Pitney Bowes Inc.  today reported first quarter 2011 results.

Revenue for the quarter was $1.3 billion, which was a decline of 2 percent when compared to the prior year. The positive impacts of currency movements added less than one percent to revenue. Revenue for the quarter benefited from increased software and equipment sales, which was more than offset by the decline in supplies, rentals and financing revenues. The decline in these recurring revenue streams is moderating because equipment sales have stabilized compared to prior periods. Revenue and earnings were also adversely affected by a fire in Dallas at the company’s largest mail presort center in its network.

Adjusted earnings per diluted share from continuing operations for the first quarter was $0.53, down $0.02 from the prior year. These earnings would have been $0.04 higher except for a more than $0.02 per share estimated loss as a result of the lower revenue due to the fire at the Dallas presort facility, and a more than $0.01 per share investment related to Volly™, the company’s new cloud-based secure mail delivery service.

Earnings per diluted share for the quarter on a Generally Accepted Accounting Principles (GAAP) basis was $0.42, an 11 percent increase on the $0.38 per diluted share for the prior year. GAAP earnings per diluted share for the recent quarter included an $0.08 charge for restructuring costs associated with the company’s Strategic Transformation initiatives versus $0.07 per share in 2010; a non-cash net tax charge of $0.01 per share associated with out-of-the money stock options that expired during the quarter versus $0.04 per share in 2010; and a $0.01 loss associated with discontinued operations versus $0.02 per share in 2010. GAAP earnings per diluted share in the first quarter 2010 also included a $0.04 per share tax charge for health care legislation changes.

Free cash flow for the quarter was $286 million, while on a GAAP basis, the company generated $297 million in cash from operations. Free cash flow benefited from the timing of tax payments and refunds, as well as lower finance receivables. During the quarter the company used $75 million of cash for dividends.

The company’s results for the quarter are summarized in the table below:

Commenting on the quarter, Chairman, President and CEO Murray D. Martin said, “We continue to gain momentum in our plan to drive long-term revenue and profitable growth across our business portfolio. We saw our third consecutive quarter of growth in equipment sales and software revenue. Equipment sales growth was led by increasing demand from high-volume mailers to update their hardware and software production platforms. Software revenue continued to benefit from global demand for data analytics and location intelligence solutions as well as a growing recurring revenue stream from multi-year licensing agreements. Trends in our recurring revenue streams of supplies, rentals and financing remain in line with the year-over-year improvements we expect to see in 2011.

“We have again achieved substantial incremental savings from our ongoing Strategic Transformation program. The benefits from our actions are fueling investments and improvements in our infrastructure that have allowed us to more effectively deliver our new products and services.

“We recently announced the launch of several new products that fit our strategy of delivering Customer Communication Management solutions to customers of all sizes. Since the January announcement of Volly™, our secure digital mail delivery system, we have introduced additional enterprise solutions that include expansion of our Intellijet™ production print line and Portrait Miner 6.0 software for predicting customer behavior. We are providing SMB customers with the industry’s only family of cloud-based solutions including pbSmartPostage™ and pbSmart™ Connections, an email marketing and communications platform. In addition, earlier this week we announced SendSuite® Live, a new web-based shipping platform that strengthens our market leadership in the Transportation Management Services shipping marketplace.”

Business Segment Results

The company reports its business segments in two groups based on the customers it primarily serves: Small and Medium Business (SMB) Solutions and Enterprise Business Solutions. The SMB Solutions group consists of the company’s global Mailing operations. The company aligns its SMB business segments into North America Mailing and International Mailing to reflect how the business is managed. North America Mailing includes the operations of U.S. Mailing and Canada Mailing. International Mailing includes all other SMB operations around the world. The Enterprise Business Solutions group includes the company’s global Production Mail, Software, Management Services, Mail Services and Marketing Services operations.

During the quarter, the North America Mailing segment continued to benefit from increased placements of its Connect+™ mailing system and improved retention rates among its existing customers. However, overall equipment sales declined, in part, due to the realignment of some customers to alternate sales channels at the beginning of the year. This is part of our continued movement of select groups of SMB customers to channels that will best serve their needs as we continue to offer more products and services online. Consistent with prior shifts, the company saw improving sales productivity throughout the quarter and expects the transition to drive growth through greater engagement of small business customers with the company’s new web-enabled solutions. While the segment’s revenue continued to be affected by lower supplies, rentals and financing revenue, clear signs of improvement exist. For example, the company’s meter population in Canada continued to grow. During the quarter, the decline in recurring revenue streams moderated compared to the prior year, consistent with the company’s outlook for 2011. EBIT margin for the segment improved by 50 basis points versus the prior year due to ongoing productivity improvements; lower credit losses; and benefits from lease extensions with customers. The company continues to provide lease extension options to its customers, which enhanced customer retention.

Product supply during the quarter was not impacted by events in Japan and based on current conditions, is not expected to be impacted through the first half of the year. The company is actively working with its supply chain partners and has a number of strategies in place to mitigate potential disruptions in the second half of the year.

International Mailing revenue declined slightly, both on a reported basis and excluding the impact of currency. Equipment sales revenue was flat this quarter when compared with the prior year. Equipment sales revenue benefited from strong placements of full-color Connect+™ mailing systems in the UK. Connect+™ will be launched in several other major European countries during the remainder of the year. As expected, supplies, rentals and financing revenue was lower than the prior year. However, the rate of decline for financing revenue moderated because of an increased ratio of leased equipment versus sold equipment. The quarter’s results reflect the continued slow and uneven economic recovery in the company’s European markets, while the Asia Pacific region experienced strong growth. EBIT margin again improved versus the prior year due to past and ongoing productivity initiatives which offset the negative margin impact from lower recurring revenue.

Events in Japan did not materially impact revenue or EBIT during the quarter.

During the quarter, worldwide Production Mail revenue growth was driven by continued demand for the company’s high-speed, high integrity inserting systems, especially in the United States. There continues to be a good backlog of orders for the company’s production mail equipment, particularly among third party mailers and companies in the financial services sector. The company continues to expand its line of Intellijet™ advanced color printing systems to address strong interest from enterprise customers in both the U.S. and Europe. EBIT margin this quarter would have been similar to the prior year, excluding investments associated with Volly™ and Intellijet™.

During the quarter the Software business experienced strong demand across its portfolio of software solutions, including data management, analytics and customer communications management. As a result, revenue increased at a double-digit pace versus the prior year. The company continued its transition to multi-year licensing agreements for many of its larger software sales. These arrangements will benefit recurring revenue in future periods, as was the case during the current quarter. Revenue and EBIT this quarter also benefited from last year’s addition of Portrait Software solutions which enhance the company’s analytics and customer communications management capabilities. Overall, Software EBIT increased at a strong double-digit pace versus the prior year because of margin leverage on revenue expansion.

As expected, revenue for the quarter declined as a result of account contractions and terminations in the U.S. last year and the company’s exit from some lower margin accounts in Europe last year. However, the company is starting to see an improving pipeline of deals. EBIT margins continued to improve globally versus the prior year. This was led by ongoing margin improvement in Europe and the U.S. resulting from the company’s focus on productivity initiatives and a continued transition to a more variable cost structure.

Mail Services revenue declined versus the prior year, because of a fire during the quarter at the largest presort facility in the company’s network. Excluding the impacts of the fire, presort-related revenue for the quarter grew and the EBIT margin continued to improve year-over-year. The disruption due to the fire impacted the company’s ability to qualify customers’ mail at the highest level of discount, which in turn reduced the quarter’s revenue and earnings. The company expects that the lost revenue contribution and the costs related to outfitting a new facility will be covered by insurance proceeds in future periods. Because of its unique ability to reroute mail within its national presort network and convert other capacity to process First Class mail, the company retained virtually all of its customers. The new permanent facility is expected to be operational in the second quarter and at previous productivity levels by the end of the third quarter. The rest of the network continues to process increasing volumes of both First Class and Standard Class mail from new and existing customers.

In addition to the impact on EBIT from lost revenue due to the fire, EBIT for the segment was also impacted by increased costs associated with the International Mail Services (IMS) portion of the business. As in the prior quarter, higher shipping rates for some international destinations reduced parcel margins. The company implemented actions that resulted in improved EBIT performance by the end of the quarter. These updates to the pricing of customer contracts and internal systems, should provide for continued improvements to EBIT margin.

Revenue declined versus the prior year because of a decline in the number of household moves compared with the prior year and a transition of online marketing revenue during the quarter to MyMove, a new online service for movers. EBIT was impacted by lower revenue and investment in MyMove, which allows individuals who are moving to opt-into various move-relevant products and services after the initial move period. The adoption rates of the new service began to ramp during the quarter.

2011 Guidance

This guidance discusses future results which are inherently subject to unforeseen risks and developments. As such, discussions about the business outlook should be read in the context of an uncertain future, as well as the risk factors identified in the safe harbor language at the end of this release.

The company reaffirms its full-year guidance for revenue, adjusted earnings per diluted share, earnings per diluted share on a GAAP basis and free cash flow.

The company expects 2011 revenue, excluding the impacts of currency, to be in a range of flat to 3 percent growth. The company’s outlook projects a return to revenue growth for the year due in part to a number of initiatives designed to stabilize its base business and drive new growth opportunities.

The company’s 2011 guidance for adjusted diluted earnings per share from continuing operations is summarized below:

In 2011, the company anticipates generating incremental earnings of $0.32 to $0.42 per share from operations growth and productivity, excluding the impact of SMB stream revenues. As noted previously, the company anticipates lower SMB stream revenues as a result of lower equipment sales in prior periods, which are expected to negatively impact earnings by $0.25 - $0.30 per share, resulting in comparative earnings for the year of $2.25 to $2.40 per share. The company also plans to invest $.05 to $.10 per share to develop the market for Volly ^TM, a secure digital mail delivery system. As a result, the company expects 2011 adjusted earnings per share from continuing operations in the range of $2.15 to $2.35.

The company’s 2011 guidance for GAAP diluted earnings per share from continuing operations is summarized below:

On a GAAP basis, the company expects 2011 earnings per diluted share from continuing operations in the range of $1.80 to $2.10 including the expected impact of $0.25 to $0.35 per share for restructuring charges associated with Strategic Transformation.

Guidance excludes any financial impact due to the fire at the company’s pre-sort facility. The impact to full-year revenue is expected to be about one-half percent. The company expects that fire-related losses will be covered by insurance proceeds. The timing of the final settlement of the insurance claim will determine when the insurance proceeds can be recognized in earnings.

The company expects to generate free cash flow for 2011 in the range of $750 million to $850 million. As compared to the prior year, the company expects increased investment in finance receivables through higher levels of equipment sales, and higher capital expenditures associated with investments in business growth which would result in lower free cash flow in 2011.

Mr. Martin concluded, “We continue to make progress in executing our strategies to deliver enhanced customer and shareholder value. Against the backdrop of a business and economic environment characterized by gradual improvement at varying rates by sector and geography, we remain focused on investing in solutions which enable businesses to manage physical and digital communications channels with their customers, while continuing to streamline and enhance our operations and processes.”

Management of Pitney Bowes will discuss the company’s results in a broadcast over the Internet today at 8:00 a.m. EDT. Instructions for listening to the earnings results via the Web are available on the Investor Relations page of the company’s web site at www.pb.com/investorrelations.

Pitney Bowes is a $5.4 billion global leader whose products, services and solutions deliver value within the mailstream and beyond. For more information visit www.pitneybowes.com.