Pitney Bowes 2010 Annual Report Download - page 39

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Income taxes / effective tax rate
The effective tax rate for 2009 and 2008 was 34.6% and 34.3%, respectively. The effective tax rate for 2009 included $13 million of
charges related to the write-off of deferred tax assets associated with the expiration of out-of-the-money vested 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 with restructuring expenses recorded during 2008, offset by adjustments of $10 million related to deferred tax assets
associated with certain U.S. leasing transactions.
Discontinued operations
The net loss from discontinued operations was $8 million and $28 million for 2009 and 2008, respectively. The 2009 net loss from
discontinued operations included $6 million, net of tax, for a bankruptcy settlement received and $7 million, net of tax, related to the
expiration of an indemnity agreement associated with the sale of a former subsidiary. This income was more than offset by the
accrual of interest on uncertain tax positions. The 2008 net loss from discontinued operations is comprised of an accrual of tax and
interest on uncertain tax positions.
Preferred stock dividends of subsidiaries attributable to noncontrolling interests
Preferred stock dividends to stockholders of subsidiary companies were $21 million in 2009 and 2008. The 2009 amount also
included $3 million associated with the redemption of $375 million of variable term voting preferred stock during the year. The 2008
amount included $2 million associated with the redemption of $10 million of 9.11% Cumulative Preferred Stock.
Restructuring Charges and Asset Impairments
In 2009, we announced that we were undertaking a series of initiatives designed to transform and enhance the way we operate as a
global company (the 2009 Program). In order to enhance our responsiveness to changing market conditions, we executed 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.
During 2010, we accelerated several of our initiatives to streamline processes and make our cost structure more variable to better
leverage changing business conditions. Due to the acceleration of these initiatives and pension and retiree medical related non-cash
charges of $24 million, pre-tax restructuring charges and asset impairments for the 2009 Program were $183 million in 2010.
Accordingly, we expect our cost range to be $300 million to $350 million. Additionally, we expect that total net annualized run rate
benefits from the 2009 Program to be in the range of $250 million to $300 million by 2012. This represents a $100 million increase in
our projected benefits resulting from process automation, channel alignment, reduced infrastructure costs and streamlined product
development. See Note 14 to the Consolidated Financial Statements for further discussion.
Acquisitions
On July 5, 2010, we acquired Portrait Software plc (Portrait) for $65 million in cash, net of cash acquired. Portrait provides software
to enhance existing customer relationship management systems, enabling clients to achieve improved customer retention and
profitability. The acquired goodwill was assigned to the Software segment. We also completed smaller acquisitions during 2010 for
an aggregate cost of $12 million.
There were no acquisitions during 2009.
In 2008, we acquired Zipsort, Inc. for $40 million in cash, net of cash acquired. Zipsort, Inc. acts as an intermediary between
customers and the U.S. Postal Service. Zipsort, Inc. offers mailing services that include presorting of first class, standard class, flats,
permit and international mail as well as metering services. We assigned the goodwill to the Mail Services segment. We also
completed several smaller acquisitions for an aggregate cost of $30 million.
The operating results of these acquisitions have been included in our consolidated financial statements since the date of acquisition.
See Note 1 to the Consolidated Financial Statements for our business combination accounting policy and Note 3 for further information
regarding these acquisitions.