Welcome to the Pitney Bowes first quarter 2010 earnings results conference call. (Operator Instructions) I would now like to introduce your speakers for today’s conference call, Mr. Murray Martin, Chairman, President and Chief Executive Officer; Mr. Michael Monahan, Executive Vice President and Chief Financial Officer; and Mr. Charles McBride, Vice President, Investor Relations. Mr. McBride will now begin the call with a Safe Harbor overview. Please go ahead, Sir.

Thank you. Included in this presentation are forward-looking statements about our expected future business and financial performance. Forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from our projections. More information about these risks and uncertainties can be found in our 2009 Form 10-K annual report and other reports filed with the SEC and are located on our website at www.pb.com by clicking on our company and Investor Relations.

Good afternoon and thanks for joining us today. Let me start by sharing some thoughts on our performance. Mike will follow with the details of our first quarter results and then we will take your questions. During this quarter we continued to take definitive actions to position ourselves for long-term growth while also addressing the lingering impact on our business from the global economic uncertainty of the last two years. We are focusing on our distinct customer segments, making progress against our growth plans and implementing our strategic transformation. Revenue for the quarter was $1.3 billion, a decline of 2% including a 3% benefit from currency. Adjusted earnings per diluted share was $0.55 compared with $0.55 from the prior year. This quarter’s results reflect some signs of stabilization among our customer base especially our large enterprise customers as well as to a lesser extent among our small and midsized customer base. Notwithstanding the modest decline in revenues, year-over-year revenue performance during the quarter was our best since the third quarter of 2008 with improving trends in equipment sales and support services which was fueled by demand from enterprise customers globally. At year-end we had an increased backlog of orders in our production mail business. This quarter the installation of those orders helped drive production mail’s strong revenue performance in addition to the strong order flow during the quarter. We saw the same positive impact from enterprise customer activity in our mail services and our software solutions during the quarter as well. Among our small to midsized customer base, our U.S. mailing equipment sales during the quarter were essentially flat with prior year. However, solutions application sales were particularly strong within this customer segment, an improvement which we previously noted started in December in our U.S. mailing business. We believe these…

Thank you Murray. Revenue was $1.3 billion for the quarter, a decline of 2% compared with the prior year. Revenue growth this quarter had about a 3 percentage point benefit from currency. Breaking down our revenue for the quarter between U.S. and non-U.S. operations, U.S. revenue declined by 5% when compared with the prior year. Outside of the U.S. revenue increased b 4% but was down about 7% when you exclude the positive impact from currency exchange rates. In addition if you exclude the impact of the timing of a postal rate increase in France then revenue outside of the U.S. would have declined about 5%, similar to the decline in the U.S. Non-U.S. operations represented 30% of total revenue in the quarter. Adjusted earnings before interest and taxes (EBIT) for the quarter was $230 million which was slightly better than last year. The adjusted EBIT margin for the quarter increased year-over-year to 17% despite lower revenue as we continued to benefit from our strategic transformation, cost management and productivity actions. We reduced our cost as a percentage of revenue in the quarter for equipment sales, business services and support services when compared with the prior year. Selling, general and administrative costs (SG&A) declined $7 million year-over-year and on a constant currency basis we had a year-over-year reduction in SG&A expense of $22 million in the quarter. When you look at just our general and administrative expense it declined $17 million year-over-year and was 20 basis points lower as a percentage of revenue excluding the effects of currency. EBIT margins improved year-over-year in 6 of our 7 business segments that included international mailing, production mail, software, management services, mail services and marketing services. These improvements in EBIT margins were a result of our revenue growth in production mail, mail services…

As you saw on our earnings release we are reaffirming our 2010 guidance for revenue, adjusted earnings per diluted share and free cash flow. We are updating our guidance for GAAP earnings per diluted share to reflect the non-cash tax charge resulting from recently enacted healthcare legislation. Let me review our guidance. We expect 2010 reported revenue to be in a range of flat to 3% growth. On a constant currency basis we expect revenue in a range of a 2% decline to 1% growth. Adjusted earnings per diluted share is expected to be in a range of $2.30 to $2.50 for the year. This excludes the expected impact of $100-150 million of pre-tax restructuring charges associated with our previously announced transformation initiatives. This also excludes expected non-cash tax charges of approximately $0.07 per diluted share associated with out of the money stock options that expire principally in the first and fourth quarters of 2010 and a non-cash tax charge of $0.04 associated with the recently enacted healthcare legislation. On a GAAP basis, the company expects 2010 earnings per diluted share from continuing operations to now being a range of $1.71 to $2.07. We expect that a greater percentage of our annual earnings will occur in the second half of the year as e1quipment sales improve and the impact of lower financing revenue moderates as well as from the realization of benefits from our transformation initiatives. We continue to expect to generate free cash flow for 2010 in a range of $650-750 million. During the year, we expect an increasing investment in finance receivables through higher levels of equipment sales requiring a higher use of cash versus the prior year. We continue to realize the benefits of our ongoing actions to improve the infrastructure, productivity and the profitability of the company. As the economy and business conditions improve we believe we are poised to take advantage of the profitable growth opportunities that lay before us. We are looking forward to talking about our growth strategies and the ways we are addressing the needs of our distinct customer segments at our upcoming investor update meeting on May 11 in New York. More information on the meeting is available on the Investor Relations page of the company’s website at www.PB.com/investorrelations. Thank you and now let’s open the line for questions.

(Operator Instructions) The first question comes from the line of Shannon Cross - Cross Research.

My first question is on the production side of the business can you talk about sort I am curious about the whole business as well, linearity in the quarter, were you seeing things get a bit better as you got further along in the quarter? On the production side of the business are there any verticals you can point to or anything weaker or stronger than others?

In production mail as we mentioned in the fourth quarter we started to see enterprise customers and that was fairly well across the board but certainly financial services is where we saw significant change in their procurement of large ticket items. As we have mentioned over the last number of years we felt at some point that would have to release demand that was building and we saw that in the backlog in Q4 and we saw that continue into Q1. I think it would be more general in the enterprise segment on the large ticket but certainly in financial services. The second part of your question was…

Linearity.

Specific to production mail I think what Murray was saying was we tend to see particularly in the production mail business we saw the demand come in. There is probably a 30-90 day lead time between order taking and fulfillment of those orders. The reference to seeing the demand in the fourth quarter and fulfilling that in the first quarter but continuing to see good demand throughout the first quarter.

Can you talk a little bit about your cash flow thoughts for the rest of the year? Clearly finance receivables will become a use of cash but how should we think about it since your cash flow was so strong this quarter as we look forward? Because you have maintained your cash flow expectations.

We maintained the cash flow expectations for a couple of reasons. As you mentioned it was strong in the first quarter. First quarter tends to be a strong quarter for us as we saw last year as well. A couple of factors. One is our capital expenditures were relatively modest in the first quarter. We expect as we implement in our strategic transformation program as we go forward we will put some more capital into those related projects but still expect to stay within the guidance range we gave of about $200-225 million so that is built into our expectations on an annual basis. So that, the financial services, as well I think play into that guidance.

Can you talk a little bit about PBMS in terms of bookings, levels of volume, how we should think about that business outperforming or under performing as we come out of an economic downturn?

PBMS has continued to be very focused on improving their productivity. You can see that in their EBIT numbers. We saw a good gain on their margins. As you look across the business Europe saw some good gains from new placements and in the U.S. we also had reasonable net written business. However, there is still the lag on volume from the economic downturn and that will stay there until we see volume come back. I think from a new business point of view the business is progressing but is still being held back on the volume basis.

The next question comes from the line of Analyst for Julio Quinteros - Goldman Sachs.

I am [inaudible] that you are beginning to see some stabilization of the SMB segment. I just wonder if you could provide more comments in terms of the improvement or I guess the stabilization you are seeing whether it is fewer number of customers going out of business and going away. Or are you seeing incremental amount of business from Asia and firmer pricing, etc.? If you could differentiate the comments on domestic versus international that would be great.

On the small business sector we are seeing some stabilization but I wouldn’t infer that as growth in that sector as to the number of businesses. I think that we have seen stabilization within those businesses and a little more willingness to begin some reinvestment in the business but I am still fairly cautious on that sector. It is pretty common around the world. It varies country by country but as consumer confidence has improved a little bit so has the SMB sector and where the consumer confidence is weak the SMB sector is really fairly much related to that.

Secondly, related to the full-year guidance obviously you have maintained versus your original guidance but I think this quarter you specifically singled out it is going to be more weighted towards the second half. I am wondering if you could comment on the relative visibility on the guidance versus the last time you talked about it and what the pace of recovery is? Is it a little bit slower versus your initial expectations?

First, I think we have consistently said it would be stronger in the second half than the first half of the year so I don’t think there is any change there. There is no change in what we would have anticipated from first to second half.

On the software segment I am wondering I guess the impact from the transition to a annuity based pricing. How much of the transition should we still expect in the coming quarters? Is there still going to be some headwinds as we move into the second half of the year?

As we look at the software segment there will be more annuity based pricing and then you will see incremental software as a service product. I think you need to start considering that software across the board is moving more to software as a service and although we have a large base that will continue to have in that space we will continue to see expansion in the service contracted revenue.

The next question comes from the line of Ananda Baruah - Brean Murray, Carret & Co. Ananda Baruah - Brean Murray, Carret & Co.: This is the second quarter in a row you have specifically talked of underlying trends in certain segments; U.S. mailing, production mail is looking a little bit better and you reaffirmed the revenue guidance of flat to up 3% for the year. I guess you were down 2% year-over-year sort of this quarter. Can you give us maybe your take on which segments you think will be the ones that will lead to the zero to 3% growth? Maybe the visibility you have or the confidence you have in those segments as you move forward?

Sure. As we look at it and we started seeing this in Q4 is the enterprise segment is starting to show growth and we are seeing that through into Q1 and we would expect the enterprise segment to continue to grow and start moving back to more typical growth patterns. In the SMB segment we have seen stabilization there and as we mentioned U.S. mailing equipment sales was basically flat which has been a significant improvement. Then we have launched new products in that area which we expect to be beneficial as we go through the year. That is the Connect+ series of products that were introduced a couple of weeks ago which puts web-based applications into the market and is really the first web-based mailing product. So we expect that to be a positive influence in the SMB segment as w ego forward. That should have some change in the number of renewals versus replacement particularly in the upper segments. So as we have discussed previously as you have the lease extensions it is good for us in the long run from a profitability point of view but when it comes to the renewals they actually will generate more revenue for us and we should see that benefit as we move throughout the year. Now as we have also mentioned as equipment sales go up we do also then start seeing an offset on the headwind in finance revenue. So we have had the headwind from lower equipment sales over the last couple of years as equipment sales grow that will start eating into that headwind as well. Those are sort of the combinations that we see on a go-forward. Ananda Baruah - Brean Murray, Carret & Co.: The extent of which the trends, the extent to which you saw some of the improvement in these trends through the quarter were they more positive than you thought they would be when we were ending the quarter?

I think as we mentioned in Q4 we weren’t calling it a trend at that point but it was sort of, if you go back to when we had planned the year, it was meeting what we had expected in the plan. I wouldn’t call it a big surprise but it is nice to see that it actually did come in and we are actually seeing some change in the environment with our customers. Ananda Baruah - Brean Murray, Carret & Co.: Piggybacking off of that, the reaffirmation of the guidance obviously is a positive this early in the year. Given the net positive underlying revenue trends and the reaffirmation of the revenue guidance and the reaffirmation of the cost save guidance at $50 million which I believe translates to $0.17 or $0.18 per share, if you back that out I guess what is implied in the midpoint of the annual guidance would actually be sort of like a $0.10 decline in the annual EPS. Can you walk us through some of the pushes and pulls that would actually get you sort of to the midpoint of the guidance X the cost savings? Sort of the assumption right now is you will do the cost savings for the year.

I think the reason we give a guidance range is obviously we are trying to prepare for a number of potential scenarios and outcomes based on business activity, the economic environment and other factors including benefits from our transformation program. I would say obviously Murray mentioned there is year-over-year cost growth that we build in productivity for. We have the financing and rental revenue lag that has a higher margin associated with it. We have tried to factor all of those things in and obviously different scenarios of growth in the ranges we have provided. That is really the basis of those ranges. Ananda Baruah - Brean Murray, Carret & Co.: I appreciate that. Is it fair to say if you did zero to 3% you would then likely do the upper half of the guidance range or are there so many moving parts around some of the modeling it is not as straight forward as saying just that?

As you know we are early in the year yet and obviously there is a lot of factors that play into it. That is why we have reaffirmed the guidance range. Ananda Baruah - Brean Murray, Carret & Co.: Can you talk about some of the ways in which you feel you may be positioned sort of defensively relative to what some of the potential secular headwinds are out there in the industry regarding mail volumes and folks paying bills online and stuff like that?

I think there are a number of areas we have been fairly effective with. One is in mail services you see we have continued growth there. A portion of that is due to our shift towards standard mail. Standard mail is now seeing some recovery and we have been focusing on that sector in which we have had a very low percentage. So there is a very low percentage of that mail that has been in the work share space. So that would be one area in the enterprise. As you move into the SMB space the Connect+ product which we will show to you at the investor day is a product that opens a number of other opportunities. Number one, it doesn’t just do metered mail. It can also do permit mail which is an area which we have not done much in. With full color printing it allows for printing return addresses and logos on the envelope, eliminating the need for pre-printed envelopes. So that is a cost saving for customers that actually we would get a piece of from the device. Then also it provides the ability to move to marketing on the envelope. It takes the device from being a productivity device to a device that affects other places within the marketplace so the dependency with that type of product will move from purely an evidencing platform to a broader based platform. Then as I mentioned it is the first web-enabled so it has a full touch screen on it which enables web-based services of which we are launching web-based services with the product and that again increases the range of items that can be dealt with on the machine; whether it is shipping applications, addressing, etc. There is a range of applications. So we are moving from just supplying a platform that does postal evidencing to a much broader platform that will be less dependent on just the evidencing component.

The next question comes from the line of Chris Whitmore - Deutsche Bank Securities.

Following up on that last question and the last answer, I am curious to learn more about this product. To what extent does it require customers to make significant changes to their existing workflows? It sounds like it has a pretty long sales cycle. Can you talk about the sales cycle and the amount of customer change that needs to happen in order to adopt that product?

I think in its full implementation it could have a longer sales cycle but it is available in a number of configurations. So it will install at basically the same cost and act like a traditional mailing machine. At the same time it has the built in functionality to go beyond that which opens another market segment for the product. That market segment when you are doing more marketing and more customization on the envelope could take a little more time. However, what we have found and again a couple of weeks isn’t much but we are seeing very strong customer reaction to the ability to eliminate pre-printing on the envelope which is a pretty straight forward item to change. That is much easier than adding the marketing because different people would be involved. In the mail room that is straight forward. When it comes to the web-based services a lot of those services they would be going after with other things or other manner in their business in different areas so that provides that on the same platform and eliminates the need to go outside of the platform.

So to what extent do you expect this to alleviate the pressure on the mix trend you have been seeing within your installed base? Is this a second half event or are we looking at 2011?

As we said we would expect and have expected this product will affect the back half of this year and that we will see the finance receivables starting to move back as we place these products rather than in lease extensions. It gives people a reason to add a new product rather than continuing with the old. It provides more capabilities and it addresses their need to have their envelopes opened and delivered more effective information to their customers.

On the financing piece has there been a change in your strategy around financing? I would have expected your finance receivables to actually be up year-over-year given the strength of equipment in Q1. Why such a long lag effect?

The lag effect is really a factor of the absolute balance of finance receivables coming down over time. When you look at a year-over-year comparison since we had lower sales activity in the prior year of activity that would lower the assets off of which we would generate finance income. That is the primary factor. A secondary factor would be that in our credit business where we provide lines of credit to customers through the economic downturn we actually cut back on those lines of credit to manage delinquencies and write offs. So we took proactive actions we felt it was prudent action to reduce that exposure during that period of time. Those two factors obviously drive that. As we see improvement in mail volumes that would bring more activity back into the line of credit business because generally customers use that to purchase postage and then at some point in the future if we decide to increase those lines of credit obviously that would make more credit available to customers. The leasing side of the business obviously as Murray said you need growth in the sales side of the business in order to return growth to the financing income but that will ladder in as the finance receivables grow over time if we have the equipment sales.

A chicken and egg question here. Is the lack of financing or available financing impacting your equipment business or vice versa?

It hasn’t really impacted the leasing side of the business. Quite honestly what we have seen is a contraction in the amount of revolving activity people do generally and I think that is true on the consumer side as well as the small business side. They tend to act like consumers where they pull back in their business activity and we would expect they do less revolving. That is a natural expectation of the cycle we are in. From a leasing perspective we meet virtually all of the customer’s needs from a leasing perspective.

Have you changed your terms at all? More or less aggressive with terms and conditions?

We haven’t really changed our terms and conditions. What we have done is has been more aggressive around collections. If we see a risk of delinquency we have refined our credit scoring processes to make sure we filter out any potential bad credit. So we try to catch it at the front of the process and then be proactive if and when somebody becomes delinquent.

A question on the U.S. mail business. You said equipment in that business was flat year-over-year but revenue X currency was down 8% after being down a similar amount last year. A pretty easy compare. Can you give us a little more color, if it wasn’t equipment what was so weak and at what point does that start to reverse? Is it purely financing or is there something else going on there?

It is driven principally by financing. Financing was down 14% and then supplies and rentals were about at the average. Then support services which is most closely tied to equipment sales was only down about 4%. So support services being the maintenance contract activity on equipment.

The next question comes from the line of Lloyd Zeitman - Bernstein Investment Research and Management.

Your supplies revenues, I would have expected possibly something a little higher on that as activity overall would pick up. Could you talk about that at all? How do you see that number in the first quarter and have you changed your expectations for this particular category at all?

I think supplies is in line with our expectations given the fact we did continue to see mail volume declines in the first quarter versus the prior year. So that lower level of activity would translate into lower usage of supplies over time. Obviously as we go forward and place new equipment supplies would follow that. As Murray mentioned in the new product not only do we have traditional postal ink but we have the opportunity for color ink as well as we build an installed base.

So then I would imagine you are expecting on a sequential quarter basis this number should improve over the course of the year?

We think the two key things that will drive that will be mail volume improvement and installed base of meters. As you know the low end of the marketplace has been slower to respond and so we don’t see the same number of new business starts and that it would be appropriate for our lowest end products. Those are the things that would drive the supply stream in the future.

Cost of support services. That came in at almost 64% which is really out of line with what we have seen over the last few years. Is there anything unusual in there at all?

In terms of support services, I think we did have an adjustment to that related to parts and supplies on equipment repair. There was a reclass made associated with that. I think it was about $19 million. But that was a reclass between cost of sales and cost of support services. So no impact on the total gross margin or the EBIT margin but we thought it was more appropriate to associate those with the cost of service.

So that was between cost of support services and cost of equipment sales?

Correct.

Essentially all of your guidance is the same as it was three months ago. I think given overall within the economy I think most people are pleasantly surprised at what we have seen in terms of first quarter results. I was just wondering, is there any difference in terms of the pieces you put together to get your total guidance, is it any different today than it was three months ago? If so could you give us some idea as to what has changed?

As I said earlier I think the guidance contemplated a number of different scenarios. That included economic conditions that could vary over time including potential for improvement as well as a number of other factors across the businesses. The reason we reaffirmed the guidance is we feel our outlook is maintained in that range.

On the financing side, I guess things are looking pretty much the same as they did three months ago?

In the financial services side?

Right. In terms of credit quality measures.

Yes. In fact, on a year-over-year basis we have seen I think about a 30 basis point improvement in delinquency rates and write offs and provisioning are in line on a year-over-year basis.

The next question comes from the line of Shannon Cross - Cross Research.

I wanted to talk about cash and cash usage; thoughts on share repurchase and acquisitions. Any more color you can give us and where you think you should be on a short-term versus long-term debt situation as we kind of come out of this, I don’t know what we were in, recession I guess?

Sure. In terms of optionality around cash usage obviously if we look at the range of cash we project, free cash flow beyond paying our dividends and capital expenditures and all we believe there is probably plus or minus $300 million of excess free cash flow. We continue to look at the options of enhancing our business through targeted acquisitions as we have done in the past and we continuously look at the opportunities around share repurchase. That is a conversation obviously that is had with the board. We continue to have authorization outstanding of about $73 million. So I would say those remain viable options for us. Obviously we feel that the credit markets are more favorable today than they were a year ago.

I am curious, what is the push back from the board at this point in time on share repurchase or is it just something you haven’t discussed recently? Because it was [such] a strategy for a long time.

I wouldn’t say there is any push back. Obviously we have the authorization outstanding. It is just a matter of a judgment as we go through in terms of what is the right use of the capital. Obviously the one other thing I should mention is obviously we have been using capital around our transformation program around the severance related costs as well as I mentioned the capital expenditures we have planned for the year.

The next question comes from the line of Ananda Baruah - Brean Murray, Carret & Co. Ananda Baruah - Brean Murray, Carret & Co.: A point of clarification on the reallocation of the costs between support services and equipment sales. Is that the new baseline? Is that kind of the new margin now for each of those line items on the P&L?

In fact I am glad you asked the question because we did put on investor relations website two years of quarterly information with a restatement of that. Anybody that wants to get that information to update their model it is available on the Investor Relations website.

It is not available right this moment but it will be available today. Ananda Baruah - Brean Murray, Carret & Co.: Is that by quarter for 2008 and 2009 when you say two years?

That is correct.

We have no one else in queue. Please go ahead with any closing remarks.

Thank you. The quarter’s results reflect some signs of stabilization among our customer base particularly, as I mentioned, in the large enterprise customers as well as small to midsized customers. Overall, revenue performance during the quarter was our best year-over-year performance since the third quarter of 2008 driven by improving trends in equipment sales and support services revenue among our enterprise customer base. Essentially flat equipment sales in U.S. mailing represent its best equipment sales performance since the end of 2008 and that was led by strong sales of solutions applications. In April we launched our Connect+ customer communication series is an example of how we are investing for future growth by delivering new products and solutions to meet the distinct needs of our key customer segments. We are continuing to invest in our future while at the same time reducing our cost of doing business as we implement our strategic transformation program. The adjusted EBIT margin or the company improved as a result of the improvement in EBIT margins in 6 of our 7 business segments this quarter. We are looking forward to seeing you at our investor update on May 11th. Thank you and have a great evening.

Thank you. Ladies and gentlemen that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.