Good afternoon, and welcome to the Pitney Bowes Fourth Quarter and Year-End 2011 Earnings Results Conference Call. [Operator Instructions] Today's call is also being recorded. If you have any objections, please disconnect your lines at this time. 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.

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 2010 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?

Thanks, Charlie. Good afternoon, and thanks for joining us today. Let me start by sharing some thoughts on our business. Mike will follow with the details on our fourth quarter and full year results, and I'll provide full year guidance for 2012. After the presentation, we'll take your questions. 2011 was a year in which we continued to make progress in laying the foundation for longer-term growth and value creation. We are pleased that we were able to achieve our original earnings objective and exceed our cash flow target despite a business environment that remained unexpectedly challenging throughout the year. As part of our Strategic Transformation program, we continued to take actions to streamline our business processes and improve the way we interact with our customers. Our cost structure is now more variable and efficient, and, as a result, we achieved EBIT margin improvement for the year on our adjusted results despite lower revenues. However, before I discuss some highlights of our fourth quarter performance, I want to put our long-term growth strategies into perspective. Our growth strategies are grounded in an understanding of the fundamental changes in the way businesses and customers communicate. Historically, when businesses communicated with customers, it was largely around transactions and primarily through physical channels. The business communications landscape is much more complex today. Now businesses are communicating with customers more frequently through multiple channels in an effort to stay connected in hypercompetitive global markets. Customers are seeking more control as they search for timely, relevant offers in the midst of an abundance of information from multiple sources. Digital Communications continues to increase through -- though physical communications remain an important part of the overall communications mix. Businesses are struggling to reach all of their customers with the right offers in the ways that their…

Thank you, Murray. Our revenue for the quarter was $1.3 billion, a decline of 6.5% when compared with the prior year. Currency this quarter had no impact on revenue. As Murray noted, revenue was adversely impacted this quarter by lower SMB sales and some deferred enterprise deals, especially in Production Mail and Software, as well as continued economic uncertainty. Breaking down our revenue for the quarter between U.S. and non-U.S. operations, U.S. revenue declined by about 8%. Outside the U.S., revenue declined by 2% versus the prior year. Non-U.S. operations now represent 33% of our total revenue. Turning to adjusted earnings before interest and taxes. Adjusted EBIT was $239 million for the quarter. Adjusted EBIT margin was 17.8%, which was a decrease of 20 basis points versus the prior year. Adjusted EBIT margin was affected this quarter by our planned investment in Volly. Excluding our investment in Volly, EBIT margin would have been 40 basis points higher and would have improved 20 basis points versus the prior year. Adjusted EBIT was also impacted by the decline in our Software revenue this quarter, as well as the anticipated decline in our rentals and finance revenue streams. Favorable margins in Mail Services, International Mailing and Marketing Services were somewhat offset by the margin impact in Software and rental financing and supply streams in North America. SG&A in the quarter declined by more than $20 million when compared with the prior year. SG&A continues to benefit from our ongoing productivity initiatives. On a segment basis, EBIT margins this quarter improved year-over-year in 4 of our 7 business segments. Both of our SMB segment businesses improved their year-over-year EBIT margins for the fourth consecutive quarter, and our Mail Services and Marketing Services businesses also had improving EBIT margins. Production Mail, excluding the Volly investment,…

Thanks, Mike. Now I'd like to turn to our guidance for 2012. We expect 2012 revenue, excluding the impacts of currency, to be in the range of plus or minus 2% in growth. Our outlook anticipates improving revenue trends versus last year due in part to a number of initiatives designed to drive new growth opportunities. The guidance reflects a postal and economic environment that is not expected to improve nor deteriorate significantly over the next 12 months. We anticipate gradual improvement in our SMB equipment sales in 2012, driven primarily by the positive outlet for sales of the Connect+ digital marketing system on a global basis, which will also result in fewer lease extensions by customers. We have previously discussed how lower equipment sales in prior periods affect financing, rentals and supplies revenue streams. As a result, we expect declines in recurring revenue streams but at a moderating rate as equipment sales improve. In 2012, we expect growth across our Enterprise businesses as well. We anticipate continued growth in Software revenue due to increasing global demand for customer communications management software solutions, such as those that manage data, target prospects and use location to make offers more relevant. We also expect increased placements of IntelliJet color printing systems in Production Mail, continued expansion in Mail Services and benefits from a focus on legal, commercial and government sectors in our Management Services business. Based on our revenue expectations, our 2012 guidance for diluted earnings per share from continuing operations is in the range of $2.05 to $2.25. Included in these earnings expectations are higher costs associated with our pension and benefit plans, increased investment in Volly and a mix shift resulting from faster growing, yet relatively lower, margin Enterprise businesses. We expect to generate free cash flow for 2012 in…

[Operator Instructions] And our first question will come from Chris Whitmore with Deutsche Bank.

I wanted to ask about revenue guidance, some revenue expectations, specifically around equipment placements and some things you're doing to drive equipment. Can you give us some color around specific growth initiatives that you're driving to improve equipment trends? And can you talk about where we are in the renewal cycle and lease cycles within your installed base? And how does that look over the next 6 to 12 months?

I'll start and then Mike can add more color to it. First of all, what we're seeing is we've seen Europe or international now run positive for the last 3 quarters. And we expect to see the rate of that -- of decline we experienced this year to decline in 2012. Now that will happen due to a number of things. First, the Connect+ product. That continues to expand around the world, and we continue to place that here in the U.S. We will see that affect our lease renewal business by having less lease extensions. And as we've described before, a lease extension gets about 70% of the revenue that we get from a lease upgrade. So as that continues to roll out, we expect to see that benefit. Then, in addition to that, they continued to roll out of our digital services around our existing meter base will also be a positive in expanding our reach into the meter base itself. At the same time, with Connect+, as you're aware, it uses color and, therefore, ink will begin to become a better part of the growth going forward. So I think those are the general items. Also, inside of international, we've seen Canada now move to a net positive. So units are actually growing again. So as we look at the different parts of the world and where they are in the economic environment, the U.S. is trailing some of the areas and slightly ahead of a few. But generally, we expect to see that move in a positive direction.

Yes, Chris, I would just add that we did see even in the fourth quarter a greater use of cash for putting rental assets into the marketplace, which is in line with the expansion of the Connect+ placements.

So if I look at the past 4 or 5 years of equipment sales on a rolling basis, it looks like, in 2011 versus 2010, that number actually decelerated incrementally. Is that a good way to think about the value of the installed base and the recurring revenue streams going forward? Or is there something that would help firm up those recurring revenue streams?

Yes, I think there's a couple of things that affect the recurring revenue streams. Also, there's one other element that affects the equipment sales line, which is the Production Mail business. A good portion of their revenue goes through that equipment sale line as well. So you have to look at that on a year-over-year basis in terms of its impact on that line, all in. But to your point, the equipment sales is the starting point of the building of the asset base and the finance receivable base, which drives financing income. And obviously, the placement of rental supplies, as Murray said. The high end with color is going to be an opportunity for greater supply streams. So it is sort of a leading indicator for the future growth of those or improvement in those trends.

Okay. And I wanted to ask about the impact of the fire on income and how that flowed through the P&L. Can you help us out with that?

Sure. In terms of the fire, as you know it occurred in February. And for the bulk of the year, we were in the process of temporarily moving that volume to other locations. It affected our ability to qualify the mail for full discounts. Subsequently, we built out -- obviously incurred the cost to build out a new facility. We're now up and running and, in fact, saw the profitability improvement come back as we've moved that mail back into the Dallas facility, which happens to be the highest-volume facility in our network. So we anticipate that, that's going to be a positive contributor going forward. We obviously lost a lot of the income early in the year, and then we've received some of the insurance benefits in the latter part of the year. So next year, we should have a much more normalized recognition of the income over the year.

And did that come through in other income or in segment results?

It's in other income.

Your next question will come from Shannon Cross with Cross Research.

My first question is with regard to cash flow expectations for 2012. Mike, maybe could you walk us through sort of the puts and takes? Because your basic guided [ph] Income, net income [ph] , it seems there'll be lower tax benefit. FR is going to shift, I guess. You -- will it still be a use of or source of cash, that's less of a source of cash? And then also, what we should think about for pension funding for 2012. So I'm just trying to figure out, from the $1 billion that you did, if $700 million to $800 million is sort of where we should be within that.

Sure. Probably, the short cut to it, Shannon, is to look at what's the difference between '11 and '12. And the principal difference is the tax refunds that we received and the higher income associated with the tax settlements in 2011. Effectively, I think the -- that the change in the finance receivables, which should be less of a source of cash, will probably be offset pretty much by reduced payments under the Strategic Transformation program as we begin to wind down payments associated with that.

Okay. And then from a pension standpoint, you needed $123 million, I think, it was this year? What...

Yes, we will probably be less than that, maybe in the $85 million to $100 million range, as a potential contribution.

Okay. And that's helpful. Can you talk a little bit about linearity during the quarter? And maybe again, because you're expecting what, a better revenue picture, as Chris was talking, about versus sort of how fourth quarter looks. So within Managed Services, has there been an improvement in terms of contract signings? Within your other businesses, have you started to see financials maybe at least return your calls when we call to see if -- when you call to see if they want to buy some equipment? Just anything you can give from a color standpoint, both vertical as well as geographic.

Sure. So on the Management Services side, you did hit the nail on head. We did see improved written business at the end of the year, both in the U.S. and in the international space. So that's one of the leading indicators, obviously, for that business in terms of improved revenue. And there's an installation process that goes with the contracts. But we put a focus in that business around 3 key verticals, and we're beginning to see some of the benefits of the actions that they've taken there. The aberrations in the fourth quarter from trend were around the Software business, which we saw a good strong growth through the first 3 quarters. In fact, for the full year, they were up 9% in revenue. We saw some delays of accounts at the end of the year and, I think, timing on some things. We would expect that to be a growth contributor in 2012. So versus the fourth quarter, more in line with what they had seen over the course of the full year of 2011, certainly in the first 3 quarters of 2011. In terms of the mailing business, I think we touched on that in terms of, obviously, Connect+ is an important product for us. As well as, Murray mentioned there's a number of digital products that have been launched over the course of 2011, and we're beginning to see some uptake on that. But they're recurring revenue-type products and low dollar value per unit which you build over time, not unlike what we did in the small and meter base. So we would look for that to contribute over a period of time.

Okay. Also, Shannon, DMT, which we also saw light in the fourth quarter, we saw significant delays, particularly in the financial sector in the U.S. So that is -- as you're aware, that business tends to be a little lumpier and is a little more financially sensitive depending on what is happening in the markets. But as we've said before, those deals are usually timing related rather than whether they exist or not. And it isn't that any of those deals were really lost. There's really just timing. And as we expressed in prior periods, they tend to bounce back fairly well. In Europe, our written business actually was up in the DMT space versus softer in the U.S. in the fourth quarter. So we'd expect to start to see that becoming more like it historically has been as we get through 2012.

And just to clarify for anyone, DMT, as we talk about, it is equivalent to the Production Mail segment as we report it.

I'm guessing, given the $26 million settlement that they announced today, that the banks will need new equipment to send out all those restructured mortgages. My last question just on Volly. You talked about increased investment in Volly and, clearly, a lot of partners. I'm curious as to sort of when we'll see a push from a marketing standpoint or -- and just kind of how -- what have been their responses? I mean, I'm sure you've done marketing in that. Just -- and just any ideas on sort of your thoughts on Volly progression through the year?

Sure. What we've been focused on, Shannon, is the signing of billers, and then the next phase is the implementation of those billers so that their data can move forward. Because as we looked at the research, and this is why we've held back from going to the consumers with the product, is if a consumer gets a product and there's no content, it is not considered valuable. And then when content appears, it's actually a negative and you have to resell it. So we are continuing to hold back until we get the content from the billers. We have announced earlier in the week that we are over 40 billers that we have signed. They have over 5,000 billers inside of those 40. So we need to now place the technology into those 40 sites. Those 40 sites now need to work with their 5,000 to get the feeds in. So we'll have one central feed from each of those sites, but we need to connect all of the others. We would expect that somewhere in the midyear to third quarter, those connectors would be in place, along with the additions that we're expecting to -- we're going to continue to grow that over the next 6 months, but we already -- if all of those were connected, that is already in the billions of pieces that could be moved digitally. So that is our drive, is to get the connectivity there, get the pipes in place and then be able to go live later in the year and consumers be able to get actual data when they turn the system on. So our investment will continue in building out the pipes, et cetera, and you really won't see us going to marketing until we are close to the launch date.

Our next question is from Ananda Baruah with Brean Murray. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Just going back to, I guess, sort of linearity coming into the March quarter, can you give us some sense of how we should expect, I guess, sort of revenue to layer in through the year? It sounds like you've had -- you've seen sort of some firming in business. So should we maybe expect, I don't know, a little bit more in the March quarter, June quarter than typical? Or if not, can you give us some help there?

Yes, I would say obviously, we only give the annual guidance and don't sort of look at it on a quarterly basis in terms of how we talk about our guidance. But what I would say is that clearly, the recurring revenue will be affected by the equipment sales. So we would expect that, as we've stated here, to be improving over the course of the year, but we need to see the sales improvement to drive the recurring revenue improvement. I think the other businesses clearly, looking at the opportunities we've -- like everyone, saw a challenging economic environment. Some verticals can be affected more than others. But we believe that the -- particularly the enterprise businesses, we should expect to see growth out of those in the course of 2012. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Okay, got it. So I guess that sort of seems like you're saying maybe -- I know you don't give guidance, but -- I mean, quarterly guidance, but softer seasonality for the March quarter than you guys typically see? I mean, that sort of sounds like what you're saying.

No, we're just not going to go there on the seasonality. It's obviously one month into the year so far, so... Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Got it. Okay. Got it. And then can you guys, Murray or Mike, could share with us? Are there any metrics for, I guess, the smart-based solution that you can provide? Sort of illustrate what kind of, I guess, traction you guys have seen? So far, I think -- I don't know if it was Mike or Murray, but one of you mentioned this being good. But I think Murray mentioned there was good momentum so far. Can you give us -- can you sort of help us there?

Sure. So we will be -- starting to be more aggressive in marketing as we go through 2012. But even with -- we wanted to be a little conservative as we launched the products and moved into cloud-based services. But we have now seen over 10,000 users come on board with the SmartPostage. We've seen connections now dial up into well over 1,000 marketers, more than 3 times that. SmartCodes is in the same area. So we're starting to see traction, both in our customer base for enhancing how they reach their customers and new customers. So I think the momentum is actually starting to move there and as we begin to market that across our existing customer base and bundle those things together. So we've talked about sort of triple play-type offers. We can provide our existing customer base or new customers multiple new services at very attractive rates rather than the stand-alone. So I'm sure you're familiar with the way cable and telephone does that. That's the way we'll be taking it to market. And we'll be looking in 2012 to reach a high percentage of our installed base with those products. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Got it, that's helpful. And I guess you guys have been shipping -- is it Connect+? Has been 5 quarters now you've been shipping Connect+?

Yes, it's since mid-2010 in the U.S. and then more recently across a number of other markets, particularly in Europe, Canada. And we're yet to launch in France...

Germany.

And Germany, which have a longer tail for approval process and all. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Got it. What -- you guys -- and can you give us any sense of, I guess, how much of the installed base is on Connect+? And can -- I guess that's the installed base that's eligible for the smart solutions, correct?

No, smart solutions actually can go across the entire base but are probably even more applicable to the very small customer base. The way Connect+ works is it has an interface that actually allows access to a number of applications that are unique to high-volume mailers as well as the pbSmart family of products.

So if you think about the life cycle of leases as around 5 years and the product's been out just over 1 year, that gives you an idea of what is available for -- in the coming years for transition. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Got it, got it. That's helpful. And Mike, I guess on the -- just on the operating margins assumptions that's sort of impled in the guidance, so it sounds like you're guiding margins down sort of more than revenue. So I guess the low end of the operating margin guidance is sort of lower than 2% down, which is the low end of the revenue guidance. And if you're not doing that, please, please correct me. But I guess the forces that you mentioned that are -- the different levers on there that are incremental are sort of -- it sounds like increased Volly investment from last year? Can you give us what that is implied in the guidance this year? And then, I mean, what the increase in pension cost is and what the impact from the Enterprise mix will be?

Sure. So if you take the midpoints of our ranges just as a way to compare, the key drivers of the difference, I would say, between our earnings this year on an adjusted basis and what's proposed next year is principally the pension and the incremental Volly investment. So pension is probably in the range of $0.04 to $0.05, and the Volly investment could be a broader range than that. It could be from $0.03 to $0.07, in that range, potentially. And that really goes back to Shannon's question of the timing of when we go to the market, how much marketing spend against that. So we've sort of planned for a wider range there until we see exactly how we go to market. But the biggest variable on that would be marketing expense. So that puts you at more or less a push, and the other drivers in there are, obviously, we anticipate faster growth in the Enterprise businesses than the SMB business, which has, on average, a lower-margin profile. And then we have the benefits from our transformation program that are mitigating that. So to give you an idea of -- about how that works out. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: And the $30 million run rate, or was it greater than $300 million run rate ultimately? When do you expect to be at that run rate, whatever it is you guys envision?

We will be, I think, at that run rate throughout 2012. And obviously, as we noted, we've been implementing some additional programs that we approved for at the end of 2011. We don't anticipate any significant charges in 2012 related to transformation. We're really shifting our focus, one, to finishing what's in flight, and, two, to a continuous improvement process that we looked to with reinvesting some of the savings that we generated. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: And I have a last one. I know I've asked a bunch here, so I apologize. But can you give us, I guess, an early take on what the Volly business model might look like in terms of operating margins, structure, if you -- I don't know if you look at it kind of Phase 1 and then to maturity and, I don't know. However you would care to characterize this for us. And I guess any sense of what the profitability could like -- look like at some point would be helpful.

Yes, given the early stage of it, obviously the business model is going to evolve as we roll it out and understand how consumers respond to it. The main element of revenue in the near term is obviously providing the digital delivery for our billing customers at much reduced cost for them. But obviously, we participate in a bigger part of the transaction. So that would be the core revenue source. Ultimately, this is a software-based model or web-based model that should have the leverage of that type of business. But that comes with, obviously, the significant user base. Ananda Baruah - Brean Murray, Carret & Co., LLC, Research Division: Got it. Any idea, I mean, any sense of like how many users you need or what volume you need or anything like that to hit that?

It's really early stages today to have that kind of thought because there's a lot of variables around how many bills per consumer, the acquisition costs and all that. So as we evolve, the model will obviously give some more clarity around it.

Next, we have Julio Quinteros with Goldman Sachs.

Just a couple of housekeeping questions. On the restructuring payments for 2012, would you guys size what you expected for total restructuring payments there?

In terms of cash out, it should be something less than $100 million. Probably, I would say in the $70 million to $100 million -- or, I'm sorry, $50 million to the $75 million range.

$50 million to $75 million, okay. And I heard you make a quick comment on the pension, but I just want to understand the pension assumptions that you guys are currently running in terms of returns and discount rate. And then the P&L impact, if I -- I think you sized it. I just didn't catch the number there.

Yes. I think in terms of the P&L impact for 2012, we think it'll be about $0.04 to $0.05. The biggest driver of that is the discount rate. That's come down to 65 basis points to 495. We also had a slight reduction of about 25 basis points on the return assumption, which is at 775.

Okay. And then -- so that's one part of the higher expenses. And then the other part is some investments that you guys were making for Volly. But could you guys size what you expect it to be, the sort of incremental expenses for Volly as we went through 2012?

Yes, I gave a relatively wide range because the big variable on it is when we go to consumer market and what exactly the marketing spend would be versus our customer acquisition strategy. So I gave a range of it's probably in the neighborhood of $0.03 to $0.07.

And then maybe just to characterize the -- or help us to understand the demand backdrop. Clearly, the minus 2 to the plus 2 range, if you had to sort of parse on one side the pieces that you actually had growing or expected to grow this year versus the pieces that are actually still expected to be a drag, is there 2 or 3 major things that we can sort of take away as positive drivers for growth versus the continued negative side that would be the more -- the pieces that are actually still expected to be in decline for 2012?

Yes, I think the key driver will be higher growth in the Enterprise side of the business. That's the key drivers. And that would likely be the Software, Production Mail and with Mail Services returning to a more steady-state growth rate for that business.

And what about the drags?

On the drag side, it's principally going to be led by the recurring streams on the SMB side, which we need to -- sale side to possibly impact those.

But you have a product cycle that's helping. But underneath that, is it more new business formations or something else that would need to happen or to turn that into a...

That's clearly part of it. And then, obviously, the take rate on some of the new digital products is the other potential driver for it. But clearly, we still haven't seen the level of small business formations that we typically see a benefit out of in our low-end business.

Your next question is from Alex Latushkin with from Manikay Partners.

Just a quick question on the competition. I'm just trying to get a better sense of kind of where you are with Neopost. It seemed like their recent result was a little stronger, so I'm just trying to get a sense of what competition looks like. And then just a quick question on earnings quality. It looked like free cash flow is down 25% year-over-year, and cash from operations is down 40%. Just trying to get a little bit more color on what's going on there relative to the decline in EBIT.

If you're asking cash flow quarter-to-quarter, I believe third to fourth?

Sorry, year-over-year.

Year-over-year.

I'll answer the first part of that and you can come back to that one. On the competitive side, we are seeing basically stable in North -- relatively stable in North America from share point of view. I think you need to look at our results across the entirety of the business. There's a lot of our business that the other traditional meter companies are not in. And also, the change in some of the business models among some of the other people in the industry. But on units, we're staying relatively consistent on market share. In Europe and Asia, we've been tending on market share growth. So we have got the carry-forward on our stream revenue from a number of years ago, which has been the biggest negative. And that has been declining as to the amount of negative headwind that we've absorbed mainly from our financial services and our stream revenues of rental and supplies. So I think you'll see that stabilizing more as we go into '12 and forward. And then, Mike, on the cash flow?

Yes, on the cash flow. The whole difference is due to the fact that in the third quarter, the IRS allowed companies to defer their third quarter tax payments into the fourth quarter because of Hurricane Irene. And that makes up the whole difference. We made a double tax payment in the fourth quarter this year versus last year, we had just the fourth quarter payment.

We have a follow-up from Shannon Cross with Cross Research.

I just want to talk about your transformational program that you had in place. I mean, clearly, it's -- you're pretty much -- so you're very successful at it. How do you sort of think about future programs like this? And I guess I know internally you've kind of changed the way you look at costs, so I'm kind of curious how we should think about that and your thoughts on sort of restructuring going forward.

Sure. What's been really critical about this program is not just taking costs out but actually reinvesting into the business. So we've probably made nearly $200 million of investments back into the business, particularly around infrastructure items, creating more share in services, leveraging outsourcing, those types of things. We've made our cost structure a lot more variable, and we have the opportunity to continue to gain some benefits and efficiencies from the systems that we're putting in place. And they range anywhere from sales automation to service force dispatch on -- in real time. And a number of other infrastructure systems around IT, facilities, reductions and all that have given us a lot more flexibility in the business and enabled us to move resources from slower-growth businesses to higher-growth businesses and gain some efficiencies in things around product management and product development, around product hierarchy. So it's been a very comprehensive program in terms of not just reducing costs but changing the way we do business.

I think also, Shannon, as we've been focused for the last number of years, it's been around the transformation. It's been our primary focus, and it's very difficult to have a primary focus on transformation of the business and have the business highly focused on revenue growth concurrently. As we move to a more steady state where we have a new way of life, the focus on transformation now is transformation on the revenue side. So as we go forward, that's where our focus now -- we'll switch to -- from the original transformation focus.

And how do we think about -- you -- I mean, you're definitely more variable. Can you -- any way of sort of boxing how big your -- like what percentage of your costs are variable at this point, both on the COGS as well as on the SG&A side?

It's really hard to give the -- a single answer to that because it, as you would appreciate it, really varies from business to business. We tend to have higher fixed costs in the Software business around R&D and channel costs, and then much more variable costs in some of our other businesses. Management Services is a good example of where we've done a lot to variabalize [ph] our labor force. So it's -- again, it's hard to put one percentage on it, but I think the results are that even in a down revenue quarter, we've seen effectively 5 of our business units show margin improvement. And that's what we're focused on, on a business-by-business basis.

[Operator Instructions] We have no one else queuing up. So please go ahead with any closing remarks.

Right. Thank you all for all of your questions. And I'd just like to summarize with the following, that we are really are pleased that in 2011, we achieved our original earnings objective. We exceeded our cash flow target with over $1 billion in free cash flow. We continued to successfully execute on our Strategic Transformation program, exceeding our expectations with an estimated run rate of net savings in excess of $300 million, and we achieved EBIT margin improvement on our adjusted results. In 2012, we'll continue to build on our foundation for long-term growth and value creation. We expect growth across all of our Enterprise businesses, and we expect gradual improvement in equipment sales, as well as improvement in the recurring revenue streams in our SMB segment. Our focus this year is executing on growth strategies, expanding our CCM capabilities and continuously improving our customer processes and our operating efficiencies. Thank you, and have a great evening.

And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation, and for using AT&T's Executive Teleconference. You may now disconnect.