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Pitney Bowes Inc. (NYSE:PBI)

Q3 2009 Earnings Call

November 3, 2009 5:00 pm ET

Executives

Murray Martin – Chairman, President and Chief Executive Officer

Michael Monahan – Executive Vice President and Chief Financial Officer

Charles McBride – Vice President Investor Relations

Analysts

Vincent Lin - Goldman Sachs

Ananda Baruah - Brean Murray, Carret & Co.

Shannon Cross - Cross Research

Chris Whitmore - Deutsche Bank Securities

Steve Surrell - Conning Asset Management

[Lloyd Zeitman – Bernstein]

Operator

Ladies and gentlemen good evening and welcome to the Pitney Bowes 2009 third quarter earnings 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. Please go ahead sir.

Charles McBride

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 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 future events or developments.

Now our Chairman, President and Chief Executive Officer, Murray Martin, will start with an overview of the quarter. Murray?

Murray Martin

Good afternoon and thanks for joining us today. I’ll open by sharing some thoughts on the business environment, our performance and the strategic transformation process which we have begun. Mike will follow with a discussion of our third quarter results and then we’ll take your questions.

Pitney Bowes remains solidly profitable with a strong cash flow and an attractive dividend yield even as the global business environment remains challenging. Companies in most industries still have limited visibility and uncertain outlooks resulting in rising unemployment and ongoing caution about capital expenditures. These factors have contributed to depressed mail volumes in mail intensive industries. You can see the unfavorable impact of these business conditions on our top line performance during the quarter as we experienced lower equipment sales and related financing and rental revenue streams. To help mitigate these persistent conditions, we have taken significant actions to reduce costs and to enhance productivity over the past several quarters.

The benefits of these actions are becoming visible in our results. In the third quarter, EBIT and EBIT margins improved sequentially in six of our seven business segments for the second consecutive quarter. Year-to-date we have generated $666 million of free cash flow and used almost half of it to reduce debt and we are increasing our guidance range for cash flow as well as narrowing our 2009 guidance for adjusted and GAAP EPS.

We believe that the sustained nature of the recessionary environment is also driving some fundamental changes in the way businesses and customers connect, communicate and complete transactions in the global marketplace. This changing environment has the potential to provide us with opportunities to use our core strengths to deliver value in new ways within and beyond the mail stream. We wanted to increase our flexibility, enhance our responsiveness to a wider range of market conditions and expand our capacity to invest in growth in order to take advantage of these emerging opportunities. That is why we have been aggressively implementing a series of actions designed to help us navigate the current environment and strengthen our position for long term growth as the economy rebounds.

During the quarter, we introduced new solutions to the marketplace. We entered new partnerships to deliver more value to our customers worldwide and we initiated a program to transform our business processes and operations. As a result of our strategic alliance with Hewlett-Packard, in September we launched the IntelliJet Printing System for high volume transactional mailers. The IntelliJet is the only integrated mail and print solution in the industry. This new solution seamlessly combines HP color inkjet printing technology with our software, high speed mail finishing system, as well as global service and support teams.

During the quarter we also announced two partnerships that will help us expand our presence in the growing Asia Pacific market. Cannon marketing Japan [Ink] will distribute one of our lower end metering systems to small and medium sized businesses in the Japanese market. We’ve also partnered with Digital China to distribute a variety of mailing solutions and software systems that provide variable data composition to small and medium sized businesses throughout China. Digital China is that country’s largest information technology distribution company with a presence in over 600 Chinese cities and a network of more than 5,000 resellers in system integration partners.

All of these partnerships give us the potential to deliver value to more customers in more geographies with more Pitney Bowes solutions. During the quarter we initiated the process to increase long term value for shareholders and customers through a comprehensive transformation of the way we operate as a global company. We are analyzing a wide range of opportunities for improvements in areas such as our global customer interactions and product development processes. We are committed to actively implementing the expected improvements to our business practices, processes and operating model that will move us toward a more integrated global business with enhanced go-to-market options and a flexible, variable cost structure.

We are in the early stages of evaluating and prioritizing these opportunities. Based on the work we’ve done to date, we are targeting annualized benefits net of investments in the range of at least $150 to $200 million on a pretax basis. We believe we can achieve the full benefit run rate by 2012. There will of course be some costs associated with achieving these benefits. The restructuring charge in the current quarter represents costs associated with initial actions identified as part of the diagnostic phase of this process.

Starting in the fourth quarter there will be some additional costs associated with achieving these benefits. Both the benefits and costs will be recognized as different actions are approved and implemented. I also want to note that we plan to hold a conference call on December the 15th to provide 2010 guidance.

Now let me turn it over to Mike for an overview of the third quarter financial results.

Michael Monahan

Thank you Murray. Revenue was $1.4 billion for the quarter, a decline of 10% from the prior year on a constant currency basis and a 12% decline as reported. Compared with the prior quarter, revenue declined less than 2% and was in line with what we expected.

For the third quarter non-U.S. operations represented 29% of total revenue. While foreign currency exchange rates have become less negative compared with the first half of the year, they still had the effect of reducing our revenue growth by 2 percentage points in the quarter.

Breaking down our revenue between U.S. and non-U.S. operations, U.S. revenue in the quarter declined by about 10% when compared with the prior year. Outside the U.S., revenue on a constant currency basis declined by about 11% and on a reported basis was down about 17%, reflecting the 650 basis points of negative impact from exchange rates when compared to the prior year.

Adjusted earnings before interest, taxes and restructuring charges or EBIT for the quarter was $231 million. The adjusted EBIT margin declined year-over-year to 17.1% on lower revenue, a shift in the mix of business and an increase in pension costs, but benefited from our cost management and productivity actions.

Largely because of the changes to our cost structure that we made to date, we had a year-over-year reduction in selling, general and administrative expenses of about $49 million. Therefore as Murray mentioned we improved EBIT margins in six of our seven reporting segments this quarter versus the second quarter. We’ve clearly done a lot to reduce our cost structure and we’re committed to doing more.

Our strategic transformation project will enable us to improve the way we go to market, interact with our customers and make our cost structure even more flexible. When we add back depreciation and amortization to our adjusted EBIT, EBITDA for the quarter was $319 million or $1.54 per share.

Net interest expense in the quarter including financing interest was about $51 million, about $4 million less than the prior year because of reduced debt levels. The average interest rate in the quarter was about 4.2%, 35 basis points less than the prior year.

The effective tax rate for the quarter was 34.3%. This was lower than the tax rate on adjusted earnings last year, which was 35.3%. The tax rate can vary during the course of the year depending on timing and mix of business, and could range between 34 to 35% in any given quarter.

Adjusted earnings per share for the quarter was $0.55 compared with our adjusted earnings per share of $0.67 for the same period last year. This is the same as our adjusted earnings per share in the first and second quarters.

Currency exchange rates compared with last year reduced our adjusted earnings per share by $0.01 this quarter. Also there was a $0.01 negative impact to earnings associated with incremental pension expense.

GAAP earnings per share included a $13 million pretax charge or $0.04 per share for restructuring costs associated with early actionable items that we’re initiating as part of our transformation project. Additionally, GAAP EPS included a $0.01 per share loss for discontinued operations, which related to interest on uncertain tax positions related to our former capital services business.

Free cash flow was $223 million for the quarter, which was a 9% increase versus the second quarter. On a year-to-date basis, free cash flow was $666 million. Our continued strong free cash flow was a result of our ongoing focus on the balance sheet, particularly in the areas of accounts receivable and capital expenditures, as well as lower financed receivables.

During the quarter we returned $75 million to our shareholders in the form of dividends and we did not purchase any shares during the quarter. Based on our strong cash flow, we continued to reduce our debt levels. While commercial paper balances increased $31 million versus the prior quarter, we used commercial paper to help pay for the $150 million of debt that matured during the quarter. However, we reduced overall debt by $119 million in the quarter and $298 million year-to-date. About 78% of our debt is fixed rate and 22% is floating rate.

The company’s stockholder equity increased by $108 million during the quarter primarily because of net income plus improved currency translation versus the second quarter, less the dividends paid during the quarter. Shareholders equity is now positive.

Let me now update you on the final stages of our restructuring initiatives announced in 2007. In the third quarter we eliminated an additional 161 positions, bringing the total to 3,204 positions eliminated including open positions since the inception of the program in the fourth quarter of 2007. We had about $18 million in cash payments related to severance during the quarter. We generated about $31 million in incremental pretax benefits in the quarter and about $96 million year-to-date, a portion of which is being reinvested in the business.

Moving to our strategic transformation program let me reiterate a few points that Murray made. Currently we’re targeting annualized benefits net of investments in the range of at least $150 to $200 million and we expect that implementation will occur over the next 18 to 24 months. Therefore we expect to achieve the full annualized run rate of benefits in 2012. We’re still finalizing the full range of actions that we expect to implement. When that process is complete and an implementation plan has been approved, we’ll be in a better position to determine the timing and amount of future costs related to the program.

So that concludes my remarks. Now Murray will provide some insight about our plans going forward and then we’ll take your questions.

Murray Martin

As you saw in our earnings release, we are modifying our 2009 guidance based on year-to-date results, recent trends in the business and our expectations for the remainder of the year. We are increasing our guidance range for free cash flow by $50 million to a range of $750 to $850 million. We are also narrowing our guidance range for adjusted and GAAP earnings per diluted share. The range for adjusted earnings per diluted share is now $2.19 to $2.31 and the range for GAAP earnings per diluted share is now $2.09 to $2.21.

We are reducing our guidance expectations for revenue by 1 percentage point to reflect the continuing impacts of the economic environment on our revenue stream. The fact that we are raising our cash flow range and narrowing our adjusted and GAAP EPS range despite a modest reduction in our revenue expectation is a significant indicator of our commitment to cost efficiency. Let me remind you that this current GAAP guidance range includes restructuring charges recorded in the third quarter but does not include any potential additional restructuring charges in the fourth quarter.

As we work through the current economic headwinds, Pitney Bowes remains solidly profitable and continues to generate strong cash flow and reduce debt, reinvest in growth areas of the business and pay an attractive dividend to our shareholders. We are fully committed to making the most of the opportunities we have to transform the way we operate as a global company and continuing to build sustainable, long term value for shareholders and customers.

Thank you and now let’s open the line for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from Vincent Lin - Goldman Sachs.

Vincent Lin - Goldman Sachs

This is Vincent sitting in for Julio. If you have not answered, we are just wondering concerning that there’s only one quarter remaining in the year, just wondering the range in terms of the EPS guidance that you have provided for the full year in terms of between the top and bottom end what was baked into the assumptions and what are some of the assumptions that you have considering in terms of providing the guidance?

Michael Monahan

Yes, I think Vincent what we tried to do is narrow the range somewhat obviously that we’re down to one quarter and I think we considered the same factors that we’ve looked at all year. The economic outlook, performance in our business and you know the normal patterns in our business in the fourth quarter.

Vincent Lin - Goldman Sachs

Just given the type of renewals in terms of the increased volume uptick in renewal volumes that we have seen over the last few quarters, just wondering if maybe you can provide some color in terms of how do the renewals play into expected revenue growth over next few quarters? And maybe longer term in terms of how the revenue trajectory could play out versus the margin.

Murray Martin

As we’ve mentioned earlier, the revenue on the lease extensions is about 70% of what it would be in replacement. However, there are lower costs so over the term, the margin is equal to positive in the entire stream. So we would expect this to continue over the next quarters. We don’t know when the recessionary environment will dissipate but during that time we would expect this to continue and have a negative impact on our mailing revenues. But across the long term it should be relatively neutral on the EBIT side.

Operator

Your next question comes from Ananda Baruah - Brean Murray, Carret & Co.

Ananda Baruah - Brean Murray, Carret & Co.

The first one is can you just give us any update on what you guys are seeing in terms of terms of the U.S. mailing business, maybe linearity kind of through the quarter? I believe exiting last quarter you said that you’d seen it maybe soften a little bit or I think maybe the exact language was “not come back” as you would have expected in the final months of the quarter.

Murray Martin

I think what we’re referring to is we haven’t seen the volume return in the mail across the board as the financial sector in particular as well as retail continues to be under stress. What we have seen towards the end of the quarter is a slight improvement in the rate of decline. So the decline has been softening somewhat and as we look forward to what the posts are projecting, they’re projecting substantially less decline on a go forward.

Ananda Baruah - Brean Murray, Carret & Co.

And Murray is that a sequential decline going through the quarter? Or is that a year-over-year decline or is that both?

Michael Monahan

Yes, Ananda, I think Murray was talking about mail volumes and the expectations along that. Yes, I think that’s correct so then on a year-over-year basis.

Murray Martin

But on a sequential it’s starting to flatten somewhat.

Ananda Baruah - Brean Murray, Carret & Co.

Do you think it can flatten in the December quarter?

Murray Martin

No I don’t think it will flatten in the December quarter. The Post Offices are still anticipating some decline although there is a normal uptick in the fourth quarter. It’s sort of is hard to judge in this environment what people will do in their marketing in the fourth quarter where there’s normally a push. So we’re anticipating that it will be a little lower decline than it was, but not necessarily a positive.

Ananda Baruah - Brean Murray, Carret & Co.

And then I guess a question around the cost action initiatives that you guys introduced today. Just I guess a point for clarification, so 18 to 24 months implementation so you would be expecting to enter 2012 at full run rate.

Murray Martin

That’s correct.

Ananda Baruah - Brean Murray, Carret & Co.

And I guess any clarification or any visibility you can give us into how much you might push through to the bottom line versus reinvest back in the business?

Murray Martin

Yes, I think we’re looking at that as being net of some of the investments we have to make. So that would you know come into the P&L over time. Obviously as we go through the program if we see additional opportunities to invest, we may look at that. But that’s our expectation.

Ananda Baruah - Brean Murray, Carret & Co.

So that’s definitely bottom line benefit, pretax income benefit.

Michael Monahan

Pretax. Correct.

Ananda Baruah - Brean Murray, Carret & Co.

Can you give us any sense for how we might expect the benefits to roll through the P&L as we go through 2010?

Michael Monahan

Specific to this program?

Ananda Baruah - Brean Murray, Carret & Co.

Correct.

Michael Monahan

Yes, we have not, you know as we stated we have not yet fully mapped the timing and expectations around this and you know as we go forward and identify that, then we’ll be more clear.

Operator

Your next question comes from Shannon Cross - Cross Research.

Shannon Cross - Cross Research

The first question is on the restructuring. Can you give us some idea of how you’ve thought about where you’re going to be restructuring, what you’re focused on? You know any more clarity you can give us to kind of get an idea of how this is going to roll out, maybe geographically, just any more color that is possible would be great.

Michael Monahan

Sure Shannon. Let me touch on I think a couple of ways that it’ll manifest itself and hopefully that helps. And you know I used the term restructure and we probably don’t look at it that way because this is really about process enhancement. So really looking at common processes and platforms, increased use of shared services, better leverage of some of the architectural and tools in our development process, obviously looking at facilities footprints. So it’s really an across the board view of our business and the opportunities to leverage what is in the different businesses into a common platform and leveraging opportunities to make that cost structure more variable. And obviously part of that is also you know completing the full integration of acquisitions that we’ve done in the past as well.

Shannon Cross - Cross Research

Can you talk a little bit about from a vertical standpoint and maybe a geographic standpoint what you’re seeing in the end market? A couple of not really competitors but also hardware guys have said that you know financials may be getting a little better. I’m just curious as to what you’ve seen out there.

Murray Martin

You know it’s so variable it’s hard to tell. And as we looked at it, we have seen some positive indications at the end of the quarter, but we’ve had glimmers before so it’s difficult to wrap around those and say that it’s there. But there have been some glimmers in some areas. We’ve seen some leveling out in some of the countries around the world, outside of the U.S. So that is positive. And we have seen a bit but nothing consistent in the financial services sector yet. I think that when you continue to utilize production assets, you do have to change some of them even in a difficult environment. So we aren’t seeing the big push that is going to have to come at some point yet but we do as I mentioned see some glimmers there.

Operator

Your next question comes from Chris Whitmore - Deutsche Bank Securities.

Chris Whitmore - Deutsche Bank Securities

I wanted to follow up on the mail volume question. What’s your outlook for mail volumes in 2010 and 2011? Do you expect continued mail declines or do you think we can stabilize around flat?

Murray Martin

I think that sort of is still a variable. The Postal Service has said that next year they’ll move from the double digit decline they’ve had this year to mid single digits next year and then it should start flattening. So it should flatten. And they’re still looking at what the rebound would be with the economy. They aren’t currently forecasting that it would rebound to where it was, but they would expect some lift and that would depend on when the economy and the mail intensive businesses start being more aggressive in their mail programs. So in summary, it’s down double digits this year and mid-singles is the current forecast in ’10, and then they expect some flattening with a question mark as to when a rebound would occur.

Chris Whitmore - Deutsche Bank Securities

What does that say about the existing utilization rates of your existing install base or your customers existing mail production equipment and mail meter equipment? Is there significant excess capacity within your customer base?

Murray Martin

Well as you look at mailing equipment, there is always excess capacity in those devices because they’re really designed for taking the end of month runs. So if you look at it, there’s always capacity there but they still have their month or quarter end volumes that they have to push out. They would be doing less loyalty programs and less solicitation and that’s what would tend to reduce the volume.

So I don’t think there’s a big swing there. You do have traditionally, as we’ve talked over the last number of years, we continue to enhance the productivity on lower end equipment so there is some downsizing on equipment, but the margins on the new equipment in dollars tend to be similar to the equipment that came out.

Chris Whitmore - Deutsche Bank Securities

The gross profit dollars seem to be consistent or is it similar margins but on lower revenue?

Murray Martin

Similar dollars because there are additional services that go with those products. So on the actual hardware it might be different, but then when you add the incremental services, then it moves back into the same range in dollars.

Chris Whitmore - Deutsche Bank Securities

And another question related to kind of cash and thoughts around your cash, uses of cash in terms of acquisitions specifically, what’s your current view on acquisitions?

Murray Martin

Yes, I think it hasn’t really changed over time. We continue to look at opportunities, enhance some of the areas that we see are good growth areas. And you know we’ve been I’d say over the last two years focused really on some acquisitions that have been incremental to our mail services and software space. But we continue to look but have not you know have any different outlook on our plans than we’ve had in the past.

Chris Whitmore - Deutsche Bank Securities

And final question for me is around the cost of the restructuring program. What do you think total charges will be required in order to realize the $150 to $200 million of savings?

Michael Monahan

That’s really the work we’re going through now to determine that and the phasing of it. So you know as we complete that work, we’ll have a better sense of that cost.

Operator

Your next question comes from Steve Surrell - Conning Asset Management.

Steve Surrell - Conning Asset Management

Is there any way to differentiate how much of your revenue decrease is secular in nature versus cyclical?

Murray Martin

As we look at this, we still see it as more cyclical. Its dependent on the economy. There has been for the last decade some change in the mix of mail as certain mail has moved to electronic and other mail has originated and small parcels have continued to grow. So we aren’t seeing anything yet that is a significant shift. It’s something we always keep an eye on but the type of mail that we’re dealing with is really staying similar and we believe it’s more affected by the economy than a particular shift.

Michael Monahan

One way of looking at our traditional mail and metering business is to think of it not unlike a cable subscription where you’re gaining access to a service and you may use that service to different degrees but essentially your cost is fixed. So there are some variable elements like supplies, but generally speaking a small change in volume is not necessarily going to remove the need for it. It may just change the amount you use it.

Steve Surrell - Conning Asset Management

Would you envision continuing to gradually reduce your debt until you see stabilization on the operating profit side?

Michael Monahan

We think reducing our debt at this point with free cash flow has been a prudent use of that cash. And you know barring other opportunities or other needs to use the cash, we would likely continue to reduce the debt.

Steve Surrell - Conning Asset Management

And lastly have you contributed any cash to your pension plan this year or do you plan to before year end? And maybe what next year’s outlook is.

Michael Monahan

We have not contributed cash at this point through the year. We don’t have a requirement to and we’ll continue to evaluate it based on returns in the marketplace and the outlook for cash flow as we go forward.

Steve Surrell - Conning Asset Management

Has the funding status improved from your 10-K for 2008, just given the markets?

Michael Monahan

Obviously the improvement in the market side of it has been a positive for us. I think you know the wild card on the funding status at the end of the year is obviously discount rate assumptions on that type of thing. But clearly there’s been a positive movement in equity valuation.

Operator

Your next question comes from Ananda Baruah - Brean Murray, Carret & Co.

Ananda Baruah - Brean Murray, Carret & Co.

Murray, is there any way to get a feel for what might be more impactful in a positive way to revenue I guess in the core business? You know you talked obviously financial services is a big vertical for you guys. But if you think about the business I guess broken up into enterprise versus small, medium business and I guess maybe some of the issues that small and medium businesses have had you know with access to credit and things like that, I guess what’s the way that you guys are thinking about you know how the enterprise versus the small, medium business kind of getting a little better might impact your business?

Murray Martin

Well as you look at the small to mid size, which is a significant component for us, we sort of look at that segment and consider them similar to consumer confidence. So as their consumer confidence, which would be similar in small business, increases and they look at expanding their business, then they will continue to grow. And one of the shifts we’ve seen is we have done less acquisition in that category to attract new customers because of the pressure they’re under. So as the economy shifts and the consumer confidence moves, we’ll then dial back up the marketing in that area which will bring incremental new units in.

But at this point with the confidence so low, the return is not real good in marketing in that segment. So I think that’s really the significant positive that would occur. And as we continue to add technology and capability, which is now being enabled through the Postal Service and through the web and the portals that are available, we’ll be able to continue to offer an expanding group of services to those people, which will make it even more attractive than we have today.

Ananda Baruah - Brean Murray, Carret & Co.

And any change in the thinking around the use of the lease extension program?

Murray Martin

We think that the lease extension program is a good thing at this point in time. It takes the uncertainty and the fear of change out of the marketplace and allows customers to continue to have access with equipment that’s very good and leaves us in a position to have that lease base there to move forward as we move out of this time area. So I think it’s been a very valuable program. It’s allowed us to maintain our customers and keep them satisfied with the goods and services. Rather than being under pressure for increased spend they’ve been able to maintain their spend. And as we link that into our mail services program, they’ve actually been able to reduce their spend when they link it into our Postal discount program, where we take the mail and induct it into our pre-sort network in the U.S.

Ananda Baruah - Brean Murray, Carret & Co.

Is there any way to give us a sense of how the mail volumes that Pitney Bowes is exposed to have been trending relative to the ones that the Post Office kind of talks about generally, the down mid double digits and going to you know sort of down mid single digits next year?

Michael Monahan

Yes. In terms of the overall postal volumes there’s really two key components to that. One is the first class mail which is generally bills and statement type of mail and is the predominant portion of the mail that we touch. While overall mail volumes this year have been down more like 15%, that portion of the mail has been down closer to 10% while standard class mail, which tends to be large bulk mailings, sort of not necessarily personalized mailings and not a part of the mail stream that we have a heavy involvement in, has been down more like 18%. So there is less impact on our traditional parts of the mail stream. And obviously as we look at expanding the business and touching more, any new business we do in the standard class, even if it’s down, is incremental opportunity for us. So we’ve been looking at areas like that in our mail services business for expansion.

Ananda Baruah - Brean Murray, Carret & Co.

So is there any way I guess if the Postal Service is down, they’re talking about sort of mid single digit, I guess that’s the blended rate.

Murray Martin

Yes. I’ve not seen a breakdown of their projection other than in a total mail volume view.

Ananda Baruah - Brean Murray, Carret & Co.

I guess my question is, is there any way since you’re down you know less as opposed to the overall mail volumes, is there any way that you guys could, I guess the first class mail volumes that you’re exposed to could be down flat, it could be flat next year?

Murray Martin

I don’t have a good read on that at this point because they’ve really projected against total mail volumes.

Operator

Your next question comes from [Lloyd Zeitman – Bernstein].

[Lloyd Zeitman – Bernstein]

Could you just give us some guidance as to how your lease portfolio looks these days?

Michael Monahan

Yes. In terms of the lease portfolio from a, I’m assuming you’re asking from a delinquency standpoint, it’s actually trended well. We’re essentially seeing the same levels as in the prior year and positive over the last couple of months so there’s I think a strong performance there. In terms of provisioning, I think you might see on the balance sheet that our provisions for the financed receivables are actually a little bit higher and that’s really based on how we look at long term trends in that business. And because of the last couple of years, we’ve edged our provisioning up a bit. So we feel like we’re in very good shape from a provisions standpoint and a quality portfolio standpoint.

Operator

We have no one else in queue.

Murray Martin

Great. Well thank you for your questions and for taking the time to allow us to share with you. This has been another challenging quarter in this economic environment but as we stated we are taking aggressive actions to position the company for profitable growth as the economy improves. As a result, we’ll have a more flexible and variable operating structure that will be better able to adapt to the changing business environment. Remember that Pitney Bowes continues to be a solidly profitable company that pays an attractive dividend to our shareholders. We remain focused on continuing our efforts to enhance shareholder value and provide unparalleled solutions and services to our customers. Thank you and have a great day.

Operator

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

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