Pitney Bowes 2008 Annual Report Download - page 34

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15
Research and development expenses
(Dollars in millions) 2008 2007 % change
$ 206 $ 186 11 %
Research and development expenses increased $20 million, or 11%, as we continue to invest in developing new technologies,
enhancing our products, and expanding our offshore development capabilities. R&D expenses as a percentage of total revenue
increased to 3.3% in 2008 from 3.0% in 2007.
Net interest expense
(Dollars in millions) 2008 2007 % change
$ 216 $ 242 (11)%
Net interest expense decreased $25 million or 11%, from prior year due to lower average interest rates during the year. Our variable
and fixed rate debt mix, after adjusting for the effect of interest rate swaps, was 22% and 78%, respectively, at December 31, 2008.
We do not allocate interest costs to our business segments.
Income taxes / effective tax rate
2008 2007
34.3% 42.4%
The effective tax rate declined 8.1% in 2008 primarily as a result of a $54 million tax charge in 2007 related principally to a valuation
allowance for certain deferred tax assets and tax rate changes outside the U.S.
Minority interest (preferred stock dividends of subsidiaries)
(Dollars in millions)
2008 2007 % change
$ 21 $ 19 8%
Minority interest includes dividends paid to preferred stockholders in subsidiary companies. In August 2008, we redeemed 100% of
the outstanding Cumulative Preferred Stock issued previously by a subsidiary company for $10 million. This redemption resulted in a
net loss of $1.8 million accounting for the year over year increase.
Discontinued operations
(Dollars in millions)
2008 2007
Revenue $ - $ -
Pretax income $ - $ -
Net income $(28) $6
Total discontinued operations, net of tax $(28) $6
Net loss in 2008 includes accruals of tax and interest on uncertain tax positions. 2007 includes a gain of $11.3 million from uncertain
tax positions, net of an interest accrual for uncertain tax positions of $5.8 million. See Note 2 to the Consolidated Financial
Statements for further discussion and details of discontinued operations.