Pitney Bowes 2010 Annual Report Download

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Annual Report 2010
in-store shopper
loves Bach
Wired subscriber
software
developer
Dad
online
browses
holds 36 patents
hiker
weekend
coaches
Little
League
Making it
personal
J
e
f

Table of contents

  • Page 1
    Annual Report 2010 Making it personal Jef software Dad holds 36 patents weekend developer loves Bach coaches Little League hiker Wired subscriber browses online in-store shopper

  • Page 2
    ... catalogs Rachel college student accomplished composition major Zoë classic film buff shops Zappos on Twitter follows gossipgirl and Blueï¬,y Catherine painter food blogger reader instructor New Yorker mother of twins Tom music yoga

  • Page 3
    Pitney Bowes Annual Report 2010 1 Businesses today face a complex challenge: How to get the attention of busy customers. Breaking through can create a huge competitive advantage. Fortunately, Pitney Bowes has the answer: Customer communications management. It's the 21st-century version of what we'...

  • Page 4
    2 Pitney Bowes Annual Report 2010 hockey fan loves technology close-knit family enjoys heli-skiing advocate for those in need advocat Murray D. Martin Chairman, President and Chief Executive Officer Fellow Shareholders: This was an especially productive year for our company. We solidified our ...

  • Page 5
    ... sizable new revenue stream. TSYS already uses Pitney Bowes technology to create and send millions of physical and digital statements each month on behalf of its customers. Business intelligence represents additional value it can now provide. Our acquisition of Portrait Software in 2010 immediately...

  • Page 6
    4 Pitney Bowes Annual Report 2010 the customer just visited the company's website. This level of insight eliminates the organizational amnesia that customers find so frustrating. It also enables companies to create new offers that are relevant and timely, leading to a better customer experience ...

  • Page 7
    Pitney Bowes Annual Report 2010 5 "Our commitment to innovation, integrity and service to the community is stronger than ever." Enhancements to our website have made it easier for our small-business customers to buy products online. Other technology investments are improving productivity and ...

  • Page 8
    ... Setting quarterly sales goals for 170 branches across Georgia and South Carolina used to take First Citizens Bank most of the quarter. Now it's all done in a week, with our PERFORM.360â„¢ suite. The software provides a complete, up-to-date view of each branch's customer base, market demographics...

  • Page 9
    Pitney Bowes Annual Report 2010 7 Columbia grad dway Alicia theatergoer th t loves Chinese takeout pays bills online early iPad adopter th mentor Gleek

  • Page 10
    8 Pitney Bowes Annual Report 2010 Seoul p parent ts parents dances to Soshi Hana lives in with her Internet fashion retailer reads Noblesse magazine Twitter follows Kim Tae-hee on n Korea Post ships via

  • Page 11
    ... for sending bills and receiving payments electronically. Today, businesses use our technology to offer their customers a range of digital options, including online account management and text notifications. We're pushing the mail channel itself to unprecedented levels of speed, efficiency...

  • Page 12
    10 Pitney Bowes Annual Report 2010 Imagine knowing the impact of every communication, so the next one can do even more We help businesses listen. Because the best communications are two-way conversations. How does a company have a genuine conversation with lots of individual customers? With our ...

  • Page 13
    Pitney Bowes Annual Report 2010 11 electrician prefers statements racing fan Man United fan stock car reads Daily D Mirror Rescued Gus from a shelter Kings of Leon Angry Birds gamer listens to

  • Page 14
    ... Volly,â„¢ a secure digital delivery service: to meet the complex needs of consumers and businesses alike. With Volly, consumers can save time and gain more control over their lives. They can pay bills, browse catalogs and track coupons, all from one secure online location. Because Volly is totally...

  • Page 15
    ... Pitney Bowes Annual Report 2010 13 beachcomber Michael Monahan Executive Vice President and Chief Financial Officer motorcyclist amateur carpenter Financial Highlights from Our CFO This annual report showcases how Pitney Bowes is helping companies grow by connecting with their customers...

  • Page 16
    14 Pitney Bowes Annual Report 2010 We are committed to providing our shareholders with excellent returns, and are pleased that in February our Board of Directors decided to increase our dividend to $0.37 per common share for the first quarter of 2011 and to increase our authorization for ...

  • Page 17
    ...Tax adjustments MapInfo purchase accounting Diluted earnings per share from continuing operations, as adjusted GAAP net cash provided by operating activities, as reported Capital expenditures Free cash flow Payments related to restructuring charges Reserve account deposits Pension plan contributions...

  • Page 18
    ...Robert E. Weissman Retired Chairman IMS Health Incorporated Corporate Officers Murray D. Martin Chairman, President and Chief Executive Officer Leslie Abi-Karam Executive Vice President and President, Mailing Solutions Management Patrick M. Brand Vice President and President, U.S. Mailing Gregory...

  • Page 19
    ...AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010 Commission file number: 1-3579 PITNEY BOWES INC. Incorporated in Delaware 1 Elmcroft Road, Stamford, Connecticut...

  • Page 20

  • Page 21
    ... Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...Certain Relationships, Related Transactions and Director Independence ...Principal Accountant Fees and Services...PART...

  • Page 22
    ...the Pitney Bowes Postage Meter Company. Today, Pitney Bowes Inc. is a provider of mail processing equipment and integrated mail solutions. We offer a full suite of equipment, supplies, software, services and end-to-end solutions which enable our customers to manage and integrate physical and digital...

  • Page 23
    ... in managing and integrating physical and digital communications we will face competition from other companies looking to digitize mail, as well as those providing on-line payment services. Leasing companies, commercial finance companies, commercial banks and other financial institutions compete, in...

  • Page 24
    ... involving our postage meters. From time to time, we will work with these governing bodies to help in the enhancement and growth of mail and the mail channel. See "Legal Proceedings" in Item 3 of this Form 10-K. Employees and Employee Relations At December 31, 2010, we employed approximately 21...

  • Page 25
    ... these services is largely dependent upon our continued access to the U.S. capital markets. An additional source of liquidity for the company consists of deposits held in our wholly-owned industrial loan corporation, The Pitney Bowes Bank (the Bank). A significant credit ratings downgrade, material...

  • Page 26
    ... in NECA-IBEW Health & Welfare Fund v. Pitney Bowes Inc. et al., a class action lawsuit filed in the U.S. District Court for the District of Connecticut. The complaint asserts claims under the Securities Exchange Act of 1934 on behalf of those who purchased the common stock of the Company during the...

  • Page 27
    ... the plan (in thousands) $150,000 $120,786 $85,000 $50,000 Total number of shares purchased Beginning balance July 2010 August 2010 September 2010 1,248,943 1,770,826 1,667,535 4,687,304 Average price paid per share $23.39 $20.21 $20.99 $21.33 In February 2011, our Board of Directors approved...

  • Page 28
    ... total return calculation. Comparison of Cumulative Five Year Total Return $140 $120 $100 $80 Pitney Bowes $60 S&P 500 Peer Group $40 2005 2006 2007 2008 2009 2010 The graph shows that on a total return basis, assuming reinvestment of all dividends, $100 invested in the company's common stock...

  • Page 29
    ... selected financial data for the Company, and should be read in conjunction with the more detailed consolidated financial statements and related notes thereto included under Item 8 of this Form 10-K. Summary of Selected Financial Data (Dollars in thousands, except per share amounts) 2010 5,425...

  • Page 30
    ... at managing customer credit risk • our success at managing costs associated with our strategy of outsourcing functions and operations not central to our business • changes in interest rates • foreign currency fluctuations • cost, timing and execution of our transformation plans including...

  • Page 31
    ... our high-margin financing, rental and supplies revenue streams. Recovery of these recurring revenue streams will lag a recovery in equipment sales. While we have been successful in reducing our cost structure across the entire business and shifting to a more variable cost structure, these actions...

  • Page 32
    ... Mail Software Management Services Mail Services Marketing Services EB Solutions Total $ 2010 1,879 923 2,802 557 363 999 562 142 2,623 % change (7)% -% (5)% 6% 5% (6)% 1% -% -% (3)% 2010 $ % change (7)% 12% (4)% 18% 13% 28% (23)% 14% 7% (2)% $ 5,425 Small & Medium Business Solutions...

  • Page 33
    ... show revenues and costs of revenues by source for the years ended December 31, 2010 and 2009: Revenues by source Equipment sales Supplies Software Rentals Financing Support services Business services Total revenue Cost of revenues by source 2010 $ 476 97 86 142 88 452 1,337 $ 2,678 2009 $ 456 94...

  • Page 34
    ... impact of 1%. The growth was primarily driven by higher sales of production mail equipment in the U.S. and higher equipment sales in Canada and parts of Europe. Period revenue was adversely affected by lease extensions. Cost of equipment sales as a percentage of revenue was 46.2% compared with 45...

  • Page 35
    ... by companies that provide retiree prescription drug benefits equivalent to Medicare Part D coverage. The effective tax rate for 2009 included $13 million of tax charges related to the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and...

  • Page 36
    ... & Medium Business Solutions: U.S. Mailing revenue decreased 10% primarily due to fewer placements of mailing equipment and related financing and rental revenues as customers continued to delay purchases of new equipment and extend leases on existing equipment due to the economic conditions. Revenue...

  • Page 37
    ... of software Cost of rentals Financing interest expense Cost of support services Cost of business services Total cost of revenues Equipment sales Equipment sales revenue decreased 20% compared to the prior year due to lower placements of mailing equipment as more customers delayed purchases of new...

  • Page 38
    ... impact of the global economic slowdown which caused many businesses to delay their capital spending worldwide. Worldwide consolidation in the financial services industry and slowness in the retail sector also adversely impacted sales and renewals of software licenses. Foreign currency translation...

  • Page 39
    ... stock options and the vesting of restricted stock, offset by $13 million of tax benefits from retirement of inter-company obligations and the repricing of leveraged lease transactions. The effective tax rate for 2008 included $12 million of tax increases related to the low tax benefit associated...

  • Page 40
    ... deposits. Our potential uses of cash include, but are not limited to, growth and expansion opportunities; internal investments; customer financing; severance and benefits payments under our restructuring programs; income tax, interest and dividend payments; pension and other benefit plan funding...

  • Page 41
    ... or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty. (2) Other non-current liabilities relate primarily to our postretirement benefits. Statements. See Note 19 to the Consolidated Financial The...

  • Page 42
    ... the meter rental and equipment maintenance agreement elements first using their respective fair values, which are determined based on prices charged in standalone and renewal transactions. Revenue is then allocated to the equipment based on the present value of the remaining minimum lease payments...

  • Page 43
    ... that our concentration of credit risk for finance receivables is limited because of our large number of customers, small account balances and customer geographic and industry diversification. Our general policy is to discontinue revenue recognition for lease receivables when they are delinquent...

  • Page 44
    ... return on plan assets U.S. Plan The discount rate for our U.S. pension plans is determined by matching the expected cash flows associated with our benefit obligations to a yield curve based on long-term, high quality fixed income debt instruments available as of the measurement date. In 2010...

  • Page 45
    ... based on historical portfolio results, the plan's asset mix and future expectations of market rates of return on the types of assets in the plan. Sensitivity to changes in assumptions: U.S. Pension Plan • Discount rate - a 0.25% increase in the discount rate would decrease annual pension...

  • Page 46
    ... income and do not affect earnings. Dividends It is a general practice of our Board of Directors to pay a cash dividend on common stock each quarter. In setting dividend payments, our board considers the dividend rate in relation to our recent and projected earnings and our capital investment...

  • Page 47
    ...employ established policies and procedures governing the use of financial instruments to manage our exposure to such risks. We do not enter into foreign currency or interest rate transactions for speculative purposes. The gains and losses on these contracts offset changes in the value of the related...

  • Page 48
    ... because of changes in conditions, or that the degree of compliance with internal control policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria...

  • Page 49
    ... and industrial sector practice at McKinsey & Company. Ms. O'Meara joined the Company in June 2008 as Executive Vice President and Chief Legal and Compliance Officer. In July 2010, Ms. O'Meara became Executive Vice President and President, Pitney Bowes Management Services & Government and Postal...

  • Page 50
    .... ITEM 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS EQUITY COMPENSATION PLAN INFORMATION TABLE The following table provides information as of December 31, 2010 regarding the number of shares of common stock that may be issued under our equity...

  • Page 51
    ... Supplemental Indenture, by and among Pitney Bowes Inc., The Bank of New York, and Citibank, N.A., to the Indenture, dated as of February 14, 2005, by and between the Company and Citibank Pitney Bowes Inc. Global Medium-Term Note (Fixed Rate), issue date March 7, 2008 (4)(a) (b) (c) (d) (e) 32

  • Page 52
    ..., copies of instruments defining the rights of holders of such indebtedness are not included as exhibits. The Company agrees to furnish copies of such instruments to the SEC upon request. Executive Compensation Plans: (10)(a) Retirement Plan for Directors of Pitney Bowes Inc. Incorporated by...

  • Page 53
    ... and Pitney Bowes Limited (n) (o) (p) Other: (q) Amended and Restated Credit Agreement dated May 19, 2006 between the Company and JPMorgan Chase Bank, N.A., as Administrative Agent Computation of ratio of earnings to fixed charges Subsidiaries of the registrant Consent of experts and counsel...

  • Page 54
    ..., thereunto duly authorized. Date: February 25, 2011 PITNEY BOWES INC. Registrant By: /s/ Murray D. Martin Murray D. Martin Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 55
    ... 38 39 40 41 42 96 Report of Independent Registered Public Accounting Firm ...Consolidated Financial Statements of Pitney Bowes, Inc. Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008 ...Consolidated Balance Sheets as of December 31, 2010 and 2009...Consolidated...

  • Page 56
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Pitney Bowes Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Pitney Bowes Inc. and its...

  • Page 57
    ... sales Supplies Software Rentals Financing Support services Business services Total revenue Costs and expenses: Cost of equipment sales Cost of supplies Cost of software Cost of rentals Financing interest expense Cost of support services Cost of business services Selling, general and administrative...

  • Page 58
    ... and equipment, net Finance receivables Allowance for credit losses Finance receivables, net Investment in leveraged leases Goodwill Intangible assets, net Non-current income taxes Other assets Total assets LIABILITIES, NONCONTROLLING INTERESTS AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts...

  • Page 59
    ...operating activities Cash flows from investing activities: Short-term and other investments Proceeds from the sale of a facility Capital expenditures Net investment in external financing Acquisitions, net of cash acquired Reserve account deposits Net cash used in investing activities Cash flows from...

  • Page 60
    ...Cash dividends: Preference Common Issuances of common stock Conversions to common stock Pre-tax stock-based compensation Adjustments to additional paid in capital, tax effect from sharebased compensation Repurchase of common stock Balance, December 31, 2008 Net income Other comprehensive income, net...

  • Page 61
    ... Accounting Policies Description of Business We are a provider of mail processing equipment and integrated mail solutions to organizations of all sizes. We offer a full suite of equipment, supplies, software, services and solutions for managing and integrating physical and digital communication...

  • Page 62
    ...out (FIFO) basis for most non-U.S. inventories. Fixed Assets and Depreciation Property, plant and equipment and rental equipment are stated at cost and depreciated principally using the straight-line method over their estimated useful lives. The estimated useful lives of depreciable fixed assets are...

  • Page 63
    ...sale of equipment, supplies, and software, rentals, financing, and support and business services. Certain of our transactions are consummated at the same time. The most common form of these transactions involves the sale or lease of equipment, a meter rental and/or an equipment maintenance agreement...

  • Page 64
    ... products. Equipment sales are financed primarily through sales-type leases. We also provide revolving lines of credit to our customers for the purchase of postage and related supplies. Financing revenue includes interest which is earned over the term of the lease or loan and related fees which are...

  • Page 65
    ...or other document management functions, are typically one to five year contracts that contain a monthly service fee and in many cases a "click" charge based on the number of copies made, machines in use, etc. Revenue is recognized over the term of the agreement based on monthly service charges, with...

  • Page 66
    PITNEY BOWES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular dollars in thousands, except per share data) We use derivative instruments to manage the related cost of debt and to limit the effects of foreign exchange rate fluctuations on financial results. Derivative instruments typically ...

  • Page 67
    ... FINANCIAL STATEMENTS (Tabular dollars in thousands, except per share data) 3. Acquisitions On July 5, 2010, we acquired Portrait Software plc (Portrait) for $65.2 million in cash, net of cash acquired. Portrait provides software to enhance existing customer relationship management systems...

  • Page 68
    ...and $306.8 million for the years ended December 31, 2010, 2009, and 2008, respectively. Rental equipment is primarily comprised of postage meters. In 2010, we recorded asset impairment charges of $9.8 million associated with a restructuring program and included these charges in restructuring charges...

  • Page 69
    ...417 Customer relationships Supplier relationships Mailing software and technology Trademarks and trade names Non-compete agreements $ $ Amortization expense for intangible assets was $60.8 million, $69.1 million and $72.3 million for the years ended December 31, 2010, 2009 and 2008, respectively...

  • Page 70
    ...622) (530) (564) (12,050) (27,465) $ $ $ $ U.S. Mailing International Mailing Small & Medium Business Solutions Production Mail Software Management Services Mail Services Marketing Services Enterprise Business Solutions Total Balance at December 31, 2008 (1) $ 220,207 322,230 542,437 138,175...

  • Page 71
    ...long-term obligations $ $ $ $ Reserve account deposits represent customers' prepayment of postage held by our subsidiary, Pitney Bowes Bank. See Note 17 for further details. Notes payable at December 31, 2010 and 2009 consists of commercial paper issuances. The weighted average interest rates for...

  • Page 72
    ...into variable interest rates. We pay a weighted average variable rate based on one-month LIBOR plus 249 basis points and receive a fixed rate of 4.625%. The weighted average rate paid during 2010 and 2009 was 2.8% and 4.3%, respectively. (2) In 2008, we unwound an interest rate swap that effectively...

  • Page 73
    ... for retiree health care costs to the extent of federal subsidies received by companies that provide retiree prescription drug benefits equivalent to Medicare Part D coverage. The effective rate for 2009 included a charge of $13 million for the write-off of deferred tax assets associated with...

  • Page 74
    ... following: 2009 2008 2010 Federal statutory provision State and local income taxes Impact of foreign operations Tax exempt income/reimbursement Federal income tax credits/incentives Unrealized stock compensation benefits Certain leasing transactions U.S. health care reform tax change Outside basis...

  • Page 75
    ...certain issues related to our former Capital Services third party leasing business. We recognize interest and penalties related to uncertain tax positions in our provision for income taxes or discontinued operations as appropriate. During the years ended December 31, 2010, 2009 and 2008, we recorded...

  • Page 76
    ... previously reported period. At December 31, 2010, our current tax accounts included a $36 million tax receivable for uncertain tax positions, which was received in February 2011. 10. Noncontrolling Interests (Preferred Stockholders' Equity in Subsidiaries) Pitney Bowes International Holdings, Inc...

  • Page 77
    ...,915 4,972,217 116,473,634 At December 31, 2010, preferred stock (4% preferred stock) outstanding was entitled to cumulative dividends at a rate of $2 per year. The preferred stock is redeemable at our option, in whole or in part at any time, at a price of $50 per share, plus dividends accrued to...

  • Page 78
    ...of Income: Years ended December 31, 2009 2010 $ 1,486 $ 1,397 640 602 884 831 18,020 16,936 731 686 21,761 20,452 (7,458) (7,265) $ 14,303 $ 13,187 0.06 0.06 $ $ 0.07 0.07 $ $ Cost of equipment sales Cost of support services Cost of business services Selling, general and administrative Research and...

  • Page 79
    ... of stock options and restricted stock units under our stock plans. Stock Options Under our stock option plan, certain officers and employees are granted options at prices equal to the market value of our common shares at the date of grant. Options granted from 2005 through 2008 generally become...

  • Page 80
    ... of our stock, the risk-free interest rate and our dividend yield. Our estimates of stock volatility are based on historical price changes of our stock. The risk-free interest rate is based on U.S. treasuries with a term equal to the expected option term. The expected life, or holding period, of...

  • Page 81
    ...to purchase 318,556 shares, 540,660 shares and 437,350 shares in 2010, 2009 and 2008, respectively. Directors' Stock Plan Under this plan, each non-employee director is granted 2,200 shares of restricted common stock annually. We granted 26,400 shares to non-employee directors in 2010, 2009 and 2008...

  • Page 82
    ...corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity, may be derived from internally developed methodologies based on management's best estimate of fair value and that are...

  • Page 83
    ... Money market funds / commercial paper Equity securities Debt securities - U.S. and foreign governments, agencies, and municipalities Corporate notes and bonds Asset-backed securities Mortgage-backed securities Derivatives Interest rate swaps Foreign exchange contracts Total assets Liabilities...

  • Page 84
    ...: Money market funds typically invest in government securities, certificates of deposit, commercial paper of companies and other highly liquid and low-risk securities. Money market funds are principally used for overnight deposits and are classified as Level 1 when unadjusted quoted prices in active...

  • Page 85
    ...values at December 31, 2010 and 2009: Fair Value at December 31, 2010 2009 Designation of Derivatives Derivatives designated as hedging instruments Balance Sheet Location Other current assets and prepayments: Foreign exchange contracts Other assets: Interest rate swaps Accounts payable and accrued...

  • Page 86
    ... Foreign exchange contracts Location of Derivative Gain (Loss) Selling, general and administrative expense $ Credit-Risk-Related Contingent Features Certain of our derivative instruments contain provisions that would require us to post collateral upon a significant downgrade in our long-term...

  • Page 87
    ... product line. The program included charges primarily associated with older equipment that we had stopped selling upon transition to the new generation of fully digital, networked, and remotely-downloadable equipment. $ 55,836 (9,941) 45,895 115,557 (73,283) 88,169 $ Pension and Retiree Medical 23...

  • Page 88
    ... in NECA-IBEW Health & Welfare Fund v. Pitney Bowes Inc. et al., a class action lawsuit filed in the U.S. District Court for the District of Connecticut. The complaint asserts claims under the Securities Exchange Act of 1934 on behalf of those who purchased the common stock of the Company during the...

  • Page 89
    ... facilities, sales and service offices, equipment and other properties, generally under operating lease agreements extending from three to 25 years. Rental expense was $118 million, $125 million and $129 million in 2010, 2009 and 2008, respectively. Future minimum lease payments under non-cancelable...

  • Page 90
    ... arise primarily from financing services offered to our customers for postage and related supplies. Loan receivables are generally due each month; however, customers may rollover outstanding balances. The components of sales-type lease and loan receivables at December 31, 2010 and 2009 were...

  • Page 91
    ... the three years ended December 31, 2010, 2009 and 2008 is as follows: Allowance for Credit Losses Sales-type Lease Receivables Loan Receivables U.S. International U.S. International Balance January 1, 2008 Amounts charged to expense Accounts written off Balance December 31, 2008 Amounts charged to...

  • Page 92
    ..., managing credit lines through the life of the customer, and to assist in collections strategy. We use a third party to score the majority of the North American portfolio on a quarterly basis using a commercial credit score. Accounts may not receive a score because of data issues related to...

  • Page 93
    ... delinquent Although the relative score of accounts within each class is used as a factor for determining the establishment of a customer credit limit, it is not indicative of our actual history of losses due to the business essential nature of our products and services. The aging schedule included...

  • Page 94
    ... key product offering, Purchase Power, is a revolving credit solution, which enables customers to finance their postage costs when they refill their meter. PBB earns revenue through transaction fees, finance charges on outstanding balances, and other fees for services. The bank's liabilities consist...

  • Page 95
    ...Medium Business Solutions: U.S. Mailing: Includes the U.S. revenue and related expenses from the sale, rental and financing of our mail finishing, mail creation, shipping equipment and software; supplies; support and other professional services; and payment solutions. International Mailing: Includes...

  • Page 96
    ... & Medium Business Solutions Production Mail Software Management Services Mail Services Marketing Services Enterprise Business Solutions Total Geographic areas: United States Outside the United States Total $ 2010 689,363 142,875 832,238 60,373 42,206 92,671 63,330 26,133 284,713 $ $ 2008 890...

  • Page 97
    ... $ 2008 146,422 63,389 209,811 7,358 37,317 65,320 32,045 8,380 150,420 360,231 $ $ $ 2010 Capital expenditures: U.S. Mailing International Mailing Small & Medium Business Solutions Production Mail Software Management Services Mail Services Marketing Services Enterprise Business Solutions Total...

  • Page 98
    PITNEY BOWES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular dollars in thousands, except per share data) Reconciliation of Segment Amounts to Consolidated Totals: Years ended December 31, 2009 $ 1,137,532 (203,906) (187,254) (48,746) (4,450) 693,176 $ 2008 1,345,136 (216,450) (209,543) (...

  • Page 99
    ... and Postretirement Medical Benefits We have several defined benefit retirement plans. Benefits are primarily based on employees' compensation and years of service. Our contributions are determined based on the funding requirements of U.S. federal and other governmental laws and regulations. We use...

  • Page 100
    ... discount rate is used to determine the present value of our future benefit obligations. The discount rate for our U.S. pension and postretirement medical benefit plans is determined by matching the expected cash flows associated with our benefit obligations to a yield curve based on long-term, high...

  • Page 101
    ... restructuring reserves in 2010 for the U.S. and foreign plans, respectively. See Note 14 for further information. Other changes in plan assets and benefit obligations for defined benefit pension plans recognized in other comprehensive income are as follows: United States Foreign 2009 2009 2010 2010...

  • Page 102
    ...average assumptions used to determine net periodic benefit costs: United States 2009 6.05% 8.00% 4.25% Foreign 2009 2.25% - 6.60% 4.49% - 7.75% 2.50% - 5.10% Discount rate Expected return on plan assets Rate of compensation increase 2010 5.75% 8.00% 3.50% 2008 6.15% 8.50% 4.50% 2010 2.25% - 6.00...

  • Page 103
    ..., such as swaps, options, forwards and futures contracts may be used for market exposure, to alter risk/return characteristics and to manage foreign currency exposure. We do not have any significant concentrations of credit risk within the plan assets. The pension plans' liabilities, investment...

  • Page 104
    ... value hierarchy levels. U.S. Pension Plans - Fair Value Measurements at December 31, 2010 Level 1 Level 2 Level 3 Total Assets: Investment securities Money market funds Equity securities Debt securities - U.S. and foreign governments, agencies, and municipalities Corporate debt securities Mortgage...

  • Page 105
    PITNEY BOWES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular dollars in thousands, except per share data) U.S. Pension Plans - Fair Value Measurements at December 31, 2009 Level 1 Level 2 Level 3 Total Assets: Investment securities Money market funds Equity securities Debt securities - U.S....

  • Page 106
    PITNEY BOWES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular dollars in thousands, except per share data) Foreign Pension Plans - Fair Value Measurements at December 31, 2010 Level 1 Level 2 Level 3 Total Assets: Investment securities Money market funds Equity securities Debt securities - ...

  • Page 107
    ...-term issues. Since the commingled fund is not listed or traded on an exchange, the investment is classified as Level 2. The investment is offset by a liability of an equal amount representing assets that participate in securities lending program, which is reflected in the Pitney Bowes Pension Plan...

  • Page 108
    ... and Canadian employees hired after April 1, 2005, are not eligible for retiree health care benefits. The change in benefit obligation, plan assets and the funded status for nonpension postretirement benefit plans are as follows: December 31, 2010 Change in benefit obligation: Benefit obligations at...

  • Page 109
    ... per share data) December 31, 2010 Change in plan assets: Fair value of plan assets at beginning of year Company contribution Plan participants' contributions Gross benefits paid Less federal subsidy on benefits paid Fair value of plan assets at end of year Funded status, end of year: Fair value of...

  • Page 110
    ...Discount rate - Canada 2010 5.35% 5.85% 2009 5.95% 6.60% 2008 5.90% 5.25% The estimated amounts that will be amortized from AOCI into net periodic benefit cost in 2011 are as follows: Net actuarial loss Prior service credit Total $ $ 7,977 (2,259) 5,718 The assumed health care cost trend rate used...

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    ... $ Savings Plans Our U.S. employees are eligible to participate in 401(k) savings plans, which are voluntary defined contribution plans. These plans are designed to help employees accumulate additional savings for retirement. We make matching contributions on a portion of eligible pay. In 2010 and...

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    PITNEY BOWES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular dollars in thousands, except per share data) 20. Earnings per Share The calculation of basic and diluted earnings per share for the years ended December 31, 2010, 2009 and 2008 is presented below. Note that the sum of the ...

  • Page 113
    PITNEY BOWES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Tabular dollars in thousands, except per share data) 21. Quarterly Financial Data (unaudited) Summarized quarterly financial data for 2010 and 2009 follows: First Quarter 2010 Total revenue $ 1,348,233 Gross profit (1) 691,788 ...

  • Page 114
    ... Gross profit is defined as total revenue less cost of equipment sales, cost of supplies, cost of software, cost of rentals, financing interest expense, cost of support services and cost of business services. (2) The sum of the quarterly earnings per share amounts may not equal the annual amount due...

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    PITNEY BOWES INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED DECEMBER 31, 2008 TO 2010 (Dollars in thousands) Description Balance at beginning of year Additions Deductions Balance at end of year Allowance for doubtful accounts 2010 $ 2009 $ 2008 $ 42,781 45,...

  • Page 116
    ...PITNEY BOWES INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (1) (Dollars in thousands) Years ended December 31, 2009 2008 $ 693,176 208,855 41,499 1,716 945,246 $ 713,177 229,343 43,030 1,717 987,267 $ 2010... (preferred stock dividends of subsidiaries), excluding taxes Total fixed charges...

  • Page 117
    ... Limited) Pitney Bowes (Dormant) Pte Ltd. 98 Country or state of incorporation UK Delaware Panama UK UK France Delaware Delaware Canada California Delaware Canada Connecticut UK Florida Canada UK Connecticut New York Hong Kong Delaware Delaware Sweden Sweden Rhode Island Delaware Massachusetts UK...

  • Page 118
    ... Rico South Africa France Brazil Mexico Connecticut Singapore China Canada Germany UK Germany Delaware Company name Pitney Bowes Espana, S.A. Pitney Bowes Finance Limited (formerly Pitney Bowes Finance plc) Pitney Bowes Finance Ireland Limited Pitney Bowes Global Financial Services LLC Pitney Bowes...

  • Page 119
    ... France Utah UK Vermont UK Luxembourg India Mexico Connecticut Dubai UK UK UK Ohio Norway Scotland Australia UK Scotland Delaware Company name Pitney Bowes Software K. K. Pitney Bowes Software Latin America Inc. Pitney Bowes Software Limited Pitney Bowes Software Pte Ltd Pitney Bowes Software Pty...

  • Page 120
    ... Bowes Inc. of our report dated February 25, 2011 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Stamford, Connecticut...

  • Page 121
    ...the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act...

  • Page 122
    ...the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act...

  • Page 123
    ... set forth below is being submitted in connection with the Annual Report of Pitney Bowes Inc. (the "Company") on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), for the purpose of complying with Rule 13a-14(b) or...

  • Page 124
    ...(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the United States Code. I, Michael Monahan, Executive Vice President and Chief Financial Officer of the Company, certify that, to the best of my knowledge: (1) The Report fully complies with...

  • Page 125
    ... stock exchanges. Investor Inquiries All investor inquiries about Pitney Bowes should be addressed to: MSC 00-63-02 Investor Relations Pitney Bowes Inc. 1 Elmcroft Road, Stamford, CT 06926-0700 Comments concerning the Annual Report should be sent to: MSC 00-63-03 Corporate Marketing Pitney Bowes...

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    Every connection is a new opportunity â„¢ 1 Elmcroft Road, Stamford, CT 06926-0700 203.356.5000 www.pb.com