Pitney Bowes 2008 Annual Report Download - page 32

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13
(Dollars in millions) 2008 2007 % change
EBIT
U.S. Mailing $ 896 $ 965 (7)%
International Mailing 185 162 14 %
Production Mail 81 74 10 %
Software 28 37 (23)%
Mailstream Solutions 1,190 1,238 (4)%
Management Services 70 76 (8)%
Mail Services 69 57 22 %
Marketing Services 16 9 76 %
Mailstream Services 155 142 9 %
Total EBIT $ 1,345 $ 1,380 (3)%
Mailstream Solutions EBIT decreased 4% to $1.2 billion. Within Mailstream Solutions:
U.S. Mailing’s EBIT decreased 7% principally due to the lower revenue growth, but was partly offset by positive impacts of our
ongoing actions to reduce costs and streamline operations. International Mailing’s EBIT grew 14% as improved EBIT margins
resulted from the Company’s actions over the last two years to reduce costs through the outsourcing of manufacturing and the
consolidation of back office operations. Production Mail’s EBIT increased 10% due to ongoing actions to reduce administrative costs
and improve gross margins in anticipation of a slowing capital investment environment. Software’s EBIT decreased 23% primarily
due to the lower revenues in the U.S., product mix and the planned investments in the expansion of the Company’s distribution
channel and globalization of its research and development infrastructure.
Mailstream Services EBIT increased 9% to $155 million. Within Mailstream Services:
Management Services EBIT decreased 8% due to weakness in the Company’s management services businesses outside the U.S.,
particularly in the U.K. and Germany. These decreases were partially offset by actions taken to reduce the fixed cost structure of its
U.S. operations. Mail Services EBIT increased 22% as a result of operating leverage from an increase in mail volume and increased
operating efficiency, partly offset by the integration costs associated with acquisitions in the U.S. and U.K. Marketing Services EBIT
increased by 76% driven by higher volumes in the Company’s mover-source program and its phased exit from the motor vehicle
registration services program.
Revenue by source
(Dollars in millions) 2008 2007 % change
Equipment sales $1,252 $1,336 (6)%
Supplies 392 393 - %
Software 424 346 23 %
Rentals 728 739 (1)%
Financing 773 790 (2)%
Support services 769 761 1 %
Business services 1,924 1,765 9 %
Total revenue $6,262 $6,130 2 %
Equipment sales revenue decreased 6% compared to the prior year. Lower sales of equipment in U.S. Mailing were primarily due to
the postal rate case in 2007, which resulted in incremental sales of mailing equipment shape-based upgrade kits during that period and
pulled sales forward from 2008, weakening global economic conditions, and product shift toward smaller, fully featured postage
machines. International sales revenue, excluding the positive impact from foreign currency of 2% and acquisitions of 2%, increased
2% principally due to a postal rate change in the first quarter of 2008 in France, combined with higher equipment placements
throughout Europe. Foreign currency translation contributed an overall favorable impact of 1% to equipment sales revenue.
Supplies revenue in 2008 was flat compared to the prior year. The decline of supplies revenue in the U.S was due to lower volumes,
offset by an increase in supplies revenue in Europe as our customers continue to migrate to digital technology. Foreign currency
translation contributed 1% to supplies revenue.