Pitney Bowes 2008 Annual Report Download - page 82

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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
63
In 2008, an analysis of the book and tax bases of leasing assets indicated that an adjustment to the deferred tax accounts was required.
A deferred tax asset related to the acceleration of rental income for tax purposes was not properly captured in prior years. A benefit of
$9.5 million related to years presented was recorded in the 2008 tax provision and an adjustment of $16.9 million was made to
opening retained earnings related to earlier years to establish the related deferred tax assets. The impact of the adjustments was not
material to any individual year.
During 2009, we expect to reverse tax benefits of approximately $11 to $13 million associated with the expiration of vested stock
options and the vesting of restricted stock units previously granted to our employees. This write-off of deferred tax assets will not
increase the amount of tax to be paid.
10. Preferred Stockholders’ Equity in Subsidiary Companies
Pitney Bowes International Holdings, Inc., a subsidiary of the Company, has 3,750,000 shares outstanding or $375 million of variable
term voting preferred stock owned by certain outside institutional investors. These preferred shares are entitled to 25% of the
combined voting power of all classes of capital stock. All outstanding common stock of Pitney Bowes International Holdings, Inc.,
representing the remaining 75% of the combined voting power of all classes of capital stock, is owned directly or indirectly by Pitney
Bowes Inc. The preferred stock, $.01 par value, is entitled to cumulative dividends at rates set at auction. The weighted average
dividend rate in 2008 and 2007 was 4.9%. Preferred dividends are included in minority interest (preferred stock dividends of
subsidiaries) in the Consolidated Statements of Income. The preferred stock is subject to mandatory redemption based on certain
events, at a redemption price not less than $100 per share, plus the amount of any dividends accrued or in arrears. No dividends were
in arrears at December 31, 2008 or 2007.
At December 31, 2007, a subsidiary of the Company had 100 shares or $10 million of 9.11% Cumulative Preferred Stock, mandatorily
redeemable in 20 years, owned by an institutional investor. In August 2008, we redeemed 100% of this Preferred Stock resulting in a
net loss of $1.8 million.
11. Stockholders’ (Deficit) Equity
At December 31, 2008, 480,000,000 shares of common stock, 600,000 shares of cumulative preferred stock, and 5,000,000 shares of
preference stock were authorized. At December 31, 2008, 206,181,193 shares of common stock (net of 117,156,719 shares of treasury
stock), 135 shares of 4% convertible cumulative preferred stock (4% preferred stock) and 36,056 shares of $2.12 convertible
preference stock ($2.12 preference stock) were issued and outstanding. In the future, the Board of Directors can issue the balance of
unreserved and unissued preferred stock (599,865 shares) and preference stock (4,963,944 shares). The Board will determine the
dividend rate, terms of redemption, terms of conversion (if any) and other pertinent features. At December 31, 2008, unreserved and
unissued common stock (exclusive of treasury stock) amounted to 115,142,879 shares.
The 4% preferred stock outstanding, entitled to cumulative dividends at the rate of $2 per year, can be redeemed at the Company’s
option, in whole or in part at any time, at the price of $50 per share, plus dividends accrued to the redemption date. Each share of the
4% preferred stock can be converted into 24.24 shares of common stock, subject to adjustment in certain events.
The $2.12 preference stock is entitled to cumulative dividends at the rate of $2.12 per year and can be redeemed at the Company’s
option at the rate of $28 per share. Each share of the $2.12 preference stock can be converted into 16.53 shares of common stock,
subject to adjustment in certain events.
Cash dividends paid on common stock were $1.40 per share, $1.32 per share and $1.28 per share for 2008, 2007, and 2006
respectively.
At December 31, 2008, a total of 599,278 shares of common stock were reserved for issuance upon conversion of the 4% preferred
stock (3,272 shares) and $2.12 preference stock (596,006 shares). In addition, 21,320,579 shares of common stock were reserved for
issuance under our dividend reinvestment and other corporate plans.