Pitney Bowes 2010 Annual Report Download - page 38

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19
Software
Software revenue decreased 14% compared to the prior year primarily due to the 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 had an
unfavorable impact of 4%.
Cost of software as a percentage of revenue was 22.5% compared with 23.9% in the prior year due to business integration initiatives
and productivity investments, which more than offset the impact of lower revenue levels.
Rentals
Rentals revenue decreased 11% compared to the prior year as customers in the U.S. continued to downsize to smaller, fully featured
machines. The weak economic conditions also impacted our international rental markets, specifically in Canada and France. Foreign
currency translation had an unfavorable impact of 1%.
Cost of rentals as a percentage of revenue was 24.5% compared with 21.1% in the prior year primarily due to the fixed costs of meter
depreciation on lower revenues.
Financing
Financing revenue decreased 10% compared to the prior year. Lower equipment sales over prior periods resulted in a decline in both
our U.S. and international lease portfolios. Foreign currency translation had an unfavorable impact of 2%.
Financing interest expense as a percentage of revenue was 14.1% compared with 14.3% in the prior year due to lower interest rates
and lower average borrowings.
Support services
Support services revenue decreased 7% compared to the prior year, principally due to lower revenues in Canada, the U.S. and the U.K.
due to lower new equipment placements and the unfavorable impact of foreign currency translation of 3%.
Cost of support services as a percentage of revenue was 65.4% compared with 69.9% in the prior year. Margin improvements in our
International Mailing, U.S. Mailing and Production Mail segments were driven by the positive impacts of ongoing productivity
investments and price increases on service contracts in Production Mail.
Business services
Business services revenue decreased 6% compared to the prior year. Lower volumes at Management Services and Marketing Services
offset the impact of an increase in mail processed at Mail Services. The unfavorable impact of foreign currency translation of 2% was
partly offset by the positive impact of acquisitions which contributed 1%.
Cost of business services as a percentage of revenue was 76.6% compared with 77.2% in the prior year. This improvement was due to
the positive impacts of cost reduction programs at our Management Services and Mail Services businesses, partly offset by lower
transaction volumes in our Management Services business.
Selling, general and administrative
SG&A expense decreased $170 million or 9%, primarily as a result of our cost reduction initiatives and the positive impact of foreign
currency translation of 3%. However, the impact of lower revenue, increased pension costs of $14 million and higher credit loss
expenses of $9 million more than offset these benefits on a percentage of revenue basis. As a percentage of revenue, SG&A expenses
were 32.3% compared to 31.5% in the prior year.
Research and development
Research and development expenses decreased $23 million or 11%, from the prior year due to the transition and related benefits from
our move to offshore development activities. Foreign currency translation also had a positive impact of 3%. As a percentage of
revenue, research and development expenses were 3.3% for 2009 and 2008 as we continue to invest in developing new technologies
and enhancing our products.
Other interest expense
Other interest expense decreased $8 million or 7%, from prior year due to lower interest rates and lower average borrowings during
the year.