor of the
IRS and adverse to Historic Boardwalk Hall LLC (HBH), a partnership in which we had made an investment in the year 2000. In January
2014, the Tax Court entered an order to implement rulings of the Third Circuit. In August 2014, we entered into an agreement with our
partner in the HBH investment releasing our respective claims against each other and agreeing to divest our investment in the
partnership. The impact of this agreement is recorded in other expense in the Consolidated Statements of Income. During the year, we
paid $54 million in tax payments representing a portion of the tax and interest due as a result of the Third Circuit decision and received
$60 million from our partner under the indemnity agreement. Additional tax payments will be due in 2015, which we have accrued in
our financial statements.
15. Noncontrolling Interests (Preferred Stockholders’ Equity in Subsidiaries)
Pitney Bowes International Holdings, Inc. (PBIH), a subsidiary, has 300,000 shares, or $300 million, of outstanding perpetual voting
preferred stock (PBIH Preferred Stock) held by certain institutional investors. The holders of PBIH Preferred Stock 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 the company. The PBIH
Preferred Stock is entitled to cumulative dividends at a rate of 6.125% through April 30, 2016. Commencing October 30, 2016, the PBIH
Preferred Stock is redeemable, in whole or in part, at the option of PBIH. If the PBIH Preferred Stock is not redeemed in whole on October
30, 2016, the dividend rate increases 50% and will increase 50% every six months thereafter. No dividends were in arrears at December 31,
2014 or December 31, 2013.
16. 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, clients or others. In management's
opinion, the potential liability, if any, that may result from these actions, either individually or collectively, is not reasonably expected to
have a material effect on our financial position, results of operations or cash flows. However, as litigation is inherently unpredictable,
there can be no assurances in this regard.
In December 2013, we received a Civil Investigative Demand (CID) from the Department of Justice (DOJ) pursuant to the False Claims
Act requesting documents and information relating to compliance with certain postal regulatory requirements in our Presort Services
business. We had previously provided information to the DOJ in response to letter requests and continue to provide information in response
to the CID and other requests from the DOJ. Given the current stage of this inquiry, we cannot provide an estimate of any possible losses
or range of loss and we cannot yet predict the ultimate outcome of this matter or its impact, if any, on our business, financial condition
or results of operations.