Pitney Bowes 2007 Annual Report Download - page 14

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Financial
Highlights
From Our CFO
Michael Monahan
The year 2007 held both successes and challenges for Pitney Bowes.
Although we made signifi cant progress in advancing our growth
strategies and generated unprecedented levels of free cash fl ow, we
did not achieve our earnings objectives and our stock price declined
during the year.
We have taken decisive actions to achieve stronger performance going
forward and to deliver enhanced shareholder value. To this end, we
have launched a series of transition initiatives to reduce costs, accelerate
improvements in operational effi ciencies, and position our product
line for the current and future regulatory environment.
In addition, we continue to investigate strategic alternatives for our
U.S. Management Services business to best align our resources for
sustained profi table growth.
Our revenue grew by 7 percent during 2007. This includes 2 percent
from favorable currency translation and 4 percent from acquisitions,
including that of MapInfo, our largest acquisition to date.
Excluding the transition initiatives charges and other items, we
grew our adjusted earnings per share from $2.69 to $2.72 per share.
However, this performance was below our expectations of $2.90
to $2.98 when we started the year. (See page 15 for a reconciliation
of adjusted-to-GAAP earnings per share.) Our earnings per share
from continuing operations on a GAAP basis was $1.63, which was
less than the prior year, primarily because of the charges related to
our transition initiatives.
In the fourth quarter, we took a pretax charge of $264 million
related to the transition initiatives. This included a non-cash charge
of $173 million related to the write-down of certain products that
will be discontinued, as well as $85 million related to net headcount
reductions of approximately 1,400. Other write-downs accounted for
the remaining $6 million. We expect these actions to generate annu-
alized savings of $150 million by 2009, half of which we expect to
reinvest in the business to enhance our growth and competitiveness.
Some of our businesses performed much better than expected, notably
our software and mail services segments and our operations in the
Asia-Pacifi c region. However, these strong results were offset by a con-
fl uence of other factors, including the wind-down of electronic-to-digital
12 PITNEY BOWES ANNUAL REPORT 2007