Pitney Bowes Reports Slightly Lower 2010 Revenue but Remains Positive on Future
Mail Services continues to process increasing volumes of both First Class and Standard Class mail from new and existing customers in the United States. There is ongoing customer demand for the company’s unique nationwide logistics capability to help mailers maximize presort discounts and expedite mail delivery. Presort-related revenue for the quarter grew and the EBIT margin continued to improve.
EBIT for the segment was impacted by increased costs associated with the International Mail Services (IMS) portion of the business. Higher shipping rates for some international destinations reduced parcel revenue margins for the quarter. However, the company is building scale in this business and has taken actions to mitigate these cost increases, including updating customer contract rates for 2011.
Marketing Services revenue declined versus the prior year primarily because of a reduced number of household moves during the quarter versus the prior year. EBIT margin continued to improve year-over-year due to improved marketing revenue per move. This business is built around a set of physical and digital products that help approximately 44 million U.S. residents with the change of address process each year.
Strategic Transformation Update
During 2010, the company accelerated several of its strategic initiatives to streamline processes and make its cost structure more variable to better leverage changing business conditions. As a result, it achieved benefits for 2010 of $120 million net of system and related investments, which was substantially in excess of its original target of at least $50 million in net benefits. Pre-tax restructuring and related impairment charges for the year were $182 million. This exceeded the company’s original target for 2010 charges in the range of $100 to $150 million, as it accelerated programs and incurred pension and retiree medical curtailment related non-cash charges of $24 million in the fourth quarter. Total costs related to the program are expected to remain within the original range, and are now estimated at $300 to $350 million. The company now expects annualized pre-tax benefits net of system and related investments will be in the range of $250 to $300 million by 2012. This represents a $100 million increase in projected net benefits resulting from process automation, channel alignment, reduced infrastructure costs and streamlined product development.