Pitney Bowes 2010 Annual Report Download - page 31

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Overview
In 2010, revenue decreased 3% to $5.4 billion compared to the prior year. Equipment sales and software revenues increased 2% and
5%, respectively, compared to the prior year; however, these improvements were offset by a decline of 7% in rental revenue, 8% in
financing revenue, 5% in supplies revenue and 3% in business services revenue compared to the prior year. Foreign currency
translation and acquisitions had less than a 1% favorable impact on revenue.
Earnings before interest and taxes (EBIT) increased in five of our segments when compared to the prior year primarily due to our
ongoing productivity and cost reduction initiatives.
Net income from continuing operations in 2010 was $310 million, or $1.50 per diluted share compared with $432 million, or $2.08 per
diluted share in 2009. Diluted earnings per share for 2010 was reduced by $0.59 for restructuring charges and asset impairments,
$0.07 for non-cash tax charges associated with out-of-the-money stock options that expired during the year, $0.05 for a one-time
charge to correct rates used to estimate unbilled International Mail Services revenue in prior periods and $0.04 for recently enacted
heath care legislation. Diluted earnings per share for 2009 was reduced by $0.15 for restructuring charges, $0.06 for non-cash tax
charges associated with out-of-the-money stock options that expired during the year partially offset by a $0.01 positive tax adjustment
associated with the repricing of leveraged lease transactions.
We generated $952 million in cash from operations, which was used to reduce debt by $171 million, repurchase $100 million of our
common stock and pay $301 million of dividends to our common stockholders.
For a more detailed discussion of our results of operations, see “Results of Operations 2010 compared to 2009” and “Results of
Operations 2009 compared to 2008.”
Outlook
During the second half of 2010, we began to see some positive signs in our business. However, the worldwide economy and business
environment continues to be uncertain, especially among small businesses. This uncertain economic environment has impacted our
financial results and in particular our recurring revenue streams, including 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 have not been
sufficient to offset the impact of lower revenues. We remain focused on streamlining our business operations and creating more
flexibility in our cost structure.
We continue to expect our mix of revenue to change, with a greater percentage of revenue coming from enterprise related products
and solutions. We expect that our future results will continue to be impacted by changes in global economic conditions and their
impact on mail intensive industries. It is not expected that total mail volumes will rebound to prior peak levels in an economic
recovery, and future mail volume trends will continue to be a factor for our businesses.
In 2009, we announced we were undertaking a series of initiatives designed to transform and enhance the way we operate as a global
company. In order to enhance our responsiveness to changing market conditions, we have been executing on a strategic
transformation program designed to create improved processes and systems to further enable us to invest in future growth in areas
such as our global customer interactions and product development processes. We expect the total pre-tax cost of this program will be
in the range of $300 million to $350 million primarily related to severance and benefit costs incurred in connection with workforce
reductions. Currently, we are targeting annualized benefits, net of system and related investments, in the range of $250 million to
$300 million on a pre-tax basis, with a full benefit run rate by 2012.