The year 2009 provided unprecedented challenges to the global economy, altering normal business cadence and significantly disrupting business access to capital. Through this period Pitney Bowes remained a strong, profitable company that continued to generate strong free cash flow, maintain unencumbered access to capital, and provide an excellent dividend to its shareholders.

While remaining a financially strong company, we were impacted by the economic downturn and experienced declines in both our revenue and adjusted earnings from continuing operations during the year. Despite these challenges, we continued to advance our initiatives to reduce our fixed cost structure, invest in new products and services, and build new partnerships for the future. Even after our investments in the business, we were able to reduce our selling, general and administrative expenses by more than $170 million when compared with the prior year.

Our revenue for the year was $5.6 billion, a decline of 11 percent, of which more than 2 percent was related to unfavorable currency impacts. In 2009, our adjusted earnings per share was $2.28 per diluted share. Our earnings per diluted share from continuing operations on a GAAP basis was $2.08, which includes pretax charges of $49 million, or $0.15 per diluted share, related to the strategic transformation program we initiated in the third quarter of 2009. Our GAAP earnings also include $0.06 per diluted share for a non-cash tax charge associated with out-of-the-money stock options, and a $0.01 benefit related to certain leveraged lease transactions in Canada.

We again generated strong free cash flow. For the year our free cash flow was $889 million as a result of aggressive management of capital expenditures and lower levels of finance receivables. We paid $298 million in dividends to our shareholders and used a portion of our free cash flow to reduce debt by $242 million from year-end 2008. In addition, our liquidity position remains solid and we continue to maintain strong investment-grade credit ratings.

Despite the challenging economic environment, several areas of the company demonstrated strong performance. Mail Services achieved both positive revenue and profit growth as it continued to gain market share. The benefits of our cost management actions were also evident in the results of our software, management services and marketing services businesses, which all achieved higher profit as well as profit margins despite lower year-over-year revenue. The global mailing and production mail businesses were adversely impacted by lower customer capital spending and declines in mail volumes in key end markets.

In November, we provided an update on the series of initiatives we designed to transform and enhance the way we operate as a global company. These initiatives, which we expect to complete over the next two years, include:

• Implementation of enterprise-wide systems and common platforms to improve and streamline corporate-wide processes.
• Enhanced use of technology to enable the company's customers to more easily interact with Pitney Bowes when and how they choose.
• Expansion of the company's agile workforce strategy to be closer to our customers and rationalize our worldwide facilities requirements.
• Utilization of enhanced procurement processes.
• An increase in shared services across business units, including an increase in outsourcing relationships.

We are targeting annualized benefits, net of investments, from our strategic transformation initiatives in the range of at least $150 million to $200 million on a pretax basis, and a related reduction in the number of required positions in the company. We expect the full-run rate to be achieved by 2012. We expect that the total related pretax costs associated with this program will be in the range of $250 million to $350 million and that most of these charges will be cash-related.

As we look ahead to 2010, we expect improving year-over-year performance, primarily in the second half of the year as the benefits from our strategic transformation start to build. In addition, we have continued to invest in new products and solutions for our customers and expect our recently announced strategic partnerships to begin to contribute to growth.

These factors have given us the confidence to increase our dividend for the 28th consecutive year. We were pleased that our Board of Directors decided to increase our dividend to $0.365 per common share for the first quarter of 2010.

We believe we are focused on the right priorities to deliver value in a changing business environment. We are investing for growth while continuing to lower our cost structure. We are committed to providing our shareholders with an excellent return through an attractive dividend yield and renewed growth in earnings per share.

Michael Monahan
Executive Vice President
and Chief Financial Officer