Pitney Bowes 2012 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 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:
• declining physical mail volumes
• mailers’ utilization of alternative means of communication or competitors’ products
• access to capital at a reasonable cost to continue to fund various discretionary priorities, including business investments, pension
contributions and dividend payments
• timely development and acceptance of new products and services
• successful entry into new markets
• success in gaining product approval in new markets where regulatory approval is required
• changes in postal or banking regulations
• interrupted use of key information systems
• third-party suppliers’ ability to provide product components, assemblies or inventories
• our success at managing the relationships with our outsource providers, including the costs of outsourcing functions and operations
not central to our business
• changes in privacy laws
• intellectual property infringement claims
• regulatory approvals and satisfaction of other conditions to consummate and integrate any acquisitions
• negative developments in economic conditions, including adverse impacts on customer demand
• our success at managing customer credit risk
• significant changes in pension, health care and retiree medical costs
• changes in interest rates, foreign currency fluctuations or credit ratings
• income tax adjustments or other regulatory levies for prior audit years and changes in tax laws, rulings or regulations
• impact on mail volume resulting from concerns over the use of the mail for transmitting harmful biological agents
• changes in international or national political conditions, including any terrorist attacks
• 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. Certain amounts and discussions below have been changed to reflect the
reclassification of our International Mailing Services (IMS) operations, previously included in our Mail Services segment, as a discontinued
operation. All table amounts are presented in millions of dollars, unless otherwise stated. Table amounts may not sum to the total due
to rounding.
Overview
Revenue for 2012 decreased 4% to $4,904 million compared to $5,123 million in 2011 as worldwide economic conditions, pricing
pressures, declining mail volumes and constrained public sector spending in Europe all contributed to the decline. Worldwide economic
conditions continue to impact equipment sales, which declined 5% compared to last year. Declining equipment sales in prior periods
also impacts financing revenue, which declined 10% in 2012 compared to 2011. Rentals and supplies revenue both declined 8% due to
a decline in mail volumes and our installed meter base. Software revenue declined 3% mainly due to an overall economic uncertainty
in our global markets, particularly in our European and Asia Pacific markets.
Net income from continuing operations and earnings per diluted share for 2012 were $436 million and $2.16, respectively, compared to
$401 million and $1.98, respectively, in 2011. The improvement in 2012 was primarily due to lower restructuring charges and goodwill
impairment charges partially offset by higher tax expense due to tax benefits recognized from tax settlements in 2011.
As a result of the continuing under-performance of our IMS operations, and to enable us to better focus on higher growth cross-border
ecommerce parcel opportunities, we began exploring strategic alternatives to exit the IMS operations related to the international delivery