Pitney Bowes 2007 Annual Report Download - page 89

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
71
Weighted average assumptions used to determine
net periodic costs during the years:
2007 2006 2005
Discount rate – U.S. ..................................................... 5.85
%
5.60% 5.75%
Discount rate – Canada................................................. 5.00
%
5.00% 5.75%
The estimated amounts that will be amortized
from AOCI into net periodic benefit cost in 2008
are as follows:
Net actuarial loss .......................................................... $ 2,982
Prior service credit........................................................ (2,465)
Total ............................................................................. $ 517
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligations for the U.S.
plan was 8.00% for 2007 and 7.00% for 2006. The assumed health care trend rate is 8.00% for 2008 and we assume it will
gradually decline to 5.00% by the year 2014 and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1% change
in the assumed health care cost trend rates would have the following effects:
1% Increase 1% Decrease
Effect on total of service and interest cost components 508 (445)
Effect on postretirement benefit obligations................. 7,412 (6,688)
Estimated Future Benefit Payments
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:
Pension
Benefits
Nonpension
Postretirement
Benefits
For the year ending 12/31/08........................................ $ 117,214 $ 27,751
For the year ending 12/31/09 ........................................ 122,219 27,278
For the year ending 12/31/10 ........................................ 129,055 26,702
For the year ending 12/31/11 ........................................ 133,439 25,419
For the year ending 12/31/12 ........................................ 143,849 23,805
For the years ending 12/31/13-12/31/17 ....................... 776,294 99,208
$ 1,422,070 $ 230,163
Postretirement benefit payments represent expected contributions, net of the annual Medicare Part D subsidy of
approximately $3.8 million in 2008. Subsidy payments for 2009 – 2017 range from $4.1 million to $6 million for each year.
14. Restructuring Charges and Asset Impairments
We recorded pre-tax restructuring charges and asset impairments of $264 million in 2007. These charges relate primarily to a
program we announced in November 2007 to lower our cost structure, accelerate efforts to improve operational efficiencies,
and transition our product line. The program includes charges primarily associated with older equipment that we have
stopped selling upon transition to the new generation of fully digital, networked, and remotely-downloadable equipment.
The asset impairment charges related to these initiatives include the write-off of inventory ($48.1 million), rental assets
($61.5 million), lease residual values ($46.1 million), and other assets ($8.8 million). The cash portion of the restructuring
charges includes employee termination costs ($85.1 million) and other exit costs ($5.8 million) and relates primarily to our
efforts to lower our cost structure and accelerate improvements in operational efficiencies. As a result of this program, we
expect a net reduction of about 1,500 positions. About half of these reductions will be outside of the U.S. As of December
31, 2007, 401 employees had been terminated under this program. Other exit costs relate primarily to lease termination costs
and other costs associated with exiting product lines and business activities. We expect to incur approximately $20 million of