Good morning and welcome to the Pitney Bowes second quarter 2013 results conference call. Your lines have been placed in a listen-only mode during the conference call until the question-and-answer segment. 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. Marc Lautenbach, 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 and good morning. 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 2012 Form 10-K, Annual Report and other reports filed with the SEC that are located on our website at www.pb.com and by clicking on 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. Also, for non-GAAP measures used in the press release or discussed in presentation, you can find reconciliations to the appropriate GAAP measures in the tables attached to our press release and also on our Investor Relations website. Additionally, we have provided slides that summarize most of the points we will discuss during the call. These slides can also found on our Investor Relations website. Now, our President and Chief Executive Officer, Marc Lautenbach will start with a few open remarks. Marc?

Thanks, Charlie. [AUDIO GAP] for joining us this morning. In addition to disclosing our second quarter earnings results, we also announced this morning that Apollo Global Management has acquired our management services business for approximately $400 million. Before I discuss our agreement with Apollo, let me briefly talk about our second quarter results and where we are in terms of our strategic objectives. Following my comments, Mike will provide more color on the results and then we will open up the lines and Mike and I will take your questions. Overall I am very pleased with the results and how our teams performed throughout the second quarter. I feel good about our position in the marketplace and where we are headed into the second half of the year. As you may recall, at Analyst Day back in May, we outlined our strategy for delivering more sustainable value to our shareholders by unlocking the inherent value in Pitney Bowes. We told you that we would focus our efforts in three critical areas. First, stabilizing mail. Second, driving operational excellence and finally, growing our business especially through participation in digital commerce. Importantly, our activities in all these initiatives today but as we discussed at Analyst Day, the benefits will accrue over some period of time. During the quarter we made solid progress in each of thee areas. In terms of stabilize our mailing business, we continue to see lower rates of decline and recurring revenue streams in North America mailing. In fact, this was the sixth consecutive quarter that the decline slowed and importantly, very importantly, there are improving trends in equipment sales. This is significant and we believe we will continue to make progress. Revenue in production mail increased 18% and we finished the quarter with a higher backlog of orders…

Thank you, Marc, and good morning. As Marc indicated, we have taken significant actions over the last several months to improve business profile, lower cost and actively manage our debt. These actions are the first steps and very important steps to lay the ground work for our transformative journey. In line with our strategy, today we announced that we have reached a definitive agreement the sell the North American operation of management services to funds affiliated with Apollo Global Management for $400 million. We expect this deal to close later this year and we will treat this business as a discontinued operation in the third quarter. Consistent with the capital allocation strategy, we laid out at Analyst Day, we expect to use the net proceeds from the sale of this business to principally reduce debt. As a result of lower than expected first half operating performance for the North American operations in management services including pricing pressure on contract renewals and a longer than anticipated sales cycle for some of the new growth areas, future and near-term cash flows are now estimated to be lower than originally projected. Accordingly, the company has performed a goodwill impairment review as of June 30, 2013. As a result of pretax non-cash goodwill impairment charge of $98 million was reported. Additionally, and as we previously announced, we entered into agreement to sell the European portions of our management services business. We closed one transaction and we expect to close on the other in the coming days. The operating results and loss on sale related to these businesses are now reported in discontinued operations. From a financial performance perspective, during the second quarter, we had double-digit revenue growth in two of our business segments and flat revenue in a third segment on a constant currency…

(Operator Instructions) Our first question will come from Kartik Mehta with Northcoast Research.

Good morning. I just wanted to ask you a little bit about the North American mailing business, the decline in that business obviously a little better than it was in the first quarter. I am wondering, as you see improvement in the business, as you look at business condition, do you anticipate that this business can get at least flat by next year or what are your expectations for this business over the next 12 months?

I am going to resist the temptation of giving a specific number here. I mean, what we said at Analyst Day, and I think is the right way to think of it is that we think that business will stabilize. As a benchmark, you can look at mail volumes in the USPS minus 1% or minus 2%, [mail], slightly more than that, so I think I will stick with the words that we used earlier and we would like to continue to see that's improve (Inaudible) we did it close to flat.

Then you talked a little bit about the digital sales force and I am wondering will this be new sales people you hire from the outside or is it outside you transfer some of the people from other segment into this new area for the company.

Yes. The answer is yes and yes. I think, we got a great sales force as I indicated in the software business already. We need to help them build their skills specific to we think our very differentiated products, so I suspect to preponderance of our sales force will be a lot we have and will make (Inaudible). As Marc has gotten into business, he is refreshing and adding to his leadership team as well, so I think it's going to be a combination of both Kartik.

Okay. Then just a last question on guidance, Mike, just a clarification, is any of the proceeds that you are going to use for PBM is to pay down included in the guidance and the lowered guidance, is all of it because of PBMS or is there a little portion because maybe business conditions are a little bit softer than you thought?

Specifically related to Management Services.

And, is there any of debt, Mike, included to pay down the debt?

It is not. It would be obviously if it's late in the year when we closed it would not be a material impact.

Thank you very much. Appreciate it.

Next question will come from Ananda Baruah with Brean Capital.

Thanks, guys, for taking the questions. I guess just the first one for me is, could you comment a little bit more on the production mail backlog that you mentioned going into the second half of the year. I think you said it was up year-over-year, and if there were mailers that are actually kind of doing installed bases refreshes right now, so I would love to get some more detail around that and I guess typically how long could we expect the refresh cycle to play on production mail? It sounds like there's lot of (Inaudible) there is obviously impact this quarter as well and there's a follow-up. Thanks.

Sure. In terms of production mail business, obviously 18% growth is quite good that related to a couple of particularly large deals that got installed in the quarter. would not say that we think the production mail business is an 18% grow over the long-term. I think the important thing is that we are continuing to see the strong backlog and that backlog obviously gives us some visibility to the latter half of the year. So we think this business is on a good path. As the economy continues to improve, that generally freezes up the capital investments by our customers. So we think it will continue to perform solidly and obviously in the second quarter we had a particularly good result with a couple of big deals.

Thanks, Mike, and then, Marc and Mike, I guess the financing income was almost flat sequentially and that's very typical in recent years for the June quarter. So is that purely the result of the stabilization that we are seeing in the metering business or there are other dynamics there at play? Then finally, given that it was essentially flat in the June quarter, are we still at a point where we might start to be able to see some kind of sustained sequential uptick in the financing revenue. I know, we sort of talked about, for a couple of years, that was talked about, we are not there where we could see could growth yet. But I just want to get the proper context for that since we saw a pretty solid quarter there.

Sure, I would frame this very much in context of what Marc described. I think with respect to recurring revenue streams, we are seeing sustained improvement in all elements, including finance receivables. We actually saw our financing receivables come down very modestly in the quarter. So I think we are on the right trajectory. I think we are still little ways from it being flat but as we described we are looking for quarter-to-quarter at rate of decline.

Got it. Then just a last one for me, guys, right now. Can you give some sense of what the incremental, as you guys have defined them, cost base were through the business model, June quarters' March quarter? Just trying to get some sort of sense of what kind of cadence you guys might be putting yourself on track for?

Yes, I think it's hard quarter-to-quarter to project that specifically but the way we would look at it is, is we had a $4 million decline. We had about $7 million of, I would say, a combination of incremental spend on growth initiatives and one-time insurance proceed last year. That would say, net net, we had about $11 million decline in the underlying SG&A. I would say that's consistent with what our plans are but again it will vary quarter-to-quarter based on the actions we take.

Our next is going to come from George Tong of Piper Jaffray. Please go ahead.

This is my first PBI earnings call and I am excited to be onboard.

Welcome aboard.

Thank you. Can you talk a bit about your meter base trends in Europe and Canada? What your views in the sustainability of growth there and how much that growth can offset the declines you are seeing in North America?

On a relative scale, obviously the North American or U.S. meter base is the largest. We continue to see a good performance in both Canada and Europe in terms of sustaining and even marginally growing that base. The U.S. base is more of a rental business than in Europe. So you see that in the aggregate of our SMB revenue. You saw that our international revenue was essentially flat year-over-year. That has been in that pattern for the last few quarters as the combination of the impacts of the meter placements was offset by some recurring revenue challenges. So we think we have shown the international business can be stabilized and now will continue to look for improved performance in North American business.

That's helpful. You mentioned earlier that your guidance update reflects primarily the sale of your management services businesses. But I know that you also revised your revenue growth guidance to down 1% to 2% growth which reflects a continuing operations expectations. So can you comment on what drove that revision and what you are seeing in your core business?

Sure, actually similarly there is an impact of the management services business, as we talked about, I have seen print outsourcing as a growth driver in the second half of the year. So as we look at the moving that business to discontinued operations we reflected that in our overall guidance and then obviously we looked at overall performance year-to-date and net-net that was the change in guidance.

Great. Then last question for me. Digital Commerce solutions are obviously an important part of your long-term growth story. You have talked about [e-commerce] and a bit about Volly. Can you tell us about other initiatives you had going on in the second quarter? How those projects are tracking and how quickly you expect revenue streams from these various projects to ramp?

In terms of the couple of key initiatives, e-commerce is an important piece of that and we continue to see that ramp in the second quarter as we made investments in building out the infrastructure to support that and moving into additional countries. As you noted and as we noted here, Volly, we continue to invest in that. Obviously, as Marc noted, other investments come in the form of go-to-market strategies both, for our core mailing business as well as our software business, so we are making investments across the business. They just vary based on the business profile and trajectory.

Next question will come from Scott Wipperman with Goldman Sachs. Please go ahead.

Good morning. Thanks for taking the questions. Mike, I was just wondering if you could elaborate on the commerce and debt pay down. Should we be thinking about that as prefunding the 2014 maturity, or do you think you guys could look up the curve to reduce some other towers you might and I have a few follow-ups.

Yes. We are evaluating that. I think, both our options for us and obviously will look at the implications, particularly as we see what the markets look like, when we get to closing period, but those are obviously two options we are considering.

Got it. Then just on international mailing, I know there have been some prior benefit from the launch of Connect+. Does that turn into a tougher comps in the second half of '13. I guess, how should we think about the trajectory there?

Actually Connect+ continue to be a positive contributor this quarter. If you recall, we launched Connect+ a little bit later in both, France and Germany, and so we continue to have some runway in those markets. They usually take long as to get product approval. France is the second-biggest mailing market after the U.S., so we see some opportunity continue to grow around Connect+.

Okay. Great. Then just the last one, just outlook for restructuring in the second half of the year, if you could just remind us, recall that charges that you discussed at the Analyst Day, but how should we think about those going second half of the year?

What we described was the charges in the neighborhood $100 million to $125 million to drive cost savings through 2014 and we took the first installment of that in the second quarter $20 million. We will continue to identify initiatives as we go forward. Incorporated now in that obviously will be the impacts of separating management services business and that will play into greater simplification of our overall infrastructure, so we would expect those costs to continue to roll in over the next several quarters.

So, it's going to be through 2014 on non-restructuring charges?

Correct.

Got it. Okay. Thanks for all the questions.

Next question will come from Shannon Cross with Cross Research.

Thank you very much. Just had a couple questions. The first question I have is basically, can you talk a little bit about the changes, Marc, you discussed in your coverage model in the U.S. can you give us a few more details on the how you are shifting things and how we should think about it from a cost perspective, or cost benefit perspective?

Yes. So, the focus is to improve our coverage and become more efficient, so the specific tactics underneath that is we are adding inside sales and web capabilities to the go-to-market mix, so that we can reach our clients more cost effectively. So, as you contemplate the sales force going forward, there will be will be a higher mix of inside sales over time, a higher mix of web capabilities and proportionally less face-to-face sales resources. So we think the net benefit of that is when users leverage techniques of web and inside sales, you reach more customers more effectively. The results of the pilot have been the increased client satisfaction. In terms of the benefits that we believe, I think I would go back to Chairman, the numbers that we offered at Analyst Day, as we exit '14, $100 million to $125 million of growing rate of SG&A. So that's buried in there and I would say, the other important aspect of this that we haven't spoken as much about is all the stuff that we are doing to make the backroom more efficient. So when we talk about simplifying the operating model and focusing on fewer number of businesses, a fewer number of products and a more consolidated geographical model that will help us simplify the business model and make the back room a lot more efficient. So we will continue in that journey. You know this is something that Mike and the team have done very credibly before and turned $4 million out. So it's a journey we know but there is still plenty of opportunity in the business.

Great, thank you, and then can you talk a little bit about the sale process for the PBMS business. I think it was back in 2008, you guys had put it, obviously well before your time, but it had put on the market and right into recession there was obviously no interest because there was the recession and people were cautiously tight. I am curious as to how this came about and, it was a bidding process or did Apollo come to you? Just any color you can give us.

The first part of the process was a fairly thorough evaluation of the overall business and it was my conclusion and the Board of Directors' conclusion, that while this is a very good business, strong client with very low-end and great leadership team but ultimately there could be more outside of Pitney Bowes family, if you will. So based on that decision, we then began a fairly robust process with the market looking at first financial as well as strategic buyers that ran over the last several months and it ultimately culminated in a signature over the last 24 hours. I have seen a lot of divestitures, and acquisitions. I will tell you, this process was as robust as any I have seen in terms of soliciting input and big backup from the market.

Great. Yes, I know. I think it is probably the right move, given the strategy you might have. My final question is, just could you talk a bit more about linearity in the quarter. I know Mike, I think you had mentioned some weakness in Asia. You had also mentioned some strengthen in production as you got to the end of the quarter. I am just kind of curious as maybe on a geographic basis, if you talk about what you are hearing from your customers in terms of sort of the health of enterprise?

Yes. I would think we see North American very much as you hear generally in the marketplace that it's a bit up and down but generally the longer-term trend is positive. Europe, for us, has been relatively stable in a relatively unfavorable economic environment. So we don't see a lot of change there. When I speak about that, I mean, particularly our mailing business. Software, we have seen more of an impact from Europe and Asia because we have a fair amount of business with government agencies. So there is a sector elements of that underlying the individual economies. I think that that's basically what we are seeing and obviously very small business where it is particularly important to us in North America. It continues to be, I would say, cautious.

I think that's a fair characterization. We are certainly not immune to the government sector in terms of going on in the economies. That said, I do like our geographic foot print right now. If you look at where we are strongest, it's the United States. Relatively speaking, that's the strongest economy that we see around the world. In terms of Europe, we are deeply penetrated in Northern Europe, relatively speaking. That's stronger in Europe. And, if you look at where we are in Asia, our biggest footprint is Australia and Japan. Again, I like those economies, so rather fortuitously I like our geographic footprint. As I said, immune from secular trends, but I like how we are positioned.

Our next question is going to come from Blaine Marder with Loeb Capital Management.

Congratulations on the strong results, particularly in North American mail production mail. My question resolves around, Marc, you said in your commentary that you believe that the segment reconfiguration is not yet complete. And just seeing the dilutive impacts of the sale, how are you sort of weighing on one hand, getting low multiples for sort of higher-margin businesses and the dilution effects of selling when may be looking at buying some higher multiple businesses and so you are shifting the mix, but paying high multiples for acquisitions potentially and selling businesses that could potentially be dilutive. I mean, how are you sort of weighing that in the entire strategy? Thank you.

That's a rather involved question. Let me kind of take it up a notch, so, let me say definitively, we have not completed our segment work to reconfiguration ourselves and again what we are trying to do is put our growth business with our growth businesses and our businesses that we are running for cash together, so we expect that that will happen over the coming couple of quarters, so that's not a belief. That would be just a fact. In terms of the overall portfolio, the way that we are thinking about it is what's the most value that we can create. As it relates to PBMS in particular, my conclusion and the board's concludes, Marc's conclusion was that more value can be created outside of Pitney Bowes family than in. That has no level of (Inaudible) on the rest of the portfolio what we do for that was a micro decision. In terms of the dilution that's caused by the divestiture as Mike indicated and we have talked about again. We are working on the cost and expense structure that will speak to the dilution to a portion of the dilution that is created and will look at our ongoing options of going forward. That said, we are moving the business to places where we can drive more value. One would expect you would see that in improved margins of our business. In terms of going forward and you jumped a little bit ahead of me about in terms of acquisitions. Again, what we said about acquisition to be very disciplined focus and do those in a way that we again think we can drive a disproportionate value, so to the extent that we do them, we would do them in digital commerce space in software and you would pay a higher multiple for that, but we would only do that if we think it's accretive to the overall business and what we said was we would have to be accretive in a fairly short 18 months amount of time. So, I like the way that we are thinking about this equation. I think it's predicated in how we drive value. By the way, I would say not just value for Pitney Bowes, but I believe in the case of PBMS divestiture in particular I think Apollo is going to create a lot of value and I am hopeful that the employees see that value as well, so this is from my perspective win all the way across the board.

Our next question is going to come from Chris Whitmore with Deutsche Bank. Please go ahead.

Thanks very much. I actually wanted to follow up along that line of questioning and ask about balance sheet targets, leverage target and alike and whether you think that this asset sale gives enough firepower capital to move into that next phase of the strategy. Can you give us some thoughts around balance sheet capacity and willingness to put on debt or do you think you have enough you capital to execute that acquisition portion of the strategy? Thank you.

Yes, so, Chris, thanks for the question. In terms of the balance sheet, obviously, if we pay down debt with this, we think we will maintain our ratios in the neighborhood of where they are today, credit ratios. So obviously as we look ahead and would look at acquisitions, we would look at that in the context of its contribution to EBITDA and if we were to add debt we would look for growth in the business that would support that. But, as Marc said, we continue to look at the overall portfolio. We continue to look at obviously growing earnings in the business to drive the opportunity for leverage. So we are not committed on a particular path at this point but we believe disposition of this business will continue to strengthen our balance sheet overall.

Are there significant assets for consideration for monetization here?

I would say, we continue to look at our whole portfolio but this is obviously of the things we have done in the business thus for the most significant.

Yes, Chris, I would go back to the comments that we said in May. We are obviously not going to comment prospectively. We might do in the future. But we did set out pretty specific criteria for the business that need to be strategically coherent, you need to return an acceptable cost of capital and visibility into the marketplace. That was and is the criteria that we look today in the portfolio and all of that is predicated on the basic sense of how do we create great value. So while there were positive impacts through the sale of PBMS in terms of the balance sheet, that was not the primary motivation. The primary motivation was about value. I liked the balance sheet last week and I like it this week. So I think we have got a strong balance and as you and others have remarked, we have got a lot of opportunity to generate a fairly substantial cash flow organically going forward.

So, Mike, you talked about classifying the businesses as growth businesses and cash flow businesses. I know software is a key component of the growth strategy. However, that asset isn't growing. Can you give us some color as to the timeline and key milestones around getting that business to turn towards positive growth? Related to that, I am a little surprised to see the significant margin expansion in that business despite the softer topline. So can you help us understand the level of investment in that business and how that may be changing going forward? Thanks a lot.

Sure, it's a great question. So, again, we talked about digital commerce. That does not equal to just the software businesses going forward and that's one of the reasons I feel so strongly that I want to reconfigure how we report segments to be transparent to you in terms of how are thinking about the business and overtime how we run the business. So that's the first task. What we said at Analyst Day was that we believe it will take a couple of years to get that business growing at market rate. So that is our objective. Again, it's $4 billion to $5 billion dollars of opportunity and those markets are growing double-digit. So that's the timeframe. The important milestones along the way beyond getting ourselves configured, from a segment perspective, is what we did with the sales force. As you will recall, my primary insight in terms of what was required to get that business to grow was a specialized and dedicated sales force. We are starting that journey but it will take some number of quarters to build those skills in a way that we would like. But once we get ourselves configured, I think some of this becomes a little bit more clearly. The other key milestone along the way is what happened to some of our key offerings and products. So Mike talked about e-commerce and our volumes there. We talked about Volly. We talked about some others that will be important as well and we will add color to those as we go forward. In terms of the margins, the margins did improved sequentially. I would tell you that they are more akin to the kinds of margins I expect to see in a software business. I gather we do consider the first quarter somewhat of an anomaly in terms of what we saw for margins. The overall investments that we are making in this business today and going forward are consistent with how you run a software business, both from an SG&A perspective, as well as an R&D perspective. Now, within the software and digital commerce business, you businesses that are more mature, that require a little bit less of sales and a little bit less R&D and you have got businesses that are growing like what we are doing with the e-commerce and that require more investments and that's what happen when you cut these mosaic of business as you got different one way or different lifecycle, so that's how we are thinking about going forward and kind of what you would expect to see and what we try to do today not just in digital commerce and that conversation begin to allow the markers for you expect to see around digital commerce operational excellence in the stabilization of mail?

Thanks very much Marc. Appreciate the color.

Our next question is going to come from (Inaudible).

I have two questions. One is the marketing efforts, are there other major changes you need to make or is this just sort of evolutionary grind of hoard?

As you evolve the business, you always make changes. Some of those would be more substantial than others, but that is just a truism of business that you need to continue to move the business or values that will mean principally we make organic investment, we will continue to look at the portfolio both, acquisitions and divestitures consistent with what we laid out, but we are certainly not going to standstill. This is a great business, but there's a lot that we need to do to unlock the value and what you are seeing, if you step back and look at what's happened over the last 90 to 180 days is fairly remarkable in terms of the level of change and how the business is being repositioned. While not everything will be as dramatic as what we have announced in the last 24 hours or [anything] in the last 90 days we are in, but we aren't going to standstill. We are going to move forward and we move forward aggressively, because we want to lead.

The questions is the balance sheet. Is there goal, because it seems to me with interest rates where they are, you would want to keep as much debt as you can, because three, four, five years from it's probably not going to be this cheap.

Yes. What we have said is, we are focused on investment grade credit ratios and we believe that we have believe that we got a very solid balance sheet around that today. We think that with this divestiture we will continue to be in that position, so we are comfortable with whatever the debt portfolio is today and we will continue to manage that as we go forward.

Our next question is going to come from Glenn Mattson with Sidoti.

Hi, gentlemen. Just looking at equipment line, I am sure some of that surge in that business was due to some kick out from the March quarter, but even when you add those two together and do year-over-year comp of the first half, there were still pretty solid growth. Can you say possibly this is the first time ever seen maybe this cyclical upturn in that business?

In terms of the equipment sales line, obviously that's benefitting from the performance in the production mail business, so that's a very positive contributor to that. We have seen progression on a quarter-to-quarter basis in the North American mailing business and non solid sales performance in the European business, so it's a combination of those things that I think are very consistent with what we laid out of continuous progress meeting with equipment sales and driving recurring revenue streams.

Kind of add a point, we are talking about stabilization of the mailing business. We are talking more than just the SMB business. We are talking about the total portfolio of assets that we have around mailing business, but we can get back to you Glenn, whether this was the first time we have seen equipment sales increase in a while or not. I think it's a pretty important data point in our journey forward.

No. I would agree. Then just a little more on the eBay relationship, I am not sure if you guys breakout specifically what you did that business for revenue, but if you don't can you talk about the progressing at the pace we should expect and also the country that you have been exporting to for a couple of quarters now. Are you seeing further penetration within those with existing countries?

We are. We saw good sequential growth and we are about $9 million higher than last year in that business, and that has come not just from eBay, but obviously the broader e-commerce business and we have continued to see the penetration by offering it in more markets around the world but we are seeing improved penetration in some of the key markets which, not surprisingly, would be markets line Canada, the UK and Australia.

Your next question is a follow-up from Ananda Baruah with Brean Capital. Please go ahead.

Thanks a lot for the follow-up. I will try to be quick. Just with regards to the EPS guidance, I wanted to ask why seemingly the second half is a little bit firmer then it appears that maybe it could be, I guess the way I am looking at it is, this is why adjust out the $0.10 yield which you are backing out from the sale of management services. If I am assuming I am doing that correctly, it would suggest that EPS for this quarter, operationally, was $0.42 and if that's the case, then it would suggest you are guiding at your midpoint of new guidance for $0.37 for the September-December quarter. If I don't do it that way, it suggests that the guidance is $0.42 for the September-December quarter. I guess, given that regardless of how I do it, seasonality in the second half the year, particularly in December, of course, would be a little bit stronger and typical. So I would think that, with the run rate of $0.42 operationally and almost linearly through the year would be a bit conservative for the second half the year. So I just wanted to ask the question as to why would we see linear operational EPS through the year? Is there something going on that you are just being a little cautious? Or there is something that we should be aware of? Thanks.

Ananda, I would suggest that our guidance has not changed except for the exclusion of management services. There is a number of puts and takes here. So it gets a little complicated but essentially, if you take the range of $1.85 to $2, and you subtract the $0.23 that's assumed here for management services, that yields the $1.62 to $1.77 adjusted EPS that is consistent with our guidance prior with the exception of management services. So we are not projecting any change in our outlook for the second half the year.

Building on that, if you look at what's implied in the revenue in the second half of the year, the revenue is going to continue to sequentially improve. So, as Mike said, there is nothing mysterious about the guidance. It is simply airlifting PBMS out for the divestiture.

Your last question in queue at this point will come from Andrew Simon [ph] with (inaudible). Please go ahead.

Thank you. It is great to see the turnaround starting to take shape at Pitney Bowes. If you combine the proceeds from the North America divestiture and the European management services divestiture, and you take out the taxes and other fees, can you say what the total net proceeds are if you combined?

Yes, obviously, we have to finalize the transaction and the taxes in the third quarter or fourth quarter but we expect to be north of $300 million in terms of net proceeds. Obviously, as we have suggested, the bulk of that would be used to reduce debt.

Is that both deals, North America and Europe or are you just talking about the North America part?

In total. So the net cash on the European business is rather modest.

Okay, so you are saying that your free cash flow this year would be $575 million to $675 million or $625 million, if you just used the midpoint. You have had $230 million of free cash flow in the first half. But based on what you said, the first quarter was $107 million, the second quarter was $124. So you still have operating free cash flow coming in this year of $395 million and proceeds so quote 400 and then 300 of net proceeds. So you have $700 million of cash coming in this year, but you ended the quarter with $600 million of cash, so that's $1.1 billion of cash on the balance sheet at the end of the year, which is something between $5 and $6 a share. So, I guess, what I would like to know is you have $450 million of debt due in 2014 and $400 million of debt due in 2015. Can we assume that you will pay that off from cash on hand.

We have left $300 million remaining due in '14, but obviously part of closing the transaction, we are looking at our options around managing the debt portfolio, so you obviously totaled it all up to pretty big number. There is dividends and other things against that as well, but we will continue to provide insight into what we are doing as we go forward.

Okay. Well, I will just say that from my perspective anyway and forgive me for telling you it, but as we wait for the turnaround which I am confident we will be successful given your plans and history. It's nice to have our investment de-risked by some of the cash going to pay down debt during the time that we wait and also pay the dividend during the [time], but I am thrilled with the quarter and you guys are doing a great job. Keep up the good work.

We appreciate the input.

And the compliment.

(Operator Instructions) No further questions at this time.

Great. Thank you. I would just summarize, we made good progress. I am very pleased with where we are so far. If you look at the progress that has been made over the last couple of quarters, that said this is a journey, so we will continue to try to be as transparent with you as we can going forward and layout our markers for our progress. Thanks for your interest in the company. We really do appreciate. I thought the questions were terrific and we will look forward to talking to you soon. Thank you.

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