Pitney Bowes 2011 Annual Report Download - page 35

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17
RESULTS OF OPERATIONS - 2010 Compared to 2009
Business segment results
The following table shows revenue and EBIT in 2010 and 2009 by business segment.
Revenue EBIT
2010 2009 % change 2010 2009 % change
North America Mailing $ 2,101 $ 2,211 (5)% $ 755 $ 770 (2)%
International Mailing 675 698 (3)% 79 99 (20)%
SMB Solutions 2,775 2,909 (5)% 834 869 (4)%
Production Mail 561 531 6 % 61 52 18 %
Software 375 356 5 % 40 34 18 %
Management Services 999 1,061 (6)% 93 72 28 %
Mail Services 573 571 -% 63 88 (28)%
Marketing Services 142 141 -% 26 23 14 %
EB Solutions 2,650 2,660 -% 283 268 5 %
Total $ 5,425 $ 5,569 (3)% $ 1,117 $ 1,138 (2)%
Small & Medium Business Solutions
Small & Medium Business Solutions revenue decreased 5% to $2,775 million and EBIT decreased 4% to $834 million, compared to
the prior year. Within the Small & Medium Business Solutions group:
North America Mailing revenue decreased 5% to $2,101 million and EBIT decreased 2% to $755 million, compared to the prior year.
The revenue decrease was driven primarily by lower financing, rental, service and supplies revenues. The decrease in financing
revenue is due to a decline in our leasing portfolio from reduced equipment sales in recent years. Rental, supplies and service
revenues were lower than prior year due to fewer placements of new meters. Equipment sales and supplies revenue were lower than
prior year due to business consolidations, lease extensions and reduced volumes of mail processed. Lease extensions have a positive
impact on profit margins longer-term but negatively impact equipment sales revenue in the current year. Revenue was also adversely
affected by the ongoing changing mix to more fully featured smaller systems. Foreign currency translation had a 1% favorable impact
on revenue. The lower EBIT was due to the decline in higher margin financing, rental and supplies revenues, which more than offset
the 1% impact from a favorable adjustment related to certain leveraged lease transactions in Canada.
International Mailing revenue decreased 3% to $675 million compared to the prior year, including a favorable impact from foreign
currency translation of 1%. While equipment sales were up slightly in certain parts of Europe, this increase was offset by continued
declines in financing and rental revenues due to reduced equipment sales in recent years. EBIT decreased 20% to $79 million
compared to prior year primarily due to the lower revenue and shift to lower margin equipment and supplies sales.
Enterprise Business Solutions
Enterprise Business Solutions revenue was flat at $2,650 million and EBIT increased 5% to $283 million, compared to the prior year.
Within the Enterprise Business Solutions group:
Production Mail revenue increased 6% over the prior year to $561 million due to increased demand in the U.S. for inserting equipment
and our first installations of production print equipment. Demand for inserting equipment continued to experience a delayed recovery
in certain countries outside of North America as many large enterprises in these regions delayed capital expenditures due to economic
uncertainty. EBIT increased 18% to $61 million compared to last year due to the higher revenue and our initiatives to improve
productivity and consolidate administrative functions. Foreign currency translation had a 1% favorable impact on EBIT.
Software revenue increased 5% over last year to $375 million, driven by the acquisition of Portrait Software (4%) and the favorable
impact of foreign currency translation (1%). We continue to build more recurring revenue streams through multi-year licensing
agreements, which have the effect of deferring some revenue to future periods. EBIT increased 18% over last year to $40 million due
to business integration and productivity initiatives. EBIT was negatively impacted by transaction-related fees of approximately $2
million associated with the Portrait acquisition. Foreign currency translation had a less than 1% favorable impact on EBIT.
Management Services revenue decreased 6% compared to last year to $999 million due to the loss of several large postal contracts and
decreased print volumes. Despite the lower revenues, EBIT increased 28% over the prior year to $93 million primarily due to our