Pitney Bowes 2011 Annual Report Download - page 29

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11
ITEM 7. – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking Statements
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains statements that are
forward-looking. We want to caution readers that any forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934 in this Form 10-K may change based on various factors. These
forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties and actual
results could differ materially. Words such as “estimate”, “target”, “project”, “plan”, “believe”, “expect”, “anticipate”, “intend”, and
similar expressions may identify such forward-looking statements. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise. Factors which could cause future
financial performance to differ materially from the expectations as expressed in any forward-looking statement made by or on our
behalf include, without limitation:
• timely development and acceptance of new products
• success in gaining product approval in new markets where regulatory approval is required
• successful entry into new markets
• changes in postal or banking regulations
• declining physical mail volumes
• impact on mail volume resulting from current concerns over the use of the mail for transmitting harmful biological agents
• mailers’ utilization of alternative means of communication or competitors’ products
• our success at managing costs associated with our strategy of outsourcing functions and operations not central to our business
• our success at managing customer credit risk
• third-party suppliers’ ability to provide product components, assemblies or inventories
• negative developments in economic conditions, including adverse impacts on customer demand
• changes in international or national political conditions, including any terrorist attacks
• interrupted use of key information systems
• intellectual property infringement claims
• changes in privacy laws
• significant increases in pension, health care and retiree medical costs
• changes in interest rates and foreign currency fluctuations
• regulatory approvals and satisfaction of other conditions to consummate and integrate any acquisitions
• income tax adjustments or other regulatory levies for prior audit years and changes in tax laws or regulations
• acts of nature
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our
Consolidated Financial Statements contained in this report.
Overview
In 2011, revenue decreased 3% to $5,278 million compared to the prior year. Foreign currency translation had a 2% favorable impact
on revenue. Excluding the effects of foreign currency translation, the decrease in overall revenue was caused by lower equipment
sales (6%), supplies revenue (5%), rental and financing revenue (7%) and services revenue (4%). Software revenue increased 6%
compared to the prior year.
Net income from continuing operations attributable to common stockholders was $351 million, or $1.73 per diluted share for 2011
compared to $310 million or $1.50 per diluted share for 2010. These results include the following items:
• In February 2011, our largest mail presort facility located in Dallas, Texas was destroyed by a fire and we were unable to
process customer mail at full capacity for a significant part of the year. We estimate that lost revenue from the fire was
approximately $20 million. Through December 31, 2011, we received $42 million of insurance proceeds, which primarily
relates to the reimbursement of lost revenue, replacement cost of equipment and additional expenses incurred as a result of
the fire. We recognized $27 million of insurance recoveries in other income. The new Dallas presort facility has now
reached operational efficiency comparable to the previous facility;
• Due to the continuing underperformance and long-term outlook of the International Mailing Services operations (IMS) of our
Mail Services segment, we recorded aggregate pre-tax goodwill and intangible asset impairment charges of $46 million and
$12 million, respectively;