Good evening, and welcome to the Pitney Bowes Fourth Quarter and Full Year 2010 Earning 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 the Safe Harbor overview.

Okay, thank you, and good afternoon. 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 that are located on our website at www.pb.com by clicking on Our Company and Investor Relations. Please keep in mind that we do not undertake any obligation to update any forward-looking statements as a result of new information or developments. Now our Chairman, President and Chief Executive Officer, Murray Martin, will start with an overview of the quarter and the year. Murray?

Good afternoon, and thanks for joining us today. Let me start by sharing some thoughts on our performance. Mike will follow with the details on our fourth quarter and full year results. And I'll provide 2011 full year guidance. Please note that we have provided slides related to the guidance discussion as part of the webcast found in the Investor Relations section of the Pitney Bowes website. After the presentation, we will take your questions. As we anticipated, 2010 was a year in which we had stronger performance in the second half of the year as we saw some initial signs of stabilization in various sectors and geographies. During the year, we continued to execute our Strategic Transformation program in order to lay the foundation for sustained growth and value creation for customers and shareholders alike. Our transformation initiatives are giving us a more variable cost structure, improved customer processes and infrastructure, as well as greater financial flexibility to continue investing in our future. Our fourth quarter performance reflects our overall journey to transform the business for enhanced growth. During the quarter, against the backdrop of an uneven global business climate, we continue to make investments in new technologies, enhance the customer experience and streamline our operations. The benefits from our ongoing actions also helps position us for future growth in our Small & Medium Business and our Enterprise Business Solutions groups. One key milestone in improving the trends for the core business during the quarter was year-over-year improvement in equipment sales. This was the second consecutive quarter of year-over-year equipment sales growth in our global SMB operations and on a consolidated basis. Growth in equipment sales in the second half of the year was paced by customer retention gains and new product placements, led by our Connect+ web-based communication…

Thank you, Murray. Our revenue for the year was $5.4 billion, a 3% decline on both a reported and a constant currency basis and in line with the guidance we provided. Revenue was $1.4 billion for the quarter, a decline of about 1% when compared with the prior year, both on a reported and a constant currency basis. Breaking down our revenue for the quarter between U.S. and non-U.S. operations, U.S. revenue declined by about 2%. Outside the U.S., revenue on a reported basis increased 1% versus the prior year. Excluding the impact of currency, revenue outside the U.S. increased 4%. Non-U.S. operations represented 31% of total revenue. I also want to note that we had a reclass between two revenue lines during the quarter. We reclassified $4 million in revenue from rentals to financing. The revenue was associated with the bundling of fees from our meter customers to access our Purchase Power product. The reclassification was related to revenue in both 2009 and 2010. Excluding this reclassification, financing revenue would have declined 5%, a moderation from previous declines, and rentals revenue would have declined 7% in line with our recent experience. Adjusted earnings before interest and taxes, or EBIT, for the quarter was $258 million, which was about 1% higher than last year. EBIT margin was 40 basis points better than last year. We continue to see the benefits of our productivity initiatives both in the cost of revenue lines and in our selling, general and administrative costs, or SG&A. In particular, SG&A costs were reduced significantly this quarter. SG&A in the quarter declined by about $23 million when compared with the prior year. And for the first time this year, SG&A improved as a percentage of revenue, a decline of 110 basis points to 31.8% when compared to…

Thanks, Mike. In 2011, we expect a business economic environment characterized by gradual improvement at varying rates by sector and by geography. While businesses are still more cautious with spending, especially on the SMB solutions group, our experience in the second half of the year shows they have become more willing to invest in solutions that help them grow their business and enhance their efficiency. It is against this backdrop that we project a return to revenue growth in 2011 due in part to a number of initiatives designed to stabilize our base business and to drive new growth opportunities. Let's turn to the first slide. We expect 2011 revenue, excluding the impacts of currency, to be in the range of flat to 3% growth as compared to 2010's 3% decline. I noted our two consecutive quarters of year-over-year improvement in equipment sales earlier. We anticipate continued improvement in equipment sales during 2011, driven in part by the positive outlook for sales of new solutions like the Connect+ communication system and continued positive growth in Production Mail. We also expect growth in several other areas in 2011. These include growth in Software revenue due to the increasing demand for term-based licenses of CCM [customer communications management] software solutions; expansion in Mail Services; and new CCM solutions across our Enterprise Business portfolio. As we have previously discussed, lower equipment sales during previous years will continue to affect financing, rental and supplies revenue streams. However, we expect moderating declines in these recurring revenue streams, related to our SMB Solutions group as equipment sales continue to improve. The next slide illustrates how we expect our earnings per share from continuing operations in 2011 to compare to 2010. In 2011, we anticipate generating incremental earnings of $0.32 to $0.42 per share from operations growth,…

[Operator Instructions] And our first question comes from Ananda Baruah. Ananda Baruah - Brean Murray, Carret & Co., LLC: I guess, the first one is, Murray or Mike, you mentioned that you got, I guess, benefits from both lower credit losses and from leasing costs. And just wondering how much of this will occur in 2011, versus being one-time?

Yes, we have seen consistent improvement in credit losses over the last, at least, four quarters. And that's really, I think, reflective of the overall improvement in the economic environment. So barring any significant changes in the overall economic outlook, we think that we should see similar types of credit loss levels in 2011. Ananda Baruah - Brean Murray, Carret & Co., LLC: Just wondering, Mike, if you could go back over with the incremental investment’s going to be in Volly. And I guess, to the extent that there's something that's going back into SMB as well. Sounds like you're increasing the cost save target from the restructuring actions in 2011 pretty subtly [ph]. But particularly given the, I guess, the revenue growth guidance of flat of 3%, it seems like a lot of that's getting -- well, it's going to get offset, I guess, by incremental investments given what your EPS guidance is. So could you just go back over that and maybe talk about how we should think about the balance in the investment in 2011? And then I guess, just sort of to dovetail off of that, is this type of investing something that we should expect going into 2012 as well?

Yes, let me differentiate a couple of things. When we talk about Strategic Transformation, we talk about it in terms of net benefits. In other words, we're achieving even greater benefits but reinvesting a good portion of that into process improvement in the systems that we need to automate processes and even in product development-types of things. We've highlighted this Volly investment really because it's the development of a new market and really creating a long-term opportunity, as Murray mentioned, for the company. So it is a different type of investment than we have traditionally been making against the net benefits in Strategic Transformation. One of the other things we tried to highlight is, obviously, the impact of the recurring revenue streams in our SMB business, which have been improving on a relative basis over, really, the last several quarters. And we expect that to continue and improve, but to have a negative impact on a year-over-year basis. What I would note, though, is that as we get this far along in the transformation of our business, we've been able to maintain very strong overall margins in the business while really shifting our dependence on different revenue streams. So we've seen a significant growth in Software that is highly recurring, and we've seen rentals and supplies becoming a smaller part of our overall revenue mix. So we think, in total, we're getting good growth in earnings out of the net benefits. At the same time, we're transforming the business and ending this transformation with still very strong margins. Ananda Baruah - Brean Murray, Carret & Co., LLC: I guess, just to clarify, what was the investment you said you intend to make for Volly this year?

It would be $0.05 to $0.10.

That $0.05 to $0.10 is market development and not the product development. The product development is really already included in 2010 and 2011 as we net out the benefits from Strategic Transformation. So we see a difference between developing products, which is part of our normal business, and then going out and developing a new market around the consumer interaction with their billers.

Our next question comes from the line of Shannon Cross. Shannon Cross - Weeden & Co. Research: I just wanted to follow up on the Volly questioning. Can you give us a little bit more on the business model, how long you expect it to be dilutive to earnings?

As we look at Volly, there are a number of things. First of all, as we stated, as we talk to billers, we are already involved with over 70% of the transaction billers in the marketplace, and those billers have both digital and physical delivery. The digital delivery is in the 10% to 12% of all transaction mail. What that does is provide opportunity as billers look to have a different cost alternative. And our business model will be such that it will be lower cost than physical. But since it is a secure environment which aggregates for the consumer, it will have a cost to it, and that is where the revenue stream will come from. At the same time, we'll be offering coupons, which will have a revenue stream from, and we'll have catalogs, which will have a revenue stream as well. So those are sort of the three streams, Shannon. As we look to launching this later in the year to the consumer side -- the launch that we had earlier in this year was to billers because we need to bring the content on first before we go to consumers. As we move into the second half of the year and begin the rollout of consumers, that's when we'll start to see the first pieces of revenue, and then it will build. I would anticipate that it depends on what the curve of adoption is as to how we choose to invest. That's why we put flexibility in the range, and we'll be able to answer your question more specifically as we get later in the year and we see how quickly consumers are willing to adapt to this model. And as they do, we would either see it taking off without a lot of support or it will require more support. So I think we'll have to answer that around midyear to third quarter as we see the first results as to how steep the curve of adoption could be, or whether it has a longer tail before the high rise in adoption.

Just to clarify too, the revenue sources would come from the billing statement providers and marketers. It would be a free service to the consumer.

Our next question comes from the line Chris Whitmore.

I wanted to follow up on the added restructuring reinvestment. Back-of-the-envelope suggests the incremental $100 million is about $0.35 to EPS. Yet, we're guiding for our earnings to be about flat sequentially. I'm just trying to understand, if you expect to grow the top line, why wouldn't underlying EPS growth occur in the business?

Sure. I think, Chris, if you look at Chart 2 that we provided, what we showed is that the benefits from growth in the business, that would be both revenue growth and the benefits of Strategic Transformation, would contribute $0.32 to $0.42, which your $0.35 calculation falls in that range. We highlighted the fact that there is about a $0.25 to $0.30 negative impact related to SMB recurring streams. That provides you with a net changing guidance on a comparative basis to 2010 of $0.02 to $0.17, which reflects the benefits of growth in the business. And then, we've identified an incremental investment in Volly, again, giving you a range of $2.15 to $2.35. So I think, incorporated in that guidance is the benefits of growth in the business.

When we look at the highest margin pieces of the business, rentals of supplies and so forth, it seems as if this is in a longer-term decline period. Are we in a situation where you need to identify $0.30 of annual cost savings to maintain earnings from here? Is that the right way to think about it?

No, I don't think it is because we're actually seeing a declining impact related to those lines. And so if we looked at 2009, 2010, the impact was greater. We expect it to be less in 2011 and all things being equal, marginal in 2012. And the other thing I would point to is that if we look at rentals as a percentage of total revenue it's about 10%. Supplies is only about 5% to 6%. So even small declines in those numbers are not going to make a big impact. And we're growing revenue streams like Software, which is now 8%, and actually has, even in the fourth quarter this year, higher margins than both supplies and rentals.

Do you think the value of your installed base will stabilize this year or perhaps, even grow?

Yes, the important thing for us is to see the sales revenue turn positive because that really is what provides the basis for the recurring revenue streams. And that's why we felt it's important to see the growth over the last couple of quarters and projecting that growth into 2011. The other periods, obviously, we'll continue to look at bringing new products and services to the marketplace that would serve that customer base as well.

I think, Chris, as we've noted at a couple of the calls and the investor meetings, that we expect a tail from the drop that we had about three years ago, and that's what that runoff is on the finance income, the supplies and the rental. And as we stated then with the moderating of that decline, which began earlier, and then the net positive that we begun seeing, the tail of that negative will decline. And it's been declining between 20% and 35% per year over the last number of years, and we expect that to continue. So that negative will continue to shrink as we go forward.

Our next question comes from the line of Shannon Cross. Shannon Cross - Weeden & Co. Research: My second question, I guess, is how about a little bit about what you're seeing in small business? And then also mid-size business with Connect+?

Sure. As we look and I guess, if we take small business and sort of look at it in two segments, the very small business and then the small- to mid-size business, we are seeing some differences there. The very small business segment, which is still a large piece of that small business customer base, has actually still remained fairly stagnant as to its ability to buy. So we still are not seeing a big change in what we've been calling a very not positive growth position. We aren't seeing those businesses spend. However, as we move up to the mid-level and higher of the small business, which are really the areas where Connect+ addresses, that business segment is now looking to reach out to create more business. So the Connect+, as we launch that, not only processes the mail, but it gives a vehicle of advertising on the front of the envelope creating open ability. And that customer group is seeing that advantage, and that's why we're seeing the Connect+ sales accelerate. And as I mentioned, we saw 20% of our sales in the quarter being in the Connect+, which, considering its segment size is very significant, and we see that continuing. On the Enterprise side, we're continuing to see the positives of Enterprise spending more. It does vary by geography around the world. We see a little more hesitancy in Europe than we do in America at the moment. So it sort of fluctuates as you can see from the announcement of different things that are happening around the world. But overall, I'd say the Enterprise segment is moving back to positive acquisition. The mid-size is looking not so much for efficiency but revenue growth opportunity, so products and services that leverage that are seen as positive. And the very small business segment is still not -- we're not seeing any positive growth in that segment. Shannon Cross - Weeden & Co. Research: And then, Mike, can you talk a little bit about how should we think about normalized free cash flow? I mean, clearly, 2010 was very strong. 2011, you're guiding strong as well. The puts and takes, just anything you can give us to sort of how we should think about, I don't know, for the next few years, the free cash flow that the company can generate, assuming sort of a 0% to 3% revenue growth?

Yes. I think if you recall in the last couple of years, when we gave sort of baseline guidance, we were sort of $650 million to $750 million as a baseline range. And that assumed that finance receivables would be relatively flat. The guidance you see in 2011, I think, is reflective of strong performance in managing working capital, capital expenditures, actually a little bit higher than 2010 assumption. We really did a good job of managing the capital, but we know we have investments to make to achieve that extra $100 million of Strategic Transformation benefit. So that's factored into our guidance as well. And there was some small one-offs in 2009. So we think 2011 is reflective of the underlying strength of the business. If we have strong sales growth in terms of leased assets beyond 2011, then that may bring that number down a bit. But that would be only a very positive thing because of the long-term benefits of the streams that, that would produce. Shannon Cross - Weeden & Co. Research: Just on the overachievement that you're seeing in terms of the cost savings. I mean, do you think you were just too conservative when you initially went about it? Because $100 million is a lot of incremental cost savings. So I'm just curious as to sort of if this was a surprise or just you had a range and it's kind of at the high end, or just how we should think about that?

When you enter a program like this, you analyze a lot of the business and you create some estimates of what you can do. It's not until you really get into the program and really begin to implement that you know for sure what you're capable of doing. And the positive virtue of this type of program is it sort of continues to -- you continue to identify incremental opportunities as you implement along the way. So I think while we were conservative relative to what we thought we can do, as we got into the program and started to realize the benefits, we were also able to identify additional opportunities. So I think it's a skill set that we built into the organization, and we look to continue to be efficient and effective and focus on variable cost as we go forward.

I think, Shannon, also in that regard, in a more normalized environment, it might have been more difficult to have an organization move as quickly on the benefits. But when everyone within an organization sees what's happening in the world, it is much easier to bring everyone rallying around what needs to be done and let's just get it done and not drag out getting things done. So we've been able, as Mike said, to bring some programs forward and add incremental programs and have the whole organization aligned around doing this quickly and effectively, particularly when they see us investing back in the business to make this sustainable. It's an easier thing to take things out than to ensure they stay out and that you put in the processes and the capabilities to ensure sustainability. And as the organization sees that happening and sees the capabilities going forward, an enthusiasm does build that allows you to accelerate, and we have experienced that.

Our next question comes from the line Ananda Baruah. Ananda Baruah - Brean Murray, Carret & Co., LLC: Mike, I was wondering if you can walk through, I guess, the dynamics of the Small & Medium Business recurring revenue slowdown that you were taking about that's going to impact this year?

Sure. Basically, the three key revenue streams from a recurring nature that are around our core business are the supplies business, the rental business and the financing business or revenue streams. Those revenue streams are really, in many ways, linked to both the installed base as well as the leased asset base that we have on the books. And over the last few years, as we've highlighted, we had a contraction in equipment sales through the economic downturn. What that did is allowed certain finance receivables to run off, and we weren't replacing them at the same rate. And when you have that contraction in the base, you lose some of the rental revenue associated with that or if a customer down trades and gets a smaller meter. The financing revenue is tied to the earnings off of that asset base. So if it's come down, that finance revenue is going to be somewhat less. And obviously, supplies are tied to usage, and we saw some mail volume contraction. So those things have, I'll say, a lag effect relative to when you see the decline in sales activity. And so since the typical lease period is four years, we have some lag effect that runs off. And I think we identified at the Analyst Day that we thought there was a 12- to 18-month lag effect or thereabouts to the recurring revenue streams after sales begin to turn positive. And since we've seen sales turn positive in the latter half of 2011, we assume they continue to be flat-to-positive in 2011 as we have in our guidance. Then, we should see that lag effect continue to diminish. What we wanted to do is call it out clearly and separate it from the underlying strength in the business and the growth in the business and the contribution of Strategic Transformation, so that it was something that you could clearly see from those line items. And quite honestly, I think if you look back over the last several quarters and look ahead, as we go announce earnings, the expectation is that we will see an improving trend in those lines. Ananda Baruah - Brean Murray, Carret & Co., LLC: On the ongoing investment in Volly, is that something -- or the investment in 2011 in Volly, is that something that we should expect to continue into 2012 in a way that it'll need to be called out or will it even be offsetting -- do you think it'll be offsetting your investment with a revenue by then?

I think that's it's a little early to tell. We'll be able to give you a better view of that as we get forward further in the year. I think, from a conservative point of view, you would carry it forward. But we'll give you a better indication as we get into the second half of the year as to how long we would assume a net negative in investment as that curve starts to kick in. Ananda Baruah - Brean Murray, Carret & Co., LLC: I guess, just on buyback, looks like you guys are ramping up the buyback a little bit here and the language that you guys used on the call is you intend to use the full $150 million over the next six quarters. Can you just clarify that as a statement? Number one. And then number two, I guess, sort of we've gotten the sense, I guess, the investment community, over the last 12 months, that you guys are actually -- you view ongoing buyback quite favorably as long as the cash flow generation is there to back it up and you feel good about the business. So might we expect, I guess, ongoing increases in the authorization now as part of, I guess, the business practice for the foreseeable future?

Ananda, as you know, we try and take a balanced approach to returning capital to shareholders. And obviously, increase in dividend is a vote of confidence by management and the Board about our ability to generate free cash flow and deliver return to our shareholders. We think share repurchase is one tool available to us. And the authorization, again, I think is a statement by the Board that if and when we find it valuable to repurchase shares, we have the $150 million of authorization available. And the 12 to 18 months as a time frame over, I think, is relatively consistent with how we utilized it in the recent past as we did $100 million in 2010. So I think that's the framework in which we should look at it.

I think also, Ananda, we consider this. Certainly, we are generating and expect to generate continued strong cash flow, which, as we've said, would be utilized for dividends, for each share repurchased and for expansion in the business. We have really held back on external expansion in the business. We did acquire Portrait last year, which is proving to be an excellent addition to our portfolio, supplying us with great products and growth. So I would say, as we have previously stated, that it depends on what opportunities are available or not available, and we take all of that into consideration in deciding what to do with that cash. So it will continue to be a balanced approach as we look at things from what we do with, as we're doing here, organic investment in the business to grow some very exciting future revenue streams, as well as adding capabilities that will continue to grow the business. As Mike noted, we've had a very significant shift in our business this quarter. The Enterprise segment went over 50% of the business. We have been able to maintain, even with that shift, the very significant margins and being able to hold our EBIT margins in the same range as we've transitioned the business. So I think we've had a very effective move that we had planned in the business. It's continuing to execute, and we'll continue to utilize the same strategies of share repurchase, dividends and investments in the business and new opportunities.

[Operator Instructions] And speakers, we have no further questions in queue at this time.

Okay. Thank you all for joining us. Just a little summary, as you heard in 2010, we saw improving trends across our business. In the small business group, we've had two consecutive quarters of growth in equipment sales, led by Connect+ and Production Mail. And as Mike discussed, that's very important to us on our looking forward. In the enterprise space, we've had two consecutive quarters of positive year-over-year revenue growth, led by Production Mail, Software and Mail Services. We achieved $120 million in net benefits, which is up significantly from where our target had been. Our adjusted earnings per share for the year was $2.23, which was in excess of our guidance. We had excellent free cash flow supporting the enhanced returns to our shareholders, giving us the 29th consecutive year of dividend increases. Our share repurchase authorization was increased to a total of $150 million. And then as we look in 2011, we're looking at a return to revenue growth moderating declines in that SMB revenue stream that we've talked about. And then looking at projected net benefits growing to $250 million to $300 million from transformation, which is up $100 million. Planned investments in Volly, which is a very exciting market development. And I'd encourage you to go to volly.com and see what the product and solution is and how it migrates over time. And then, continued very strong free cash flow as we go into 2011. So overall, I think it was a great end to 2010, positions us for 2011, setting a great foundation for us to build off of as we move 2011 and beyond. So thank you, all, and look forward to speaking with all of you in the future.

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