Pitney Bowes 2008 Annual Report Download - page 30

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11
ITEM 7. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains statements that are
forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties.
Actual results could differ materially because of factors discussed in “Forward-Looking Statements” and elsewhere in this report.
Overview
Revenue grew 2% in 2008 to $6.3 billion, of which acquisitions contributed 3%.
Income from continuing operations was $447.5 million in 2008 compared with $361.2 million in 2007 and diluted earnings per share
from continuing operations was $2.13 compared with $1.63 in 2007. Diluted earnings per share from continuing operations was
reduced by restructuring charges and asset impairment charges of 69 cents and 87 cents, in 2008 and 2007, respectively. In 2008,
diluted earnings per share from continuing operations also included positive tax adjustments of 4 cents related primarily to deferred
tax assets associated with certain U.S. leasing transactions. In 2007, diluted earnings per share from continuing operations was also
reduced by 5 cents for the purchase accounting alignment of MapInfo, and 16 cents for tax adjustments related principally to a
valuation allowance for net operating losses outside the U.S.
Despite volatile economic conditions, particularly in the second half of 2008, certain of our business segments produced solid results,
including both revenue and EBIT growth at International Mailing, Mail Services and Marketing Services. In addition, International
Mailing, worldwide Production Mail, and Marketing Services improved their EBIT margins as well. These strong performances were
offset by revenue declines at U.S. Mailing due to lower equipment sales due in part from the prior year stimulus from sales of shape-
based kits, lower financing and rental revenues. Also, declines in worldwide Production Mail were due to the effects of a slowdown
in U.S. sales as large enterprises curtailed large-ticket capital expenditures due to ongoing credit constraints and global economic
uncertainty.
In late 2007, we announced a plan to lower our cost structure, accelerate efforts to improve operational efficiencies, enhance our
customer experience, and to transition our product line. On completion of this program, which continued throughout 2008, we
reduced our global workforce by roughly eight percent and improved margins in many of our business segments.
In addition, we generated $990 million in cash from operations during 2008.
See “Results of Operations” for 2008, 2007 and 2006 for a more detailed discussion of our results of operations.
Outlook
Our business model and the actions we have taken to significantly reduce costs and streamline our operations, will help mitigate, but
do not eliminate the effects of prolonged global economic weakness and unanticipated currency fluctuations. Two external factors in
particular, the strengthening of the U.S. dollar and the Japanese yen last year and the significant increase in pension costs related to
recent changes in capital markets and other assumptions, will negatively impact 2009 reported results.
We expect our mix of revenue to continue to change, with a greater percentage of revenue coming from diversified revenue streams
associated with fully featured smaller systems and a smaller percentage from larger system sales. In addition, we expect to derive
further synergies from our recent acquisitions. We will continue to remain focused on enhancing our productivity and to allocate
capital in order to optimize our returns.