UNITED STATES	
SECURITIES AND EXCHANGE COMMISSION	
WASHINGTON, D.C. 20549	
 	
FORM 10-K	

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES	
EXCHANGE ACT OF 1934	

For the fiscal year ended December 31, 2010	Commission file number: 1-3579	
PITNEY BOWES INC.
 	 	
Incorporated in Delaware	I.R.S. Employer Identification No.	
1 Elmcroft Road, Stamford, Connecticut 06926-0700	06-0495050	
(203) 356-5000	 	

Securities registered pursuant to Section 12(b) of the Act:	 	 	
Title of Each Class	 	Name of Each Exchange on Which Registered	

	 	

	
Common Stock, $1 par value per share
$2.12 Convertible Cumulative Preference Stock (no par value)	 	New York Stock Exchange
New York Stock Exchange	
Securities registered pursuant to Section 12(g) of the Act: 4% Convertible Cumulative Preferred Stock ($50 par value)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes  o      No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No  o

Indicate by check marks whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)
Yes      No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.      o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 	 	 	 	
Large accelerated filer	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o	
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o     No

As of June 30, 2010, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $4,566,444,000 based on the closing sale price as reported on the New York Stock Exchange.

Number of shares of common stock, $1 par value, outstanding as of close of business on February 15, 2011: 203,785,248 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement to be filed with the Securities and Exchange Commission (the Commission) on or before March 31, 2011 and to be delivered to stockholders in connection with the 2011 Annual Meeting of Stockholders to be held May 9, 2011, are incorporated by reference in Part III of this Form 10-K.

1

PITNEY BOWES INC.
TABLE OF CONTENTS
 	 	 	
 	 	PAGE	

	
PART I	
 	 	 	
ITEM 1.	Business	3	
ITEM 1A.	Risk Factors	5	
ITEM 1B.	Unresolved Staff Comments	7	
ITEM 2.	Properties	7	
ITEM 3.	Legal Proceedings	7	
ITEM 4.	Removed and Reserved	7	
 	 	 	
PART II	
 	
ITEM 5.	Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8	
ITEM 6.	Selected Financial Data	10	
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11	
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	28	
ITEM 8.	Financial Statements and Supplementary Data	29	
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	29	
ITEM 9A.	Controls and Procedures	29	
ITEM 9B.	Other Information	29	
 	 	 	
PART III	
 	
ITEM 10.	Directors, Executive Officers and Corporate Governance	30	
ITEM 11.	Executive Compensation	31	
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	31	
ITEM 13.	Certain Relationships, Related Transactions and Director Independence	31	
ITEM 14.	Principal Accountant Fees and Services	31	
 	 	 	
PART IV	
 	
ITEM 15.	Exhibits and Financial Statement Schedules	32	
SIGNATURES	35	
Consolidated Financial Statements and Supplemental Data	36	
2

PITNEY BOWES INC.
P ART I

ITEM 1. – BUSINESS

General

Pitney Bowes Inc. was incorporated in the state of Delaware on April 23, 1920, as the Pitney Bowes Postage Meter Company. Today, Pitney Bowes Inc. is a provider of mail processing equipment and integrated mail solutions. We offer a full suite of equipment, supplies, software, services and end-to-end solutions which enable our customers to manage and integrate physical and digital communication channels. Our growth strategies focus on leveraging our historic leadership in physical communications with our expanding capabilities in digital and hybrid communications. We see long-term opportunities in delivering products, software, services and solutions that help customers grow their business by more effectively managing their physical and digital communications with their customers. In this report, the terms “we,” “us,” “our,” or “Company” are used to refer collectively to Pitney Bowes Inc. and its subsidiaries.

For more information about us, our products, services and solutions, visit www.pb.com. Also, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments or exhibits to those reports are available, free of charge, through the Investor Relations section of our website at  www.pb.com/investorrelations , as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (the SEC). The information found on our website is not part of this or any other report we file with or furnish to the SEC.

We file annual, quarterly and current reports, proxy statements and other information with the SEC, and these filings can be obtained from the SEC’s website at  http://www.sec.gov . This uniform resource locator is an inactive textual reference only and is not intended to incorporate the contents of the SEC website into this Form 10-K.

You may read and copy any document we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You may also request copies of the documents that we file with the SEC by writing to the SEC’s Office of Public Reference at the above address, at prescribed rates. Please call the SEC at (800) 732-0330 for further information on the operations of the Public Reference Room and copying charges.

Business Segments

We conduct our business activities in seven reporting segments within two business groups, Small & Medium Business Solutions and Enterprise Business Solutions, based on the customers they primarily serve. We are a global company with operations in the United States and internationally. See Note 18 to the Consolidated Financial Statements for financial information concerning our reporting segments and the geographic areas in which we operate. The principal products and services of each of our reporting segments are as follows:
 	 	
Small & Medium Business Solutions:	
 	 	
 	U.S. Mailing: Includes the U.S. revenue and related expenses from the sale, rental and financing of our mail finishing, mail creation, shipping equipment and software; supplies; support and other professional services; and payment solutions.	
 	 	
 	International Mailing: Includes the non-U.S. revenue and related expenses from the sale, rental and financing of our mail finishing, mail creation, shipping equipment and software; supplies; support and other professional services; and payment solutions.	
 	 	
Enterprise Business Solutions:	
 	 	
 	Production Mail: Includes the worldwide revenue and related expenses from the sale, support and other professional services of our high-speed, production mail systems, sorting and production print equipment.	
 	 	
 	Software: Includes the worldwide revenue and related expenses from the sale and support services of non-equipment-based mailing, customer relationship and communication and location intelligence software.	
 	 	
 	Management Services: Includes worldwide revenue and related expenses from facilities management services; secure mail services; reprographic, document management services; and litigation support and eDiscovery services.	
 	 	
 	Mail Services: Includes the worldwide revenue and related expenses from presort mail services and cross-border mail services.	
 	 	
 	Marketing Services: Includes the revenue and related expenses from direct marketing services for targeted customers.	
3

Support Services

We maintain extensive field service organizations to provide servicing for customers’ equipment, usually in the form of annual maintenance contracts.

Marketing

We market our products and services through our sales force, direct mailings, outbound telemarketing and independent distributors and dealers. We sell to a variety of business, governmental, institutional and other organizations. We have a broad base of customers, and we are not dependent upon any one customer or type of customer for a significant part of our revenue. We do not have significant backlog or seasonality relating to our businesses.

Credit Policies

We establish credit approval limits and procedures based on the credit quality of the customer and the type of product or service provided to control risk in extending credit to customers. In addition, we utilize an automatic approval program for certain leases within our internal financing operations. This program is designed to facilitate low dollar transactions by utilizing historical payment patterns and losses realized for customers with common credit characteristics. The program defines the criteria under which we will accept a customer without performing a more detailed credit investigation, such as maximum equipment cost, a customer’s time in business and payment experience. 

We closely monitor the portfolio by analyzing industry sectors and delinquency trends by product line, industry and customer to ensure reserve levels and credit policies reflect current trends. Management continues to closely monitor credit lines, collection resources, and revise credit policies as necessary to be more selective in managing the portfolio.

Competition

We are a leading supplier of products and services in the large majority of our business segments. Our meter base and our continued ability to place and finance meters in key markets is a significant contributor to our current and future revenue and profitability. However, all of our segments face competition from a number of companies. In particular, we face competition from products and services offered as alternative means of message communications and for new placements of mailing equipment from other postage meter and mailing machine suppliers, and all of our mailing products, services and software face competition. As we expand our activities in managing and integrating physical and digital communications we will face competition from other companies looking to digitize mail, as well as those providing on-line payment services. Leasing companies, commercial finance companies, commercial banks and other financial institutions compete, in varying degrees, in the markets in which our finance operations do business. Our competitors range from very large, diversified financial institutions to many small, specialized firms. We offer a complete line of products and services as well as a variety of finance and payment offerings to our customers. We finance the majority of our products through our captive financing business and we are a major provider of business services to the corporate, financial services, professional services and government markets, competing against national, regional and local firms specializing in facilities and document management throughout the world.

We believe that our long experience and reputation for product quality, and our sales and support service organizations are important factors in influencing customer choices with respect to our products and services.

Research, Development and Intellectual Property

We make significant investments in research and development operations. We have many research and development programs that are directed toward developing new products and service offerings. As a result of our research and development efforts, we have been awarded a number of patents with respect to several of our existing and planned products. We do not believe our businesses are materially dependent on any one patent or any group of related patents or on any one license or any group of related licenses. Our expenditures for research and development were $156 million, $182 million and $206 million in 2010, 2009 and 2008, respectively.

Material Suppliers

We depend on third-party suppliers for a variety of services, components, supplies and a large portion of our product manufacturing. We believe we have adequate sources for our purchases of materials, components, services and supplies for products that we manufacture or assemble.

4

Regulatory Matters

We are subject to the regulations of postal authorities worldwide, related to product specifications and business practices involving our postage meters. From time to time, we will work with these governing bodies to help in the enhancement and growth of mail and the mail channel. See “Legal Proceedings” in Item 3 of this Form 10-K.

Employees and Employee Relations

At December 31, 2010, we employed approximately 21,600 persons in the U.S. and 9,100 persons outside the U.S. The large majority of our employees are not represented by any labor union, and we believe that our current relations with employees are good. Management follows the policy of keeping employees informed of decisions, and encourages and implements employee suggestions whenever practicable.

Executive Officers

See Part III, Item 10. “Directors, Executive Officers and Corporate Governance” of this Form 10-K for information about Executive Officers of the Registrant.

ITEM 1A. – RISK FACTORS

In addition to other information and risk disclosures contained in this Form 10-K, the risk factors discussed in this section should be considered in evaluating our business. We work to manage and mitigate these risks proactively, including through our use of an enterprise risk management program. In our management of these risks, we also evaluate the potential for additional opportunities to mitigate these risks. Nevertheless, the following risks, some of which may be beyond our control, could materially impact our brand and reputation or results of operations or could cause future results to differ materially from our current expectations:

Our revenue and profitability could be adversely affected by changes in postal regulations and processes.

The majority of our revenue is directly or indirectly subject to regulation and oversight by postal authorities worldwide. We depend on a healthy postal sector in the geographic markets where we do business, which could be influenced positively or negatively by legislative or regulatory changes in those countries. Our profitability and revenue in a particular country could be affected by adverse changes in postal regulations, the business processes and practices of individual posts, the decision of a post to enter into particular markets in direct competition with us, and the impact of any of these changes on postal competitors that do not use our products or services. These changes could affect product specifications, service offerings, customer behavior and the overall mailing industry.

An accelerated decline in the use of physical mail could adversely affect our business.

Changes in our customers’ communication behavior, including changes in communications technologies, could adversely impact our revenue and profitability. Accelerated decline in physical mail could also result from government actions such as executive orders, legislation or regulations that mandate electronic substitution, prohibit certain types of mailings, increase the difficulty of using information or materials in the mail, or impose higher taxes or fees on mailing or postal services. While we have introduced various product and service offerings as alternatives to physical mail, we face competition from existing and emerging products and services that offer alternative means of communication, such as email and electronic document transmission technologies. An accelerated increase in the acceptance of electronic delivery technologies or other displacement of physical mail could adversely affect our business.

Reduced confidence in the mail system could impact our mail volume.

Unexpected events such as the transmission of biological or chemical agents, or acts of terrorism could have a negative effect on customer confidence in a postal system and as a result adversely impact mail volume. An unexpected and significant interruption in the use of the mail could adversely affect our business.

We depend on third-party suppliers and our business could be adversely affected if we fail to manage suppliers effectively.

We depend on third-party suppliers for a variety of services, components, supplies and a portion of our product manufacturing. In certain instances, we rely on single sourced or limited sourced suppliers around the world because the relationship is advantageous due to quality, price, or there are no alternative sources. If production or service was interrupted and we were not able to find alternate suppliers, we could experience disruptions in manufacturing and operations including product shortages, higher freight costs, and re-engineering costs. This could result in our inability to meet customer demand, damage our reputation and customer relationships and adversely affect our business.

5

Market deteriorations and credit downgrades could adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets.

We provide financing services to our customers for equipment, postage, and supplies. Our ability to provide these services is largely dependent upon our continued access to the U.S. capital markets. An additional source of liquidity for the company consists of deposits held in our wholly-owned industrial loan corporation, Pitney Bowes Bank (the Bank). A significant credit ratings downgrade, material capital market disruptions, significant withdrawals by depositors at the Bank, or adverse changes to our industrial loan charter could impact our ability to maintain adequate liquidity, and impact our ability to provide competitive offerings to our customers.

A portion of our total borrowings has been issued in the commercial paper markets. Although we continue to have unencumbered access to the commercial paper markets, there can be no assurance that such markets will continue to be a reliable source of short-term financing for us. If market conditions deteriorate, there may be no assurance that other funding sources would be available or sufficient.

We may not realize anticipated benefits from our Strategic Transformation.

In 2009, we announced that we were embarking on an initiative called Strategic Transformation, a program focusing on how we improve the way we go to market and how we interact with our customers while also reducing the company’s cost structure to make it more flexible. The initiatives are aimed at optimizing our cost structure and efficiency through new system implementation, outsourcing programs, and headcount reduction. If our new system implementation or outsourcing programs are not successful, the savings from Strategic Transformation may not be sustainable.

Failure to comply with privacy laws and other related regulations could subject us to significant liability.

Several of our services and financing businesses use, process and store customer information that could include confidential, personal or financial information. We also provide third party benefits administrators with access to our employees’ personal information. Privacy laws and similar regulations in many jurisdictions where we do business, as well as contractual provisions, require that we and our benefits administrators take significant steps to safeguard this information. Failure to comply with any of these laws, regulations or contract provisions could adversely affect our reputation and business and subject us to significant liability.

The failure of our information technology systems could adversely impact our operating results.

Our portfolio of product, service and financing solutions increases our dependence on information technologies. We maintain a secure system to collect revenue for certain postal services, which is critical to enable both our systems and the postal systems to run reliably. The continuous and uninterrupted performance of our systems is critical to our ability to support and service our customers and to support postal services. Although we maintain back-up systems, these systems could be damaged by acts of nature, power loss, telecommunications failures, computer viruses, vandalism and other unexpected events. If our systems were disrupted, we could be prevented from fulfilling orders and servicing customers and postal services, which could have an adverse effect on our reputation and business.

Our inability to obtain and protect our intellectual property and defend against claims of infringement by others may negatively impact our operating results.

We rely on copyright, trade secret, patent and other intellectual property laws in the United States and similar laws in other countries to establish and protect proprietary rights that are important to our business. If we fail to enforce our intellectual property rights, our business may suffer. We, or our suppliers, may be subject to third-party claims of infringement on intellectual property rights. These claims, if successful, may require us to redesign affected products, enter into costly settlement or license agreements, pay damage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our products .

If we fail to comply with government contracting regulations, our operating results, brand name and reputation could suffer.

Many of our contracts are with governmental entities. Government contracts are subject to extensive and complex government procurement laws and regulations, along with regular audits of contract pricing and our business practices by government agencies. If we are found to have violated some provisions of the government contracts, we could be required to provide a refund, pay significant damages, or be subject to contract cancellation, civil or criminal penalties, fines, or debarment from doing business with the government. Any of these events could not only affect us financially but also adversely affect our brand and reputation.

6

ITEM 1B. – UNRESOLVED STAFF COMMENTS

None.

ITEM 2. – PROPERTIES

Our world headquarters is located in Stamford, Connecticut. We have facilities worldwide that are either leased or owned. We have limited manufacturing and assembly operations in our Danbury, Connecticut and Harlow, United Kingdom locations. Our principal research and development facilities are located in Shelton, Connecticut and Noida, India. We believe that our manufacturing, administrative and sales office properties are adequate for the needs of all of our operations.

ITEM 3. – LEGAL PROCEEDINGS

In the ordinary course of business, we are routinely defendants in or party to a number of pending and threatened legal actions. These may involve litigation by or against us relating to, among other things, contractual rights under vendor, insurance or other contracts; intellectual property or patent rights; equipment, service, payment or other disputes with customers; or disputes with employees. Some of these actions may be brought as a purported class action on behalf of a purported class of employees, customers or others.

Our wholly-owned subsidiary, Imagitas, Inc., is a defendant in several purported class actions initially filed in five different states. These lawsuits have been coordinated in the United States District Court for the Middle District of Florida,  In re: Imagitas, Driver’s Privacy Protection Act Litigation (Coordinated, May 28, 2007). Each of these lawsuits alleges that the Imagitas DriverSource program violates the federal Drivers Privacy Protection Act (DPPA). Under the DriverSource program, Imagitas entered into contracts with state governments to mail out automobile registration renewal materials along with third party advertisements, without revealing the personal information of any state resident to any advertiser. The DriverSource program assisted the state in performing its governmental function of delivering these mailings and funding the costs of them. The plaintiffs in these actions were seeking statutory damages under the DPPA. On December 21, 2009, the Eleventh Circuit Court affirmed the District Court’s summary judgment decision in  Rine, et al. v. Imagitas, Inc . (United States District Court, Middle District of Florida, filed August 1, 2006), which ruled in Imagitas’ favor and dismissed that litigation. That decision is now final, with no further appeals available. With respect to the remaining state cases, Imagitas filed its motion to dismiss these cases on October 8, 2010. Plaintiff’s opposition brief was filed on December 6, 2010, and Imagitas filed its reply brief on December 22, 2010. Although the plaintiffs are still contending that the cases filed in Ohio and Missouri can proceed, they have admitted in their response that the reasoning in the Rine decision does require that actions based on Minnesota and New York laws be dismissed. We are awaiting a decision by the District Court on the motion to dismiss.

On October 28, 2009, the Company and certain of its current and former officers were named as defendants in NECA-IBEW Health & Welfare Fund v. Pitney Bowes Inc. et al. ,  a class action lawsuit filed in the U.S. District Court for the District of Connecticut. The complaint asserts claims under the Securities Exchange Act of 1934 on behalf of those who purchased the common stock of the Company during the period between July 30, 2007 and October 29, 2007 alleging that the Company, in essence, missed two financial projections. Plaintiffs filed an amended complaint on September 20, 2010. On December 3, 2010, defendants moved to dismiss the complaint. Oral argument on that motion is scheduled for April 15, 2011.

We expect to prevail in the legal actions above; however, as litigation is inherently unpredictable, there can be no assurance in this regard. If the plaintiffs do prevail, the results may have a material effect on our financial position, future results of operations or cash flows, including, for example, our ability to offer certain types of goods or services in the future.

ITEM 4. – (REMOVED AND RESERVED)

7

PART II
 	 	
ITEM 5. – 	MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	
Pitney Bowes common stock is traded under the symbol “PBI”. The principal market is the New York Stock Exchange (NYSE). Our stock is also traded on the Boston, Chicago, Philadelphia, Pacific and Cincinnati stock exchanges. At January 31, 2011, we had 21,844 common stockholders of record.

The following table sets forth, for the periods indicated, the high and low sales prices, as reported on the NYSE, and the cash dividends paid per share of common stock.
 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Stock Price	 	Dividend
Per Share	 	 	

	 	 	 	 	 	
 	 	High	 	Low	 	 	 	 	 	

	 	

	 	

	 	 	 	
For the year ended December 31, 2010	 	 	 	 	 	 	 	 	 	 	 	 	
First Quarter	 	$	24.76	 	$	20.80	 	$	0.365	 	 	 	
Second Quarter	 	$	26.00	 	$	21.28	 	 	0.365	 	 	 	
Third Quarter	 	$	25.00	 	$	19.06	 	 	0.365	 	 	 	
Fourth Quarter	 	$	24.79	 	$	21.19	 	 	0.365	 	 	 	

	

	 	 	 	
 	 	 	 	 	 	 	 	$	1.46	 	 	 	

	

	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
For the year ended December 31, 2009	 	 	 	 	 	 	 	 	 	 	 	 	
First Quarter	 	$	27.46	 	$	17.62	 	$	0.36	 	 	 	
Second Quarter	 	$	26.25	 	$	20.71	 	 	0.36	 	 	 	
Third Quarter	 	$	25.57	 	$	20.38	 	 	0.36	 	 	 	
Fourth Quarter	 	$	26.41	 	$	22.44	 	 	0.36	 	 	 	

	

	 	 	 	
 	 	 	 	 	 	 	 	$	1.44	 	 	 	

	

	 	 	 	
In February 2011, our Board of Directors authorized a half-cent increase in our quarterly common stock dividend to $0.37 per share, marking the 29th consecutive year that we have increased the dividend on our common stock. This represents a one percent increase and applies to the common stock dividend with a record date of February 18, 2011. We expect to continue to pay quarterly cash dividends. There are no material restrictions on our ability to declare dividends.

See Equity Compensation Plan Information Table in Item 12 of this Form 10-K for information regarding securities for issuance under our equity compensation plans.

Share Repurchases

We periodically repurchase shares of our common stock to manage the dilution created by shares issued under employee stock plans and for other purposes in the open market. In May 2010, the Board of Directors approved an expansion of our share repurchase authorization to $150 million. During 2010, we repurchased 4.7 million shares at a total cost of $100 million and at December 31, 2010, had $50 million of authorization remaining under this program. The following table summarizes our share repurchase activity under active programs during 2010. There were no share repurchases during the fourth quarter of 2010.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Total number of
shares
purchased	 	Average price
paid per share	 	Total number of
shares purchased as
part of a publicly
announced plan	 	Approximate dollar
value of shares that may
yet be purchased under
the plan (in thousands)	 	

	 	

	 	

	 	

	 	
Beginning balance	 	 	 	 	 	 	 	 	 	 	$	150,000	 	
July 2010	 	 	1,248,943	 	$	23.39	 	 	1,248,943	 	$	120,786	 	
August 2010	 	 	1,770,826	 	$	20.21	 	 	1,770,826	 	$	85,000	 	
September 2010	 	 	1,667,535	 	$	20.99	 	 	1,667,535	 	$	50,000	 	

	

	 	

	

	 	

	

	 	 	 	 	
 	 	 	4,687,304	 	$	21.33	 	 	4,687,304	 	 	 	 	

	

	 	

	

	 	

	

	 	 	 	 	
In February 2011, our Board of Directors approved an increase of $100 million in our share repurchase authorization to $150 million.

8

Stock Performance Graph

The accompanying graph compares the most recent five-year performance of Pitney Bowes common stock with the Standard and Poor’s (“S&P”) 500 Composite Index, and Peer Group Index.

The Peer Group Index is comprised of the following companies: Automatic Data Processing, Inc., Diebold, Inc., R.R. Donnelley & Sons Co., DST Systems, Inc., Fedex Corporation, Hewlett-Packard Company, Lexmark International, Inc., Pitney Bowes Inc., United Parcel Service, Inc., and Xerox Corporation.

Total return for the Peer Group and the S&P 500 Composite Index is based on market capitalization, weighted for each year.

All information is based upon data independently provided to us by Standard & Poor’s Corporation and is derived from their official total return calculation.

The graph shows that on a total return basis, assuming reinvestment of all dividends, $100 invested in the company’s common stock on December 31, 2005 would have been worth $72 on December 31, 2010. By comparison, $100 invested in the S&P 500 Composite Index on December 31, 2005 would have been worth $112 on December 31, 2010. An investment of $100 in the Peer Group on December 31, 2005 would have been worth $118 on December 31, 2010.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Indexed Returns
December 31,	 	

	 	
Company Name / Index	 	2005	 	2006	 	2007	 	2008	 	2009	 	2010	 	

	 	

	 	

	 	

	 	

	 	

	 	
Pitney Bowes	 	$	100	 	$	113	 	$	96	 	$	67	 	$	64	 	$	72	 	
S&P 500	 	$	100	 	$	116	 	$	122	 	$	77	 	$	97	 	$	112	 	
Peer Group	 	$	100	 	$	119	 	$	124	 	$	92	 	$	116	 	$	118	 	
9

 	 	
ITEM 6. – 	SELECTED FINANCIAL DATA	
The following tables summarize selected financial data for the Company, and should be read in conjunction with the more detailed consolidated financial statements and related notes thereto included under Item 8 of this Form 10-K.
Summary of Selected Financial Data
(Dollars in thousands, except per share amounts)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	2007	 	2006	 	

	 	

	 	

	 	

	 	

	 	
Total revenue	 	$	5,425,254	 	$	5,569,171	 	$	6,262,305	 	$	6,129,795	 	$	5,730,018	 	
Total costs and expenses	 	 	4,890,677	 	 	4,875,995	 	 	5,549,128	 	 	5,469,084	 	 	4,815,528	 	
Income from continuing operations before income taxes	 	 	534,577	 	 	693,176	 	 	713,177	 	 	660,711	 	 	914,490	 	
Provision for income taxes	 	 	205,770	 	 	240,154	 	 	244,929	 	 	280,222	 	 	335,004	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Income from continuing operations	 	 	328,807	 	 	453,022	 	 	468,248	 	 	380,489	 	 	579,486	 	
(Loss) gain from discontinued operations, net of income tax	 	 	(18,104	)	 	(8,109	)	 	(27,700	)	 	5,534	 	 	(460,312	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income before attribution of noncontrolling interests	 	 	310,703	 	 	444,913	 	 	440,548	 	 	386,023	 	 	119,174	 	
Less: Preferred stock dividends of subsidiaries attributable to noncontrolling interests	 	 	18,324	 	 	21,468	 	 	20,755	 	 	19,242	 	 	13,827	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income	 	$	292,379	 	$	423,445	 	$	419,793	 	$	366,781	 	$	105,347	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share of common stock attributable to common stockholders (1):	
Continuing operations	 	$	1.51	 	$	2.09	 	$	2.15	 	$	1.65	 	$	2.54	 	
Discontinued operations	 	 	(0.09	)	 	(0.04	)	 	(0.13	)	 	0.03	 	 	(2.07	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income	 	$	1.42	 	$	2.05	 	$	2.01	 	$	1.68	 	$	0.47	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings per share of common stock attributable to common stockholders (1):	
Continuing operations	 	$	1.50	 	$	2.08	 	$	2.13	 	$	1.63	 	$	2.51	 	
Discontinued operations	 	 	(0.09	)	 	(0.04	)	 	(0.13	)	 	0.03	 	 	(2.04	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income	 	$	1.41	 	$	2.04	 	$	2.00	 	$	1.66	 	$	0.47	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash dividends paid to stockholders	 	$	301,456	 	$	297,555	 	$	291,611	 	$	288,790	 	$	285,051	 	
Cash dividends per share of common stock	 	$	1.46	 	$	1.44	 	$	1.40	 	$	1.32	 	$	1.28	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	$	303,653	 	$	338,895	 	$	379,117	 	$	383,141	 	$	363,258	 	
Capital expenditures	 	$	119,768	 	$	166,728	 	$	237,308	 	$	264,656	 	$	327,887	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance sheet	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	$	8,444,023	 	$	8,571,039	 	$	8,810,236	 	$	9,465,731	 	$	8,527,331	 	
Long-term debt	 	$	4,239,248	 	$	4,213,640	 	$	3,934,865	 	$	3,802,075	 	$	3,847,617	 	
Total debt	 	$	4,292,742	 	$	4,439,662	 	$	4,705,366	 	$	4,755,842	 	$	4,338,157	 	
Noncontrolling interests (Preferred stockholders’ equity in subsidiaries)	 	$	296,370	 	$	296,370	 	$	374,165	 	$	384,165	 	$	384,165	 	
Stockholders’ (deficit) equity (2)	 	$	(96,581	)	$	(3,152	)	$	(303,594	)	$	544,454	 	$	600,340	 	
(1) The sum of the earnings per share amounts may not equal the totals above due to rounding.

(2) Stockholders’ (deficit) equity has been reduced for all periods presented for the impact of an opening retained earnings adjustment of $16,815 pertaining to prior periods. See Note 9 to the Consolidated Financial Statements for further details.

10

 	 	
ITEM 7. – 	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements contained in this report. All table amounts are presented in millions of dollars, unless otherwise stated.

Forward-Looking Statements

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains statements that are forward-looking. We want to caution readers that any forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 in this Form 10-K may change based on various factors. These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties and actual results could differ materially. Words such as “estimate”, “target”, “project”, “plan”, “believe”, “expect”, “anticipate”, “intend”, and similar expressions may identify such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Factors which could cause future financial performance to differ materially from the expectations as expressed in any forward-looking statement made by or on our behalf include, without limitation:
 	 	 	
 	•	negative developments in economic conditions, including adverse impacts on customer demand	
 	 	 	
 	•	changes in postal or banking regulations	
 	 	 	
 	•	timely development and acceptance of new products	
 	 	 	
 	•	declining physical mail volumes	
 	 	 	
 	•	success in gaining product approval in new markets where regulatory approval is required	
 	 	 	
 	•	successful entry into new markets	
 	 	 	
 	•	mailers’ utilization of alternative means of communication or competitors’ products	
 	 	 	
 	•	our success at managing customer credit risk	
 	 	 	
 	•	our success at managing costs associated with our strategy of outsourcing functions and operations not central to our business	
 	 	 	
 	•	changes in interest rates	
 	 	 	
 	•	foreign currency fluctuations	
 	 	 	
 	•	cost, timing and execution of our transformation plans including any potential asset impairments	
 	 	 	
 	•	regulatory approvals and satisfaction of other conditions to consummate and integrate any acquisitions	
 	 	 	
 	•	interrupted use of key information systems	
 	 	 	
 	•	changes in international or national political conditions, including any terrorist attacks	
 	 	 	
 	•	intellectual property infringement claims	
 	 	 	
 	•	impact on mail volume resulting from current concerns over the use of the mail for transmitting harmful biological agents	
 	 	 	
 	•	third-party suppliers’ ability to provide product components, assemblies or inventories	
 	 	 	
 	•	negative income tax adjustments or other regulatory levies for prior audit years and changes in tax laws or regulations	
 	 	 	
 	•	changes in pension, health care and retiree medical costs	
 	 	 	
 	•	changes in privacy laws	
 	 	 	
 	•	acts of nature	
11

Overview

In 2010, revenue decreased 3% to $5.4 billion compared to the prior year. Equipment sales and software revenues increased 2% and 5%, respectively, compared to the prior year; however, these improvements were offset by a decline of 7% in rental revenue, 8% in financing revenue, 5% in supplies revenue and 3% in business services revenue compared to the prior year. Foreign currency translation and acquisitions had less than a 1% favorable impact on revenue.

Earnings before interest and taxes (EBIT) increased in five of our segments when compared to the prior year primarily due to our ongoing productivity and cost reduction initiatives.

Net income from continuing operations in 2010 was $310 million, or $1.50 per diluted share compared with $432 million, or $2.08 per diluted share in 2009. Diluted earnings per share for 2010 was reduced by $0.59 for restructuring charges and asset impairments, $0.07 for non-cash tax charges associated with out-of-the-money stock options that expired during the year, $0.05 for a one-time charge to correct rates used to estimate unbilled International Mail Services revenue in prior periods and $0.04 for recently enacted heath care legislation. Diluted earnings per share for 2009 was reduced by $0.15 for restructuring charges, $0.06 for non-cash tax charges associated with out-of-the-money stock options that expired during the year partially offset by a $0.01 positive tax adjustment associated with the repricing of leveraged lease transactions.

We generated $952 million in cash from operations, which was used to reduce debt by $171 million, repurchase $100 million of our common stock and pay $301 million of dividends to our common stockholders.

For a more detailed discussion of our results of operations, see “Results of Operations 2010 compared to 2009” and “Results of Operations 2009 compared to 2008.”

Outlook

During the second half or 2010, we began to see some positive signs in our business. However, the worldwide economy and business environment continues to be uncertain, especially among small businesses. This uncertain economic environment has impacted our financial results and in particular our recurring revenue streams, including our high-margin financing, rental and supplies revenue streams. Recovery of these recurring revenue streams will lag a recovery in equipment sales. While we have been successful in reducing our cost structure across the entire business and shifting to a more variable cost structure, these actions have not been sufficient to offset the impact of lower revenues. We remain focused on streamlining our business operations and creating more flexibility in our cost structure.

We continue to expect our mix of revenue to change, with a greater percentage of revenue coming from enterprise related products and solutions. We expect that our future results will continue to be impacted by changes in global economic conditions and their impact on mail intensive industries. It is not expected that total mail volumes will rebound to prior peak levels in an economic recovery, and future mail volume trends will continue to be a factor for our businesses.

In 2009, we announced we were undertaking a series of initiatives designed to transform and enhance the way we operate as a global company. In order to enhance our responsiveness to changing market conditions, we have been executing on a strategic transformation program designed to create improved processes and systems to further enable us to invest in future growth in areas such as our global customer interactions and product development processes. We expect the total pre-tax cost of this program will be in the range of $300 million to $350 million primarily related to severance and benefit costs incurred in connection with workforce reductions. Currently, we are targeting annualized benefits, net of system and related investments, in the range of $250 million to $300 million on a pre-tax basis, with a full benefit run rate by 2012.

12

RESULTS OF OPERATIONS - 2010 Compared to 2009

Business segment results

We conduct our business activities in seven reporting segments within two business groups, Small & Medium Business Solutions (SMB Solutions) and Enterprise Business Solutions (EB Solutions). The following table shows revenue and EBIT in 2010 and 2009 by business segment. EBIT, a non-GAAP measure, is determined by deducting from segment revenue the related costs and expenses attributable to the segment. EBIT is useful to management in demonstrating the operational profitability of the segments by excluding interest and taxes, which are generally managed across the entire company on a consolidated basis, and general corporate expenses, restructuring charges and asset impairments. EBIT is also used for purposes of measuring the performance of our management team. Refer to Note 18 to the Consolidated Financial Statements for a reconciliation of segment amounts to income from continuing operations before income taxes.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Revenue	 	EBIT	 	

	 	

	 	
 	 	2010	 	2009	 	% change	 	2010	 	2009	 	% change	 	

	 	

	 	

	 	

	 	

	 	

	 	
U.S. Mailing	 	$	1,879	 	$	2,016	 	 	(7	)%	$	689	 	$	743	 	 	(7	)%	
International Mailing	 	 	923	 	 	920	 	 	—	%	 	143	 	 	128	 	 	12	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
SMB Solutions	 	 	2,802	 	 	2,936	 	 	(5	)%	 	832	 	 	871	 	 	(4	)%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Production Mail	 	 	557	 	 	526	 	 	6	%	 	61	 	 	51	 	 	18	%	
Software	 	 	363	 	 	346	 	 	5	%	 	42	 	 	38	 	 	13	%	
Management Services	 	 	999	 	 	1,061	 	 	(6	)%	 	93	 	 	72	 	 	28	%	
Mail Services	 	 	562	 	 	559	 	 	1	%	 	63	 	 	83	 	 	(23	)%	
Marketing Services	 	 	142	 	 	141	 	 	—	%	 	26	 	 	23	 	 	14	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
EB Solutions	 	 	2,623	 	 	2,633	 	 	—	%	 	285	 	 	267	 	 	7	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	5,425	 	$	5,569	 	 	(3	)%	$	1,117	 	$	1,138	 	 	(2	)%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Small & Medium Business Solutions

Small & Medium Business Solutions revenue decreased 5% to $2,802 million and EBIT decreased 4% to $832 million, compared to the prior year. Within Small & Medium Business Solutions:

U.S. Mailing revenue decreased 7% to $1,879 million and EBIT decreased 7% to $689 million, compared to the prior year. The revenue decrease was driven primarily by lower financing, rental, service and supplies revenues. The decrease in financing revenue is due to a decline in our leasing portfolio from reduced equipment sales in recent years. Rental, supplies and service revenues were lower than prior year due to fewer placements of new meters. Lease extensions have a positive impact on profit margins longer-term but negatively impact equipment sales revenue in the current year. Equipment sales and supplies revenue were lower than prior year due to business consolidations, lease extensions and reduced volumes of mail processed. Revenue was also adversely affected by the ongoing changing mix to more fully featured smaller systems. The lower EBIT was due to the decline in higher margin financing, rental and supplies revenues.

International Mailing revenue was flat at $923 million compared to the prior year, including a favorable impact from foreign currency translation of 2%. While equipment sales were up slightly in certain parts of Europe and Canada, this increase was offset by continued declines in financing and rental revenues due to reduced equipment sales in recent years. EBIT increased 12% to $143 million compared to prior year, and was favorably impacted by an adjustment related to certain leveraged lease transactions in Canada (6%), our initiatives to improve productivity and consolidate functions globally and by 4% from foreign currency translation.

Enterprise Business Solutions

Enterprise Business Solutions revenue was flat at $2,623 million and EBIT increased 7% to $285 million, compared to the prior year. Within Enterprise Business Solutions:

Production Mail revenue increased 6% over the prior year to $557 million due to increased demand in the U.S. for inserting equipment and our first installations of production print equipment. Demand for inserting equipment continued to experience a delayed recovery in certain countries outside of North America as many large enterprises in these regions continue to delay capital expenditures due to

13

economic uncertainty. EBIT increased 18% to $61 million compared to last year due to the higher revenue and our initiatives to improve productivity and consolidate administrative functions. Foreign currency translation had a 1% favorable impact on EBIT.

Software revenue increased 5% over last year to $363 million, driven by the acquisition of Portrait Software (4%) and the favorable impact of foreign currency translation (1%). We continue to build more recurring revenue streams through multi-year licensing agreements, which have the effect of deferring some revenue to future periods. EBIT increased 13% over last year to $42 million due to business integration and productivity initiatives. EBIT was negatively impacted by transaction-related fees of approximately $2 million associated with the Portrait acquisition. Foreign currency translation had a less than 1% favorable impact on EBIT.

Management Services revenue decreased 6% compared to last year to $999 million due to the loss of several large postal contracts and decreased print volumes. Despite the lower revenues, EBIT increased 28% over the prior year to $93 million primarily due to our actions to align costs with changing volumes through a more variable cost infrastructure, ongoing productivity initiatives and a focus on more profitable contracts. Foreign currency translation had a less than 1% impact on both revenue and EBIT.

Mail Services revenue increased 1% compared to last year to $562 million, while EBIT decreased 23% to $63 million. Mail Services revenue and EBIT were adversely impacted by $21 million and $16 million, respectively, due to a one-time out of period adjustment in the International Mail Services portion of the business primarily related to the correction to the rates used to estimate earned but unbilled revenue for the periods 2007 through the first quarter of 2010. The impact of this adjustment was not material on any individual quarter or year during these periods. Excluding the impact of this adjustment, revenue increased 4% over the prior year, but EBIT decreased 5%. The revenue increase was driven partially by increased volumes of presort mail and Standard Class mail processed and acquisitions (2%). The decrease in EBIT was driven by higher shipping rates charged by international carriers for our International Mail Services business, which more than offset the favorable margin impacts in our Presort business.

Marketing Services revenue of $142 million was flat compared to the prior year. Revenue was impacted by increased vendor advertising for Movers’ Source kits offset by a decline in household moves compared to prior year. EBIT increased 14% over last year due to more profitable vendor revenue per transaction.

Revenues and Cost of revenues by source

The following tables show revenues and costs of revenues by source for the years ended December 31, 2010 and 2009:

Revenues by source
 	 	 	 	 	 	 	 	 	 	 	
 	 	2010	 	2009	 	% change	 	

	 	

	 	

	 	
Equipment sales	 	$	1,030	 	$	1,007	 	 	2	%	
Supplies	 	 	318	 	 	336	 	 	(5	)%	
Software	 	 	382	 	 	365	 	 	5	%	
Rentals	 	 	601	 	 	647	 	 	(7	)%	
Financing	 	 	638	 	 	695	 	 	(8	)%	
Support services	 	 	712	 	 	714	 	 	—	%	
Business services	 	 	1,744	 	 	1,805	 	 	(3	)%	

	

	 	

	

	 	

	

	 	
Total revenue	 	$	5,425	 	$	5,569	 	 	(3	)%	

	

	 	

	

	 	

	

	 	
Cost of revenues by source
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Percentage of Revenue	 	

	 	
 	 	2010	 	2009	 	2010	 	2009	 	

	 	

	 	

	 	

	 	
Cost of equipment sales	 	$	476	 	$	456	 	 	46.2	%	 	45.3	%	
Cost of supplies	 	 	97	 	 	94	 	 	30.5	%	 	27.9	%	
Cost of software	 	 	86	 	 	82	 	 	22.5	%	 	22.5	%	
Cost of rentals	 	 	142	 	 	159	 	 	23.6	%	 	24.5	%	
Financing interest expense	 	 	88	 	 	98	 	 	13.8	%	 	14.1	%	
Cost of support services	 	 	452	 	 	467	 	 	63.5	%	 	65.4	%	
Cost of business services	 	 	1,337	 	 	1,382	 	 	76.7	%	 	76.6	%	

	

	 	

	

	 	

	

	 	

	

	 	
Total cost of revenues	 	$	2,678	 	$	2,738	 	 	49.4	%	 	49.2	%	

	

	 	

	

	 	

	

	 	

	

	 	
14

Equipment sales

Equipment sales revenue increased 2% to $1,030 million compared to the prior year. Foreign currency translation had a positive impact of 1%. The growth was primarily driven by higher sales of production mail equipment in the U.S. and higher equipment sales in Canada and parts of Europe. Period revenue was adversely affected by lease extensions.

Cost of equipment sales as a percentage of revenue was 46.2% compared with 45.3% in the prior year, primarily due to the higher mix of lower margin production mail equipment sales, which more than offset the positive impacts of higher levels of lease extensions and ongoing productivity improvements.

Supplies

Supplies revenue decreased 5% to $318 million compared to the prior year due to lower supplies usage resulting from lower mail volumes and fewer installed meters due to customer consolidations worldwide. Foreign currency translation had less than a 1% favorable impact.

Cost of supplies as a percentage of revenue was 30.5% compared with 27.9% in the prior year primarily due to the increasing mix of lower margin non-compatible supplies sales worldwide.

Software

Software revenue increased 5% to $382 million compared to the prior year. The acquisition of Portrait accounted for 4% of the increase and foreign currency translation accounted for 1% of the increase. Period revenue growth was also negatively impacted by the shift to recurring revenue streams through multi-year licensing agreements.

Cost of software as a percentage of revenue was 22.5%, unchanged from the prior year.

Rentals

Rentals revenue decreased 7% to $601 million compared to the prior year as customers in the U.S. continue to downsize to smaller, fully featured machines. The weak economic conditions have also impacted our international rental markets, specifically in France. Foreign currency translation had less than a 1% positive impact.

Cost of rentals as a percentage of revenue was 23.6% compared with 24.5% in the prior year. Rental margins have been positively impacted by lower depreciation associated with higher levels of lease extensions.

Financing

Financing revenue decreased 8% to $638 million compared to the prior year as lower equipment sales in previous years have resulted in a net decline in both our U.S. and international lease portfolios. Foreign currency translation had a 1% positive impact.

Financing interest expense as a percentage of revenue was 13.8% compared with 14.1% in the prior year due to lower interest rates and lower average borrowings. In computing financing interest expense, which represents the cost of borrowing associated with the generation of financing revenues, we assume a 10:1 leveraging ratio of debt to equity and apply our overall effective interest rate to the average outstanding finance receivables.

Support Services

Support services revenue of $712 million was flat compared to the prior year. Growth has been negatively impacted by lower placements of mailing equipment, primarily in the U.S., U.K. and France. Foreign currency translation had a positive impact of 1%.

Cost of support services as a percentage of revenue improved to 63.5% compared with 65.4% in the prior year due to margin improvements from our ongoing productivity investments in the U.S. and International Mailing and Production Mail businesses.

Business Services

Business services revenue decreased 3% to $1,744 million compared to the prior year primarily due to the loss of several large postal contracts and print volumes at Management Services. Foreign currency translation had less than a 1% negative impact.

Cost of business services as a percentage of revenue was 76.7% compared with 76.6% in the prior year. Positive impacts of cost reduction programs at our Management Services and Presort businesses were offset by higher shipping costs in International Mail Services.

15

Selling, general and administrative (SG&A)

SG&A expenses decreased $40 million, or 2% primarily as a result of our cost reduction initiatives. Businesses acquired in 2010 increased SG&A by $15 million and foreign currency translation had a less than 1% unfavorable impact. As a percentage of revenue, SG&A expenses were 32.5% compared to 32.3% in the prior year.

Research and development

Research and development expenses decreased $26 million, or 14%from the prior year due to the wind-down of redundant costs related to our transition to offshore development activities and the launch of the new Connect+ TM  mailing system. Foreign currency translation had an unfavorable impact of 1%. As a percentage of revenue, research and development expenses were 2.9% compared to 3.3% in the prior year.

Other interest expense

Other interest expense increased $4 million, or 4% in 2010 compared to the prior year. Included in other interest expense is credit facility fees which were higher compared to the prior year. We do not allocate other interest expense to our business segments.

Income taxes / effective tax rate

The effective tax rates for 2010 and 2009 were 38.5% and 34.6%, respectively. The effective tax rate for 2010 includes $16 million of tax benefits associated with previously unrecognized deferred taxes on outside basis differences, a $15 million charge for the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock units previously granted to our employees and a $9 million charge for the write-off of deferred tax assets related to the U.S. health care reform legislation that eliminated the tax deduction for retiree health care costs to the extent of federal subsidies received by companies that provide retiree prescription drug benefits equivalent to Medicare Part D coverage.

The effective tax rate for 2009 included $13 million of tax charges related to the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock, offset by $13 million of tax benefits from retirement of inter-company obligations and the repricing of leveraged lease transactions.

Discontinued operations

The loss from discontinued operations in 2010 primarily relates to the accrual of interest on uncertain tax positions and additional tax associated with the disposed operations. The 2009 net loss from discontinued operations includes $10 million of pre-tax income ($6 million net of tax) for a bankruptcy settlement received and $11 million of pre-tax income ($7 million net of tax) related to the expiration of an indemnity agreement associated with the sale of a former subsidiary. This income was more than offset by the accrual of interest on uncertain tax positions. See Note 2 to the Consolidated Financial Statements.

Preferred stock dividends of subsidiaries attributable to noncontrolling interests

Preferred stock dividends to stockholders of subsidiary companies were $18 million and $21 million in 2010 and 2009, respectively. The 2009 amount included an expense of $3 million associated with the redemption of $375 million of variable term voting preferred stock. See Note 10 to the Consolidated Financial Statements for further discussion.

16

RESULTS OF OPERATIONS - 2009 Compared to 2008

Business segment results

The following table shows revenue and EBIT in 2009 and 2008 by business segment. Results have been reclassified to conform to the current year presentation.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Revenue	 	EBIT	 	

	 	

	 	
 	 	2009	 	2008	 	% change	 	2009	 	2008	 	% change	 	

	 	

	 	

	 	

	 	

	 	

	 	
U.S. Mailing	 	$	2,016	 	$	2,250	 	 	(10	)%	$	743	 	$	890	 	 	(17	)%	
International Mailing	 	 	920	 	 	1,134	 	 	(19	)%	 	128	 	 	185	 	 	(31	)%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
SMB Solutions	 	 	2,936	 	 	3,384	 	 	(13	)%	 	871	 	 	1,075	 	 	(19	)%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Production Mail	 	 	526	 	 	616	 	 	(15	)%	 	51	 	 	82	 	 	(37	)%	
Software	 	 	346	 	 	400	 	 	(14	)%	 	38	 	 	28	 	 	32	%	
Management Services	 	 	1,061	 	 	1,172	 	 	(9	)%	 	72	 	 	70	 	 	3	%	
Mail Services	 	 	559	 	 	542	 	 	3	%	 	83	 	 	69	 	 	20	%	
Marketing Services	 	 	141	 	 	148	 	 	(5	)%	 	23	 	 	21	 	 	8	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
EB Solutions	 	 	2,633	 	 	2,878	 	 	(9	)%	 	267	 	 	270	 	 	(1	)%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	5,569	 	$	6,262	 	 	(11	)%	$	1,138	 	$	1,345	 	 	(15	)%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Small & Medium Business Solutions

Small & Medium Business Solutions revenue decreased 13% to $2,936 million and EBIT decreased 19% to $871 million, compared to the prior year. Within Small & Medium Business Solutions:

U.S. Mailing revenue decreased 10% primarily due to fewer placements of mailing equipment and related financing and rental revenues as customers continued to delay purchases of new equipment and extend leases on existing equipment due to the economic conditions. Revenue was adversely affected by lower business activity levels and the ongoing changing mix to more fully featured smaller systems. Lease extensions have a positive impact on profit margins longer-term but negatively impact revenue in the current year. As a result of lower business activity levels over the prior year, EBIT decreased 17% principally due to lower equipment sales, financing revenue, meter rentals, and supplies sales.

International Mailing revenue decreased 19%, with 8% of this decline driven by the unfavorable impact of foreign currency translation. The international economic environment continued to create weaker demand for our products and services. As a result, many customers delayed making purchase decisions for new mailing systems and lower mail volume reduced supplies revenue. EBIT declined 31%, primarily driven by lower levels of equipment and supplies sales, and lower financing revenue.

Enterprise Business Solutions:

Enterprise Business Solutions revenue decreased 9% to $2,633 million; however EBIT decreased only 1% to $267 million, compared to the prior year. Within Enterprise Business Solutions:

Production Mail revenue decreased 15% primarily as a result of lower equipment sales in the U.S., France, and Asia Pacific as economic uncertainty continued to delay large-ticket capital expenditures for many large enterprises worldwide. Foreign currency translation had an unfavorable impact of 2%. EBIT decreased 37% driven by lower revenues and a shift in product mix to lower margin products.

Software revenue decreased 14%, with 4% of this decline driven by the unfavorable impact of foreign currency translation. Worldwide consolidation in the financial services industry and slowness in the retail sector adversely impacted the sales and renewal of software licenses. Uncertainty surrounding the economy resulted in many large multi-national organizations changing their approval policies for capital expenditures, which lengthened the sales cycle. EBIT increased to $38 million compared to $28 million in the prior year due to business integration and productivity initiatives which resulted in substantial EBIT margin improvements. This helped offset the pressure on margins from lower revenue and a higher mix of lower margin software sales.

Management Services revenue decreased 9%, of which 2% was driven by the unfavorable impact of foreign currency translation. Revenue was adversely affected by lower business activity and decreased print and transaction volumes throughout the U.S. and

17

Europe. EBIT however, increased 3% primarily due to productivity enhancements that have improved the profitability of the operations globally.

Mail Services revenue increased 3% mostly due to the impact of 2008 acquisitions (4%) partly offset by the unfavorable impact of foreign currency translation (1%). Customer base expansion and continued growth in the volume of mail processed drove a slight increase in revenue for the year. EBIT increased 20% due to the integration of Mail Services sites acquired last year and ongoing automation and productivity initiatives implemented by the business.

Marketing Services revenue decreased 5%, mostly due to the impact of fewer household moves during the year and the resulting decline in the volume of change of address kits mailed. EBIT increased 8% however, due to an improving cost structure and the exit from the motor vehicle registration services program.

Revenues and cost of revenues by source

The following tables show revenues and costs of revenues by source for the years ended December 31, 2009 and 2008:
Revenue by source	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	
 	 	2009	 	2008	 	%change	 	

	 	

	 	

	 	
Equipment sales	 	$	1,007	 	$	1,252	 	 	(20	)%	
Supplies	 	 	336	 	 	392	 	 	(14	)%	
Software	 	 	365	 	 	424	 	 	(14	)%	
Rentals	 	 	647	 	 	728	 	 	(11	)%	
Financing	 	 	695	 	 	773	 	 	(10	)%	
Support services	 	 	714	 	 	769	 	 	(7	)%	
Business services	 	 	1,805	 	 	1,924	 	 	(6	)%	

	

	 	

	

	 	

	

	 	
Total revenue	 	$	5,569	 	$	6,262	 	 	(11	)%	

	

	 	

	

	 	

	

	 	

Cost of revenues by source	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	Percentage of Revenue	 	

	 	
 	 	2009	 	2008	 	2009	 	2008	 	

	 	

	 	

	 	

	 	
Cost of equipment sales	 	$	456	 	$	574	 	 	45.3	%	 	45.9	%	
Cost of supplies	 	 	94	 	 	104	 	 	27.9	%	 	26.5	%	
Cost of software	 	 	82	 	 	101	 	 	22.5	%	 	23.9	%	
Cost of rentals	 	 	159	 	 	154	 	 	24.5	%	 	21.1	%	
Financing interest expense	 	 	98	 	 	110	 	 	14.1	%	 	14.3	%	
Cost of support services	 	 	467	 	 	537	 	 	65.4	%	 	69.9	%	
Cost of business services	 	 	1,382	 	 	1,486	 	 	76.6	%	 	77.2	%	

	

	 	

	

	 	

	

	 	

	

	 	
Total cost of revenues	 	$	2,738	 	$	3,066	 	 	49.2	%	 	49.0	%	

	

	 	

	

	 	

	

	 	

	

	 	
Equipment sales

Equipment sales revenue decreased 20% compared to the prior year due to lower placements of mailing equipment as more customers delayed purchases of new equipment and extended their leases on existing equipment due to the global economic conditions. Revenue also continued to be adversely affected by the ongoing changing mix in equipment placements to smaller, fully featured systems. Foreign currency translation had an unfavorable impact of 3%.

Cost of equipment sales as a percentage of revenue was 45.3% compared with 45.9% in the prior year, primarily due to the positive impacts of ongoing productivity improvements, partly offset by a higher mix of lower margin sales.

Supplies

Supplies revenue decreased 14% compared to the prior year due to lower supplies usage resulting from lower mail volumes and fewer installed meters due to customer consolidations in the U.S. and internationally. Foreign currency translation had an unfavorable impact of 3%.

Cost of supplies as a percentage of revenue was 27.9% compared with 26.5% in the prior year due to a greater mix of non-ink supplies in U.S Mailing.

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Software

Software revenue decreased 14% compared to the prior year primarily due to the impact of the global economic slowdown which caused many businesses to delay their capital spending worldwide. Worldwide consolidation in the financial services industry and slowness in the retail sector also adversely impacted sales and renewals of software licenses. Foreign currency translation had an unfavorable impact of 4%.

Cost of software as a percentage of revenue was 22.5% compared with 23.9% in the prior year due to business integration initiatives and productivity investments, which more than offset the impact of lower revenue levels.

Rentals

Rentals revenue decreased 11% compared to the prior year as customers in the U.S. continued to downsize to smaller, fully featured machines. The weak economic conditions also impacted our international rental markets, specifically in Canada and France. Foreign currency translation had an unfavorable impact of 1%.

Cost of rentals as a percentage of revenue was 24.5% compared with 21.1% in the prior year primarily due to the fixed costs of meter depreciation on lower revenues.

Financing

Financing revenue decreased 10% compared to the prior year. Lower equipment sales over prior periods resulted in a decline in both our U.S. and international lease portfolios. Foreign currency translation had an unfavorable impact of 2%.

Financing interest expense as a percentage of revenue was 14.1% compared with 14.3% in the prior year due to lower interest rates and lower average borrowings.

Support services

Support services revenue decreased 7% compared to the prior year, principally due to lower revenues in Canada, the U.S. and the U.K. due to lower new equipment placements and the unfavorable impact of foreign currency translation of 3%.

Cost of support services as a percentage of revenue was 65.4% compared with 69.9% in the prior year. Margin improvements in our International Mailing, U.S. Mailing and Production Mail segments were driven by the positive impacts of ongoing productivity investments and price increases on service contracts in Production Mail.

Business services

Business services revenue decreased 6% compared to the prior year. Lower volumes at Management Services and Marketing Services offset the impact of an increase in mail processed at Mail Services. The unfavorable impact of foreign currency translation of 2% was partly offset by the positive impact of acquisitions which contributed 1%.

Cost of business services as a percentage of revenue was 76.6% compared with 77.2% in the prior year. This improvement was due to the positive impacts of cost reduction programs at our Management Services and Mail Services businesses, partly offset by lower transaction volumes in our Management Services business.

Selling, general and administrative

SG&A expense decreased $170 million or 9%, primarily as a result of our cost reduction initiatives and the positive impact of foreign currency translation of 3%. However, the impact of lower revenue, increased pension costs of $14 million and higher credit loss expenses of $9 million more than offset these benefits on a percentage of revenue basis. As a percentage of revenue, SG&A expenses were 32.3% compared to 31.5% in the prior year.

Research and development

Research and development expenses decreased $23 million or 11%, from the prior year due to the transition and related benefits from our move to offshore development activities. Foreign currency translation also had a positive impact of 3%. As a percentage of revenue, research and development expenses were 3.3% for 2009 and 2008 as we continue to invest in developing new technologies and enhancing our products.

Other interest expense

Other interest expense decreased $8 million or 7%, from prior year due to lower interest rates and lower average borrowings during the year.

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Income taxes / effective tax rate

The effective tax rate for 2009 and 2008 was 34.6% and 34.3%, respectively. The effective tax rate for 2009 included $13 million of charges related to the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock, offset by $13 million of tax benefits from retirement of inter-company obligations and the repricing of leveraged lease transactions. The effective tax rate for 2008 included $12 million of tax increases related to the low tax benefit associated with restructuring expenses recorded during 2008, offset by adjustments of $10 million related to deferred tax assets associated with certain U.S. leasing transactions.

Discontinued operations

The net loss from discontinued operations was $8 million and $28 million for 2009 and 2008, respectively. The 2009 net loss from discontinued operations included $6 million, net of tax, for a bankruptcy settlement received and $7 million, net of tax, related to the expiration of an indemnity agreement associated with the sale of a former subsidiary. This income was more than offset by the accrual of interest on uncertain tax positions. The 2008 net loss from discontinued operations is comprised of an accrual of tax and interest on uncertain tax positions.

Preferred stock dividends of subsidiaries attributable to noncontrolling interests

Preferred stock dividends to stockholders of subsidiary companies were $21 million in 2009 and 2008. The 2009 amount also included $3 million associated with the redemption of $375 million of variable term voting preferred stock during the year. The 2008 amount included $2 million associated with the redemption of $10 million of 9.11% Cumulative Preferred Stock.

Restructuring Charges and Asset Impairments

In 2009, we announced that we were undertaking a series of initiatives designed to transform and enhance the way we operate as a global company (the 2009 Program). In order to enhance our responsiveness to changing market conditions, we executed a strategic transformation program designed to create improved processes and systems to further enable us to invest in future growth in areas such as our global customer interactions and product development processes.

During 2010, we accelerated several of our initiatives to streamline processes and make our cost structure more variable to better leverage changing business conditions. Due to the acceleration of these initiatives and pension and retiree medical related non-cash charges of $24 million, pre-tax restructuring charges and asset impairments for the 2009 Program were $183 million in 2010. Accordingly, we expect our cost range to be $300 million to $350 million. Additionally, we expect that total net annualized run rate benefits from the 2009 Program to be in the range of $250 million to $300 million by 2012. This represents a $100 million increase in our projected benefits resulting from process automation, channel alignment, reduced infrastructure costs and streamlined product development. See Note 14 to the Consolidated Financial Statements for further discussion.

Acquisitions

On July 5, 2010, we acquired Portrait Software plc (Portrait) for $65 million in cash, net of cash acquired. Portrait provides software to enhance existing customer relationship management systems, enabling clients to achieve improved customer retention and profitability. The acquired goodwill was assigned to the Software segment. We also completed smaller acquisitions during 2010 for an aggregate cost of $12 million.

There were no acquisitions during 2009.

In 2008, we acquired Zipsort, Inc. for $40 million in cash, net of cash acquired. Zipsort, Inc. acts as an intermediary between customers and the U.S. Postal Service. Zipsort, Inc. offers mailing services that include presorting of first class, standard class, flats, permit and international mail as well as metering services. We assigned the goodwill to the Mail Services segment. We also completed several smaller acquisitions for an aggregate cost of $30 million.

The operating results of these acquisitions have been included in our consolidated financial statements since the date of acquisition. See Note 1 to the Consolidated Financial Statements for our business combination accounting policy and Note 3 for further information regarding these acquisitions.

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LIQUIDITY AND CAPITAL RESOURCES

We believe that cash flow from operations, existing cash and liquid investments, as well as borrowing capacity under our commercial paper program, the existing credit facility and debt capital markets should be sufficient to finance our capital requirements and to cover our customer deposits. Our potential uses of cash include, but are not limited to, growth and expansion opportunities; internal investments; customer financing; severance and benefits payments under our restructuring programs; income tax, interest and dividend payments; pension and other benefit plan funding; acquisitions; and share repurchases.

We continuously review our liquidity profile. We monitor for material changes in the creditworthiness of those banks acting as derivative counterparties, depository banks or credit providers to us through credit ratings and the credit default swap market. We have determined that there has not been a material variation in the underlying sources of cash flows currently used to finance the operations of the company. To date, we have had consistent access to the commercial paper market.

Cash Flow Summary
 	 	 	 	 	 	 	 	
The change in cash and cash equivalents is as follows:	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
 	 	2010	 	2009	 	

	 	

	 	
Net cash provided by operating activities	 	$	952	 	$	824 	 	
Net cash used in investing activities	 	 	(301	)	 	(172	)	
Net cash used in financing activities	 	 	(580	)	 	(626	)	
Effect of exchange rate changes on cash	 	 	1	 	 	10 	 	

	

	 	

	

	 	
Increase in cash and cash equivalents	 	$	72	 	$	36 	 	

	

	 	

	

	 	
2010 Cash Flows

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items and changes in operating assets and liabilities. Cash provided by operating activities included decreases in finance receivables and accounts receivables of $180 million and $43 million, respectively. Due to declining equipment sales, finance receivables have declined as strong cash collections exceed the financing of new business. Similarly, accounts receivables have declined primarily due to strong cash collections in excess of new billings. Cash flow also benefited from the proceeds of $32 million from the unwinding of interest rate swaps and by $59 million due to the timing of payments of accounts payable, accrued liabilities and income taxes. Partially offsetting these benefits were restructuring payments of $120 million and an increase in inventory of $12 million.

Net cash used in investing activities consisted primarily of the net purchase of investment securities of $122 million, capital expenditures of $120 million and acquisitions of $78 million.

Net cash used in financing activities primarily included net payments on commercial paper borrowings of $171 million, stock repurchases of $100 million and dividends paid to common stockholders and noncontrolling interests of $321 million.

2009 Cash Flows

Cash flow provided by operations for 2009 is primarily due to the decrease in finance receivables and accounts receivables of $207 million and $84 million, respectively, primarily due to lower sales volumes, and an increase in current and non-current income taxes of $86 million due to the timing of tax payments. These cash inflows were partially offset by a reduction in accounts payable and accrued liabilities of $127 million, primarily due to timing of payments, voluntary pension plan contributions of $125 million and restructuring payments of $105 million.

Net cash used in investing activities consisted primarily of capital expenditures of $167 million.

Net cash used in financing activities consisted primarily of dividends paid to common stockholders and noncontrolling interests of $317 million, a net reduction in debt of $242 million, and a net cash outflow associated with the issuance and redemption of preferred stock issued by a subsidiary of $79 million.

Capital Expenditures

Capital expenditures in 2010 and 2009 included additions to property, plant and equipment of $61 million and $85 million; respectively, and additions to rental equipment and related inventories of $59 million and $82 million, respectively. The decrease in capital expenditures is due to lower new meter investments and control over capital spending.

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Financings and Capitalization

We are a Well-Known Seasoned Issuer with the SEC, which allows us to issue debt securities, preferred stock, preference stock, common stock, purchase contracts, depositary shares, warrants and units in an expedited fashion. We have a commercial paper program that is a significant source of liquidity for us and a committed line of credit of $1.25 billion which supports our commercial paper issuance. The line of credit expires in 2013. We have not experienced any problems to date in accessing the commercial paper market. As of December 31, 2010, the line of credit had not been drawn upon.

At December 31, 2010, we had $50 million of outstanding commercial paper with a weighted average interest rate of 0.32%. During 2010, borrowings under our commercial paper program averaged $347 million at a weighted average interest rate of 0.23%. The maximum amount of commercial paper issued at any point in time during 2010 was $552 million.

At December 31, 2009, we had $221 million of outstanding commercial paper with a weighted average interest rate of 0.09%. During 2009, borrowings under our commercial paper program averaged $430 million at a weighted average interest rate of 0.18%. The maximum amount of commercial paper issued at any point in time during 2009 was $848 million.

In August 2010, we unwound two interest rate swaps with an aggregate notional amount of $250 million. These interest rate swaps effectively converted the fixed rate of 5.6% on $250 million of notes, due 2018, into variable interest rates. In connection with unwinding these interest rate swaps, we received $32 million, excluding accrued interest. The transaction was not undertaken for liquidity purposes, but rather to fix our effective interest rate at 3.7% for the remaining term of the notes as the amount received will be recognized as a reduction in interest expense over the remaining term of the notes.

There were no other significant changes to long-term debt during 2010. No long-term notes will mature in 2011.

We anticipate making contributions of approximately $130 million and $15 million to our U.S. and foreign pension plans, respectively during 2011. We will reassess our funding alternatives as the year progresses.

We believe our financing needs in the short and long-term can be met from cash generated internally, the issuance of commercial paper, debt issuance under our effective shelf registration statement and borrowing capacity under our existing credit agreements.

Contractual Obligations and Off-Balance Sheet Arrangements

The following summarizes our known contractual obligations and off-balance sheet arrangements at December 31, 2010 and the effect that such obligations are expected to have on our liquidity and cash flow in future periods:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Payments due by period	 	

	 	
(Dollars in millions)	 	Total	 	Less than
1 year	 	1-3 years	 	3-5 years	 	More than
5 years	 	

	 	

	 	

	 	

	 	

	 	
Commercial paper borrowings	 	$	50	 	$	50	 	$	—	 	$	—	 	$	—	 	
Long-term debt and current portion of long-term debt	 	 	4,175	 	 	—	 	 	925	 	 	850	 	 	2,400	 	
Non-cancelable operating lease obligations	 	 	289	 	 	99	 	 	119	 	 	45	 	 	26	 	
Interest payments on debt	 	 	1,681	 	 	197	 	 	374	 	 	308	 	 	802	 	
Capital lease obligations	 	 	10	 	 	4	 	 	5	 	 	1	 	 	—	 	
Purchase obligations (1)	 	 	276	 	 	205	 	 	56	 	 	15	 	 	—	 	
Other non-current liabilities (2)	 	 	649	 	 	—	 	 	121	 	 	48	 	 	480	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total	 	$	7,130	 	$	555	 	$	1,600	 	$	1,267	 	$	3,708	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

(1)	Purchase obligations include unrecorded agreements to purchase goods or services that are enforceable and legally binding upon us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty.	
 	 	
(2)	Other non-current liabilities relate primarily to our postretirement benefits. See Note 19 to the Consolidated Financial Statements.	
The amount and period of future payments related to our income tax uncertainties cannot be reliably estimated and, therefore, is not included in the above table. See Note 9 to the Consolidated Financial Statements for further details.

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Critical Accounting Estimates

We have identified the policies below as critical to our business operations and to the understanding of our results of operations. We have discussed the impact and any associated risks on our results of operations related to these policies throughout the MD&A. For a detailed discussion on the application of these and other accounting policies, see Note 1 to the Consolidated Financial Statements.

The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses that are reported in the consolidated financial statements and accompanying disclosures, including the disclosure of contingent assets and liabilities. These estimates are based on management’s best knowledge of current events, historical experience, actions that we may undertake in the future, and on various other assumptions that are believed to be reasonable under the circumstances. These estimates include, but are not limited to, allowance for doubtful accounts and credit losses, inventory obsolescence, residual values of leased assets, useful lives of long-lived assets and intangible assets, impairment of goodwill, allocation of purchase price to tangible and intangible assets acquired in business combinations, warranty obligations, restructuring costs, pensions and other postretirement benefits and loss contingencies. We believe our assumptions and estimates are reasonable and appropriate in accordance with GAAP; however, actual results could differ from those estimates and assumptions.

Revenue recognition

Multiple element and internal financing arrangements

We derive our revenue from multiple sources including sales, rentals, financing and services. Certain of our transactions are consummated at the same time and can therefore generate revenue from multiple sources. The most common form of these transactions involves a non-cancelable equipment lease, a meter rental and an equipment maintenance agreement. As a result, we are required to determine whether the deliverables in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and if so, how the price should be allocated among the delivered elements and when to recognize revenue for each element.

In multiple element arrangements, we recognize revenue for each of the elements based on their respective fair values. We recognize revenue for delivered elements only when the fair values of undelivered elements are known and uncertainties regarding customer acceptance are resolved. Our allocation of the fair values to the various elements does not change the total revenue recognized from a transaction, but impacts the timing of revenue recognition. Revenue is allocated to the meter rental and equipment maintenance agreement elements first using their respective fair values, which are determined based on prices charged in standalone and renewal transactions. Revenue is then allocated to the equipment based on the present value of the remaining minimum lease payments. We then compare the allocated equipment fair value to the range of cash selling prices in standalone transactions during the period to ensure the allocated equipment fair value approximates average cash selling prices.

We provide lease financing for our products primarily through sales-type leases. The vast majority of our leases qualify as sales-type leases using the present value of minimum lease payments classification criteria. We believe that our sales-type lease portfolio contains only normal collection risk. Accordingly, we record the fair value of equipment as sales revenue, the cost of equipment as cost of sales and the minimum lease payments plus the estimated residual value as finance receivables. The difference between the finance receivable and the equipment fair value is recorded as unearned income and is amortized as income over the lease term using the interest method.

Equipment residual values are determined at inception of the lease using estimates of equipment fair value at the end of the lease term. Estimates of future equipment fair value are based primarily on our historical experience. We also consider forecasted supply and demand for our various products, product retirement and future product launch plans, end of lease customer behavior, regulatory changes, remanufacturing strategies, used equipment markets, if any, competition and technological changes. We evaluate residual values on an annual basis or as changes to the above considerations occur.

See Note 1 to the Consolidated Financial Statements for our accounting policies on revenue recognition.

Allowances for doubtful accounts and credit losses

Allowance for doubtful accounts

We estimate our accounts receivable risks and provide allowances for doubtful accounts accordingly. We believe that our credit risk for accounts receivable is limited because of our large number of customers, small account balances for most of our customers and customer geographic and industry diversification. We evaluate the adequacy of the allowance for doubtful accounts based on our historical loss experience, length of time receivables are past due, adverse situations that may affect a customer’s ability to pay and

23

prevailing economic conditions, and make adjustments to our actual aggregate reserve as necessary. This evaluation is inherently subjective and actual results may differ significantly from estimated reserves.

Allowance for credit losses

We estimate our finance receivables risks and provide allowances for credit losses accordingly. We establish credit approval limits based on the credit quality of the customer and the type of equipment financed. Finance receivables are written-off against the allowance for credit losses after collection efforts are exhausted and we deem the account uncollectible. We believe that our concentration of credit risk for finance receivables is limited because of our large number of customers, small account balances and customer geographic and industry diversification. Our general policy is to discontinue revenue recognition for lease receivables when they are delinquent more than 120 days, and to discontinue revenue recognition on unsecured loan receivables that are delinquent for more than 90 days. We resume revenue recognition when payments reduce the account to 60 days or less past due.

We evaluate the adequacy of allowance for credit losses based on our historical loss experience, the nature and volume of our portfolios, adverse situations that may affect a customer’s ability to pay and prevailing economic conditions, and make adjustments to our actual aggregate reserve as necessary. This evaluation is inherently subjective and actual results may differ significantly from estimated reserves.

Accounting for income taxes

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions.

We regularly assess the likelihood of tax adjustments in each of the tax jurisdictions in which we operate and account for the related financial statement implications. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are subject to challenge and possible adjustment. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances, such as the progress of a tax audit. We have established tax reserves which we believe to be appropriate given the possibility of tax adjustments. Determining the appropriate level of tax reserves requires us to exercise judgment regarding the uncertain application of tax law. Future changes in tax reserve requirements could have a material impact on our results of operations.

Significant judgment is also required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we consider all available evidence for each jurisdiction including past operating results, estimates of future taxable income and the feasibility of ongoing tax planning strategies. As new information becomes available that would alter our determination as to the amount of deferred tax assets that will ultimately be realized, we adjust the valuation allowance with a corresponding impact to income tax expense in the period in which such determination is made.

Based on our 2010 income from continuing operations before income taxes, a 1% change in our effective tax rate would impact income from continuing operations by approximately $5 million.

Goodwill and long-lived assets

Useful lives of long-lived assets

We depreciate property, plant and equipment and rental property and equipment principally using the straight-line method over the estimated useful lives of three to 15 years for machinery and equipment and up to 50 years for buildings. We amortize properties leased under capital leases on a straight-line basis over the primary lease term. We amortize capitalized costs related to internally developed software using the straight-line method over the estimated useful life, which is principally three to ten years. Intangible assets with finite lives are amortized over their estimated useful lives, which are principally four to 15 years, using the straight-line method or an accelerated attrition method. Our estimates of useful lives could be affected by changes in regulatory provisions, technology or business plans.

Impairment review

We evaluate the recoverability and, if necessary, the fair value of our long-lived assets, including intangible assets, on an annual basis or as circumstances warrant. We derive the cash flow estimates that are incorporated into the analysis from our historical experience and our future long-term business plans and, if necessary, apply an appropriate discount rate to assist in the determination of its fair value. In addition, we used quoted market prices when available and appraisals as appropriate to assist in the determination of fair value. Changes in the estimates and assumptions incorporated in our long-lived asset impairment assessment could materially affect

24

the determination of fair value. During 2010, an asset impairment charge of $4.7 million was recorded related to the impairment of certain intangible assets.

Goodwill is tested annually for impairment, or sooner when circumstances indicate an impairment may exist at the reporting unit level. Our goodwill impairment review requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units and determining the fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions. We derive the cash flow estimates from our historical experience and our future long-term business plans. We use a combination of techniques to determine the fair value of our reporting units, including the present value of future cash flows, multiples of competitors and multiples from sales of like businesses. Changes in the estimates and assumptions incorporated in our goodwill impairment assessment could materially affect the determination of fair value and/or goodwill impairment for each reporting unit.

The calculated fair value of each of our reporting units was based on a combination of inputs and assumptions, including projections of future cash flows, discount rates, growth rates and applicable multiples of competitors and multiples from sales of like businesses. For 2010, the calculated fair values for all of our reporting units were considered substantially in excess of the respective reporting unit’s carrying value. Accordingly, no goodwill impairment was identified or recorded. However, future events and circumstances, some of which are described below, may result in an impairment charge:
 	 	
•	Future economic results that are below our expectations used in the current assessments;	
 	 	
•	Changes in postal regulations governing the types of meters allowable for use;	
 	 	
•	New technological developments that provide significantly enhanced benefits over current technology;	
 	 	
•	Significant ongoing negative economic or industry trends; or	
 	 	
•	Changes in our business strategy that alters the expected usage of the related assets.	
Pension benefits

Assumptions and estimates

The valuation and calculation of our net pension expense, assets and obligations are dependent on assumptions and estimates relating to discount rate, rate of compensation increase and expected return on plan assets. These assumptions are evaluated and updated annually and are described in further detail in Note 19 to the Consolidated Financial Statements.

The weighted average assumptions for our largest plan, the U.S. Qualified Pension Plan, and our largest foreign plan, the U.K. Qualified Pension Plan, for 2010 and 2009 were as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	U.S. Plan	 	U.K. Plan	 	

	 	

	 	
 	 	2010	 	2009	 	2010	 	2009	 	

	 	

	 	

	 	

	 	
Discount rate	 	 	 	5.60	%	 	 	 	5.75	%	 	 	 	5.30	%	 	 	 	5.70	%	 	
Rate of compensation increase	 	 	 	3.50	%	 	 	 	3.50	%	 	 	 	3.50	%	 	 	 	3.50	%	 	
Expected return on plan assets	 	 	 	8.00	%	 	 	 	8.00	%	 	 	 	7.25	%	 	 	 	7.50	%	 	
U.S. Plan

The discount rate for our U.S. pension plans is determined by matching the expected cash flows associated with our benefit obligations to a yield curve based on long-term, high quality fixed income debt instruments available as of the measurement date. In 2010, we reduced the population of bonds used to derive this yield curve with the adoption of a bond matching approach which incorporates a selection of bonds that align with our projected benefit obligations. We believe this bond matching approach more closely reflects the process we would employ to settle our pension obligations. The rate of compensation increase assumption reflects our actual experience and best estimate of future increases. Our expected return on plan assets is based on historical and projected rates of return for current and planned asset classes in the plans’ investment portfolio after analyzing historical experience and future expectations of the returns and volatility of the various asset classes. The overall expected rate of return for the portfolio is determined based on the target asset allocations for each asset class, adjusted for historical and expected experience of active portfolio management results, when compared to the benchmark returns. When assessing the expected future returns for the portfolio, we place more emphasis on the expected future returns than historical returns.

U.K. Plan

We determine our discount rate for the U.K. retirement benefit plan by using a model that discounts each year’s estimated benefit payments by an applicable spot rate. These spot rates are derived from a yield curve created from a large number of high quality corporate bonds. The rate of compensation increase assumption reflects our actual experience and best estimate of future increases.

25

Our expected return on plan assets is determined based on historical portfolio results, the plan’s asset mix and future expectations of market rates of return on the types of assets in the plan.

Sensitivity to changes in assumptions:

U.S. Pension Plan
 	 	 	
 	•	Discount rate – a 0.25% increase in the discount rate would decrease annual pension expense by approximately $3.0 million and would lower the projected benefit obligation by $43.5 million.	
 	 	 	
 	•	Rate of compensation increase – a 0.25% increase in the rate of compensation increase would increase annual pension expense by approximately $0.1 million.	
 	 	 	
 	•	Expected return on plan assets – a 0.25% increase in the expected return on assets of our principal plans would decrease annual pension expense by approximately $3.7 million.	
U.K. Pension Plan
 	 	 	
 	•	Discount rate – a 0.25% increase in the discount rate would decrease annual pension expense by approximately $1.4 million and would lower the projected benefit obligation by $16.0 million.	
 	 	 	
 	•	Rate of compensation increase – a 0.25% increase in the rate of compensation increase would increase annual pension expense by approximately $0.5 million.	
 	 	 	
 	•	Expected return on plan assets – a 0.25% increase in the expected return on assets of our principal plans would decrease annual pension expense by approximately $0.8 million.	
Delayed recognition principles

Actual pension plan results that differ from our assumptions and estimates are accumulated and amortized over the estimated future working life of the plan participants and will therefore affect future pension expense. We also base our net pension expense primarily on a market related valuation of plan assets. Under this approach, differences between the actual and expected return on plan assets are recognized over a five-year period and will also impact future pension expense.

Investment related risks and uncertainties

We invest our pension plan assets in a variety of investment securities in accordance with our strategic asset allocation policy. The composition of our U.S. pension plan assets at December 31, 2010 was approximately 57% equity securities, 34% fixed income securities and 9% real estate and private equity investments. The composition of our U.K. pension plan assets at December 31, 2010 was approximately 68% equity securities, 29% fixed income securities and 3% cash. Investment securities are exposed to various risks such as interest rate, market and credit risks. In particular, due to the level of risk associated with investment securities, it is reasonably possible that change in the value of such investment securities will occur and that such changes could materially affect our future results.

New Accounting Pronouncements

In 2010, we adopted guidance that increases disclosures regarding the credit quality of an entity’s financing receivables and its allowance for credit losses. The guidance also requires an entity to disclose credit quality indicators, past due information, and modifications of its financing receivables. The adoption of this guidance resulted in additional disclosures but did not have an impact on our consolidated financial statements. See Note 17 to the Consolidated Financial Statements.

In September 2009, new guidance was introduced addressing the accounting for revenue arrangements with multiple elements and certain revenue arrangements that include software. The guidance allows companies to allocate consideration in a multiple element arrangement in a way that better reflects the economics of the transaction and eliminates the residual method. In addition, tangible products that have software components that are “essential to the functionality” of the tangible product will be scoped out of the software revenue guidance. The new guidance will also result in more expansive disclosures. The new guidance became effective on January 1, 2011 and is not expected to have a material impact on our financial position, results of operations or cash flows.

Legal and Regulatory Matters

Legal

See Legal Proceedings in Item 3 of this Form 10-K for information regarding our legal proceedings.

Other regulatory matters

We are continually under examination by tax authorities in the United States, other countries and local jurisdictions in which we have operations. The years under examination vary by jurisdiction. The current IRS exam of tax years 2001-2004 is estimated to be

26

completed within the next year and the examination of years 2005-2008 within the next two years. In connection with the 2001-2004 exam, we have received notices of proposed adjustments to our filed returns and the IRS has withdrawn a civil summons to provide certain company workpapers. Tax reserves have been established which we believe to be appropriate given the possibility of tax adjustments. A variety of post-2000 tax years remain subject to examination by other tax authorities, including the U.K., Canada, France, Germany and various U.S. states. Tax reserves have been established which we believe to be appropriate given the possibility of tax adjustments. However, the resolution of such matters could have a material impact on our results of operations, financial position and cash flows. See Note 9 to the Consolidated Financial Statements.

We are currently undergoing unclaimed property audits, which are being conducted by several states.

Effects of Inflation and Foreign Exchange

Inflation

Inflation, although minimal in recent years, continues to affect worldwide economies and the way companies operate. It increases labor costs and operating expenses, and raises costs associated with replacement of fixed assets such as rental equipment. Despite these growing costs, we have generally been able to maintain profit margins through productivity and efficiency improvements, introduction of new products and expense reductions.

Foreign Exchange

During 2010, approximately 30% of our revenue and 35% of pre-tax income from continuing operations were derived from operations outside of the U.S. Currency translation increased our 2010 revenue and pre-tax income from continuing operations by less than 1%. Based on the current contribution from our international operations, a 1% increase in the value of the U.S. dollar would result in a decline in revenue of approximately $16 million and a decline in pre-tax income from continuing operations of approximately $2 million.

Assets and liabilities of subsidiaries operating outside the U.S. are translated at rates in effect at the end of the period and revenue and expenses are translated at average monthly rates during the period. Net deferred translation gains and losses are included in accumulated other comprehensive loss in stockholders’ deficit in the Consolidated Balance Sheets. Changes in the value of the U.S. dollar relative to the currencies of countries in which we operate impact our reported assets, liabilities, revenue and expenses. Exchange rate fluctuations can also impact the settlement of intercompany receivables and payables from the transfer of finished goods inventories between our affiliates in different countries, and intercompany loans.

To mitigate the risk of foreign currency exchange rate fluctuations, we enter into foreign exchange contracts. These derivative contracts expose us to counterparty credit risk. To mitigate this risk, we enter into contracts with only those financial institutions that meet stringent credit requirements as set forth in our derivative policy. We regularly review our credit exposure balances as well as the creditworthiness of our counterparties. Maximum risk of loss on these contracts is limited to the amount of the difference between the spot rate at the date of the contract delivery and the contracted rate. At December 31, 2010, the fair value of our outstanding foreign exchange contracts was a net liability of $4 million.

During 2010, deferred translation losses of $16 million were recorded primarily resulting from the strengthening of the U.S. dollar as compared to the British pound and Euro, partially offset by a weakening of the U.S. dollar as compared to the Canadian dollar. In 2009, deferred translation gains of $120 million were recorded as the U.S. dollar weakened against the British pound, Euro and Canadian dollar. Deferred translation gains and losses are recorded as a component of accumulated other comprehensive income and do not affect earnings.

Dividends

It is a general practice of our Board of Directors to pay a cash dividend on common stock each quarter. In setting dividend payments, our board considers the dividend rate in relation to our recent and projected earnings and our capital investment opportunities and requirements. We have paid a dividend each year since 1934.

27

ITEM 7A. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of interest rate changes and foreign currency fluctuations due to our investing and funding activities and our operations denominated in different foreign currencies.

Our objective in managing our exposure to changing interest rates is to limit the volatility and impact of changing interest rates on earnings and cash flows. To achieve these objectives, we use a balanced mix of debt maturities and interest rate swaps that convert the fixed rate interest payments on certain debt issuances to variable rates.

Our objective in managing our exposure to foreign currency fluctuations is to reduce the volatility in earnings and cash flows associated with the effect of foreign exchange rate changes on transactions that are denominated in foreign currencies. Accordingly, we enter into various contracts, which change in value as foreign exchange rates change, to protect the value of external and intercompany transactions. The principal currencies actively hedged are the British pound, Canadian dollar and Euro.

We employ established policies and procedures governing the use of financial instruments to manage our exposure to such risks. We do not enter into foreign currency or interest rate transactions for speculative purposes. The gains and losses on these contracts offset changes in the value of the related exposures.

We utilize a “Value-at-Risk” (VaR) model to determine the potential loss in fair value from changes in market conditions. The VaR model utilizes a “variance/co-variance” approach and assumes normal market conditions, a 95% confidence level and a one-day holding period. The model includes all of our debt and all interest rate derivative contracts as well as our foreign exchange derivative contracts associated with forecasted transactions. The model excludes anticipated transactions, firm commitments, and receivables and accounts payable denominated in foreign currencies, which certain of these instruments are intended to hedge. The VaR model is a risk analysis tool and does not purport to represent actual losses in fair value that will be incurred by us, nor does it consider the potential effect of favorable changes in market factors.

During 2010 and 2009, our maximum potential one-day loss in fair value of our exposure to foreign exchange rates and interest rates, using the variance/co-variance technique described above, was not material.

28

ITEM 8. – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See “Index to Consolidated Financial Statements and Supplemental Data” on Page 36 of this Form 10-K.

ITEM 9. – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the direction of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), we evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) and internal control over financial reporting. Our CEO and CFO concluded that such disclosure controls and procedures were effective as of December 31, 2010, based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Exchange Act. It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals. Notwithstanding this caution, the CEO and CFO have reasonable assurance that the disclosure controls and procedures were effective as of December 31, 2010.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with internal control policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in  Internal Control - Integrated Framework . Management’s assessment included evaluating the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on its assessment, management concluded that, as of December 31, 2010, our internal control over financial reporting was effective based on the criteria issued by COSO in  Internal Control – Integrated Framework .

PricewaterhouseCoopers LLP, the independent accountants that audited our financial statements included in this Form 10-K, has issued an attestation report on our internal control over financial reporting, which report is included on page 37 of this Form 10-K.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended December 31, 2010, that have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting.

ITEM 9B. – OTHER INFORMATION

None.

29

PART III

ITEM 10. – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information pertaining to our Directors and the members of the Audit Committee of the Board of Directors is incorporated herein by reference to the sections entitled “Compensation Committee Interlocks and Insider Participation,” “Election of Directors,” “Security Ownership of Directors and Executive Officers,” “Beneficial Ownership,” “Report of the Audit Committee” and “Corporate Governance” of the Definitive Proxy Statement to be filed with the Commission pursuant to Regulation 14A in connection with our 2011 Annual Meeting of Stockholders, which is scheduled to be held on May 9, 2011. Such Definitive Proxy Statement will be filed with the Commission on or before March 31, 2011 and is incorporated herein by reference. Our executive officers are as follows:

Executive Officers of the Registrant as of February 15, 2011
 	 	 	 	 	 	 	 	
Name	 	 	Age	 	Title	 	Executive
Officer Since	

	 	 	

	 	

	 	

	
Murray D. Martin	 	63	 	Chairman, President and Chief Executive Officer	 	1998	
 	 	 	 	 	 	 	
Leslie Abi-Karam	 	52	 	Executive Vice President and President, Mailing Solutions Management	 	2005	
 	 	 	 	 	 	 	
Gregory E. Buoncontri	 	63	 	Executive Vice President and Chief Information Officer	 	2000	
 	 	 	 	 	 	 	
Michael Monahan	 	50	 	Executive Vice President and Chief Financial Officer	 	2005	
 	 	 	 	 	 	 	
Vicki A. O’Meara	 	53	 	Executive Vice President and President, Pitney Bowes Management Services & Government and Postal Affairs	 	2008	
 	 	 	 	 	 	 	
Daniel J. Goldstein	 	49	 	Executive Vice President and Chief Legal and Compliance Officer	 	2010	
 	 	 	 	 	 	 	
Joseph H. Timko	 	50	 	Executive Vice President and Chief Strategy and Innovation Officer	 	2010	
 	 	 	 	 	 	 	
Johnna G. Torsone	 	60	 	Executive Vice President and Chief Human Resources Officer	 	1993	
There is no family relationship among the above officers. All of the officers have served in various corporate, division or subsidiary positions with the Company for at least the past five years except as described below:

Mr. Goldstein re-joined the Company in October 2010 as Executive Vice President and Chief Legal and Compliance Officer. From September 2008 until October 2010, Mr. Goldstein served as the Senior Vice President and General Counsel for GAF Materials Corporation and International Specialty Products, ISP Materials, a group of privately held, commonly owned companies in the building materials, chemicals and mining industries. Mr. Goldstein originally joined Pitney Bowes in 1999 as Associate General Counsel and was appointed Vice President, Deputy General Counsel in 2005.

Mr. Timko joined the Company in February 2010 as Executive Vice President and Chief Strategy and Innovation Officer. Prior to joining the Company, Mr. Timko was a partner in the technology / telecom and industrial sector practice at McKinsey & Company.

Ms. O’Meara joined the Company in June 2008 as Executive Vice President and Chief Legal and Compliance Officer. In July 2010, Ms. O’Meara became Executive Vice President and President, Pitney Bowes Management Services & Government and Postal Affairs, relinquishing her responsibilities as the Chief Legal and Compliance Officer. Prior to joining the Company, she was President - U.S. Supply Chain Solutions for Ryder System, Inc., a leading transportation and supply chain solutions company. Ms. O’Meara joined Ryder System, Inc. as Executive Vice President and General Counsel in June 1997.

30

ITEM 11. – EXECUTIVE COMPENSATION

The sections entitled “Directors’ Compensation,” “Compensation Discussion and Analysis”, and “Executive Compensation Tables and Related Narrative” of our Definitive Proxy Statement to be filed with the Commission on or before March 31, 2011 in connection with our 2011 Annual Meeting of Stockholders are incorporated herein by reference.
 	 	
ITEM 12. –	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	
EQUITY COMPENSATION PLAN INFORMATION TABLE

The following table provides information as of December 31, 2010 regarding the number of shares of common stock that may be issued under our equity compensation plans.
 	 	 	 	 	 	 	 	 	 	 	
Plan Category	 	(a)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights	 	(b)
Weighted-average
exercise price of
outstanding options,
warrants and rights	 	(c)
Number of securities
remaining available for
future issuance under
equity compensation
plans excluding
securities reflected in
column (a)	 	

	 	

	 	

	 	

	 	
Equity compensation plans approved by security holders	 	 	16,143,764	 	$	36.18	 	 	17,458,044	 	
Equity compensation plans not approved by security holders	 	 	—	 	 	—	 	 	—	 	

	

	 	

	

	 	

	

	 	
Total	 	 	16,143,764	 	$	36.18	 	 	17,458,044	 	

	

	 	

	

	 	

	

	 	
The sections entitled “Security Ownership of Directors and Executive Officers” and “Beneficial Ownership” of our Definitive Proxy Statement to be filed with the Commission on or before March 31, 2011 in connection with our 2011 Annual Meeting of Stockholders are incorporated herein by reference.

ITEM 13. – CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The sections entitled “Corporate Governance” and “Certain Relationships and Related-Person Transactions” of our Definitive Proxy Statement to be filed with the Commission on or before March 31, 2011 in connection with our 2011 Annual Meeting of Stockholders are incorporated herein by reference.

ITEM 14. – PRINCIPAL ACCOUNTANT FEES AND SERVICES

The section entitled “Principal Accountant Fees and Services” of our Definitive Proxy Statement to be filed with the Commission on or before March 31, 2011 in connection with our 2011 Annual Meeting of Stockholders is incorporated herein by reference.

31

PART IV

ITEM 15. – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 	 	 	
(a)	1.	Financial statements - see Item 8 on page 29 and “Index to Consolidated Financial Statements and Supplemental Data” on page 36 of this
Form 10-K.	
 	 	 	
 	2.	Financial statement schedules - see “Index to Consolidated Financial Statements and Supplemental Data” on page 36 of this Form 10-K.	
 	 	 	
 	3.	Exhibits (numbered in accordance with Item 601 of Regulation S-K).	

Reg. S-K
exhibits	 	Description	 	Status or incorporation by reference	

	

	

	

	

	
(3)(a)	 	Restated Certificate of Incorporation, as amended	 	Incorporated by reference to Exhibit (3) to Form 10-Q as filed with the Commission on August 14, 1996. (Commission file number 1-3579)	
 	 	 	 	 	
(a.1)	 	Certificate of Amendment to the Restated Certificate of Incorporation (as amended May 29, 1996)	 	Incorporated by reference to Exhibit (a.1) to Form 10-K as filed with the Commission on March 27, 1998. (Commission file number 1-3579)	
 	 	 	 	 	
(a.2)	 	Certificate of Amendment to the Restated Certificate of Incorporation (as amended March 27, 1998)	 	Incorporated by reference to Exhibit (3)(a.2) to Form 8-K as filed with the Commission on May 12, 2010. (Commission file number 1-3579)	
 	 	 	 	 	
(b)	 	Pitney Bowes Inc. Amended and Restated By-laws	 	Incorporated by reference to Exhibit (3)(ii) to Form 10-Q as filed with the Commission on August 6, 2007. (Commission file number 1-3579)	
 	 	 	 	 	
(b.1)	 	Amendment to the Pitney Bowes Inc. Amended and Restated By-laws (effective as of May 10, 2010)	 	Incorporated by reference to Exhibit (3)(b.1) to Form 8-K as filed with the Commission on May 12, 2010. (Commission file number 1-3579)	
 	 	 	 	 	
(4)(a)	 	Form of Indenture between the Company and SunTrust Bank, as Trustee	 	Incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-3 (No. 333-72304) as filed with the Commission on October 26, 2001.	
 	 	 	 	 	
(b)	 	Supplemental Indenture No. 1 dated April 18, 2003 between the Company and SunTrust Bank, as Trustee	 	Incorporated by reference to Exhibit 4.1 to Form 8-K as filed with the Commission on August 18, 2004.	
 	 	 	 	 	
(c)	 	Form of Indenture between the Company and Citibank, N.A., as Trustee, dated as of February 14, 2005	 	Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-3ASR (No. 333-151753) as filed with the Commission on June 18, 2008.	
 	 	 	 	 	
(d)	 	First Supplemental Indenture, by and among Pitney Bowes Inc., The Bank of New York, and Citibank, N.A., to the Indenture, dated as of February 14, 2005, by and between the Company and Citibank	 	Incorporated by reference to Exhibit 4.1 to Form 8-K as filed with the Commission on October 24, 2007. (Commission file number 1-3579)	
 	 	 	 	 	
(e)	 	Pitney Bowes Inc. Global Medium-Term Note (Fixed Rate), issue date March 7, 2008	 	Incorporated by reference to Exhibit 4(d)(1) to Form 8-K as filed with the Commission on March 7, 2008. (Commission file number 1-3579)	
32

The Company has outstanding certain other long-term indebtedness. Such long-term indebtedness does not exceed 10% of the total assets of the Company; therefore, copies of instruments defining the rights of holders of such indebtedness are not included as exhibits. The Company agrees to furnish copies of such instruments to the SEC upon request.

Executive Compensation Plans:
 	 	 	 	 	
(10)(a)	 	Retirement Plan for Directors of Pitney Bowes Inc.	 	Incorporated by reference to Exhibit (10a) to Form 10-K as filed with the Commission on March 30, 1993. (Commission file number 1-3579)	
 	 	 	 	 	
(b)	 	Pitney Bowes Inc. Directors’ Stock Plan (as amended and restated 1999)	 	Incorporated by reference to Exhibit (i) to Form 10-K as filed with the Commission on March 30, 2000. (Commission file number 1-3579)	
 	 	 	 	 	
(b.1)	 	Pitney Bowes Inc. Directors’ Stock Plan (Amendment No. 1, effective as of May 12, 2003)	 	Incorporated by reference to Exhibit (10) to Form 10-Q as filed with the Commission on August 11, 2003. (Commission file number 1-3579)	
 	 	 	 	 	
(b.2)	 	Pitney Bowes Inc. Directors’ Stock Plan (Amendment No. 2 effective as of May 1, 2007)	 	Incorporated by reference to Exhibit (10.(b.2)) to Form 10-K as filed with the Commission on March 1, 2007 (Commission file number 1-3579)	
 	 	 	 	 	
(c)	 	Pitney Bowes 1991 Stock Plan (as amended and restated)	 	Incorporated by reference to Exhibit (10) to Form 10-Q as filed with the Commission on May 14, 1998. (Commission file number 1-3579)	
 	 	 	 	 	
(c.1)	 	Pitney Bowes 1998 Stock Plan (as amended and restated)	 	Incorporated by reference to Exhibit (ii) to Form 10-K as filed with the Commission on March 30, 2000. (Commission file number 1-3579)	
 	 	 	 	 	
(c.2)	 	Pitney Bowes Stock Plan (as amended and restated as of January 1, 2002)	 	Incorporated by reference to Annex 1 to the Definitive Proxy Statement for the 2002 Annual Meeting of Stockholders filed with the Commission on March 26, 2002. (Commission file number 1-3579)	
 	 	 	 	 	
(c.3)	 	Pitney Bowes Inc. 2007 Stock Plan (as amended November 7, 2009)	 	Incorporated by reference to Exhibit (v) to Form 10-K as filed with the Commission on February 26, 2010. (Commission file number 1-3579)	
 	 	 	 	 	
(d)	 	Pitney Bowes Inc. Key Employees’ Incentive Plan (as amended and restated October 1, 2007)(as amended November 7, 2009)	 	Incorporated by reference to Exhibit (iv) to Form 10-K as filed with the Commission on February 26, 2010. (Commission file number 1-3579)	
 	 	 	 	 	
(e)	 	Pitney Bowes Severance Plan (as amended, and restated effective January 1, 2008)	 	Incorporated by reference to Exhibit (10)(e) to Form 10-K as filed with the Commission on February 29, 2008. (Commission file number 1-3579)	
 	 	 	 	 	
(f)	 	Pitney Bowes Senior Executive Severance Policy (amended and restated as of January 1, 2008)	 	Incorporated by reference to Exhibit (10)(f) to Form 10-K as filed with the Commission on February 29, 2008. (Commission file number 1-3579)	
 	 	 	 	 	
(g)	 	Pitney Bowes Inc. Deferred Incentive Savings Plan for the Board of Directors, as amended and restated effective January 1, 2009	 	Incorporated by reference to Exhibit 10(g) to Form 10-K as filed with the Commission on February 26, 2009. (Commission file number 1-3579	
 	 	 	 	 	
(h)	 	Pitney Bowes Inc. Deferred Incentive Savings Plan as amended and restated effective January 1, 2009	 	Incorporated by reference to Exhibit 10(h) to Form 10-k as filed with the Commission on February 26, 2009. (Commission file number 1-3579)	
 	 	 	 	 	
(i)	 	Pitney Bowes Inc. 1998 U.K. S.A.Y.E. Stock Option Plan	 	Incorporated by reference to Annex II to the Definitive Proxy Statement for the 2006 Annual Meeting of Stockholders filed with the Commission on March 23, 2006. (Commission file number 1-3579)	
 	 	 	 	 	
(j)	 	Form of Equity Compensation Grant Letter	 	Incorporated by reference to Exhibit (10)(n) to Form 10-Q as filed with the Commission on May 4, 2006. (Commission file number 1-3579)	
 	 	 	 	 	
(k)	 	Form of Performance Award	 	Incorporated by reference to Exhibit (10) to Form 10-Q as filed with the Commission on August 5, 2009. (Commission file number 1-3579)	
33

 	 	 	 	 	
(l)	 	Form of Long Term Incentive Award Agreement	 	Incorporated by reference to Exhibit (10) to Form 10-Q as filed with the Commission on November 6, 2009. (Commission file number 1-3579)	
 	 	 	 	 	
(m)	 	Service Agreement between Pitney Bowes Limited and Patrick S. Keddy dated January 29, 2003	 	Incorporated by reference to Exhibit 10.2 to Form 8-K as filed with the Commission on February 17, 2006. (Commission file number 1-3579)	
 	 	 	 	 	
(n)	 	Separation Agreement and General Release dated April 14, 2008 by and between Pitney Bowes Inc. and Bruce P. Nolop	 	Incorporated by reference to Exhibit 10.1 to Form 8-K as filed with the Commission on April 15, 2008. (Commission file number 1-3579)	
 	 	 	 	 	
(o)	 	Compensation arrangement for Vicki O’Meara dated June 1, 2010	 	Incorporated by reference to Exhibit 10(a) to Form 10-Q as filed with the Commission on August 5, 2010. (Commission file number 1-3579)	
 	 	 	 	 	
(p)	 	Separation (Compromise) Agreement dated December 30, 2010, by and between Patrick Keddy and Pitney Bowes Limited	 	Exhibit (iv)	
Other:
 	 	 	 	 	
(q)	 	Amended and Restated Credit Agreement dated May 19, 2006 between the Company and JPMorgan Chase Bank, N.A., as Administrative Agent	 	Incorporated by reference to Exhibit 10.1 to Form 8-K as filed with the Commission on May 24, 2006. (Commission file number 1-3579)	
 	 	 	 	 	
(12)	 	Computation of ratio of earnings to fixed charges	 	Exhibit (i)	
 	 	 	 	 	
(21)	 	Subsidiaries of the registrant	 	Exhibit (ii)	
 	 	 	 	 	
(23)	 	Consent of experts and counsel	 	Exhibit (iii)	
 	 	 	 	 	
(31.1)	 	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.	 	Exhibit 31.1	
 	 	 	 	 	
(31.2)	 	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.	 	Exhibit 31.2	
 	 	 	 	 	
(32.1)	 	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350	 	Exhibit 32.1	
 	 	 	 	 	
(32.2)	 	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350	 	Exhibit 32.2	
34

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 	 	 	 	
Date: February 25, 2011	 	 	PITNEY BOWES INC.	

	 	 	

	
 	 	 	Registrant	

 	By: 	/s/ Murray D. Martin	 	

	 	
  Murray D. Martin	
Chairman, President and Chief Executive Officer	
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
 	 	 	 	 	
Signature	 	Title	 	Date	

	 	

	 	

	
 	 	 	 	 	
/s/ Murray D. Martin	 	Chairman, President and Chief Executive Officer Director	 	February 25, 2011	

	 	 	 	 	
Murray D. Martin	 	 	 	 	
 	 	 	 	 	
/s/ Michael Monahan	 	Executive Vice President and Chief Financial Officer	 	February 25, 2011	

	 	(Principal Financial Officer)	 	 	
Michael Monahan	 	 	 	 	
 	 	 	 	 	
/s/ Steven J. Green	 	Vice President–Finance and Chief Accounting	 	February 25, 2011	

	 	Officer (Principal Accounting Officer)	 	 	
Steven J. Green	 	 	 	 	
 	 	 	 	 	
/s/ Rodney C. Adkins	 	Director	 	February 25, 2011	

	 	 	 	 	
Rodney C. Adkins	 	 	 	 	
 	 	 	 	 	
/s/ Linda G. Alvarado	 	Director	 	February 25, 2011	

	 	 	 	 	
Linda G. Alvarado	 	 	 	 	
 	 	 	 	 	
/s/ Anne M. Busquet	 	Director	 	February 25, 2011	

	 	 	 	 	
Anne M. Busquet	 	 	 	 	
 	 	 	 	 	
/s/ Anne Sutherland Fuchs	 	Director	 	February 25, 2011	

	 	 	 	 	
Anne Sutherland Fuchs	 	 	 	 	
 	 	 	 	 	
/s/ Ernie Green	 	Director	 	February 25, 2011	

	 	 	 	 	
Ernie Green	 	 	 	 	
 	 	 	 	 	
/s/ James H. Keyes	 	Director	 	February 25, 2011	

	 	 	 	 	
James H. Keyes	 	 	 	 	
 	 	 	 	 	
/s/ Eduardo R. Menascé	 	Director	 	February 25, 2011	

	 	 	 	 	
Eduardo R. Menascé	 	 	 	 	
 	 	 	 	 	
/s/ Michael I. Roth	 	Director	 	February 25, 2011	

	 	 	 	 	
Michael I. Roth	 	 	 	 	
 	 	 	 	 	
/s/ David L. Shedlarz	 	Director	 	February 25, 2011	

	 	 	 	 	
David L. Shedlarz	 	 	 	 	
 	 	 	 	 	
/s/ David B. Snow, Jr.	 	Director	 	February 25, 2011	

	 	 	 	 	
David B. Snow, Jr.	 	 	 	 	
 	 	 	 	 	
/s/ Robert E. Weissman	 	Director	 	February 25, 2011	

	 	 	 	 	
Robert E. Weissman	 	 	 	 	

35

PITNEY BOWES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
 	 	 	
 	 	PAGE	

	
Report of Independent Registered Public Accounting Firm	 	37	
Consolidated Financial Statements of Pitney Bowes, Inc.	 	 	
Consolidated Statements of Income for the Years Ended December 31, 2010, 2009 and 2008	 	38	
Consolidated Balance Sheets as of December 31, 2010 and 2009	 	39	
Consolidated Statements of Cash Flows for the Years Ended December 31, 2010, 2009 and 2008	 	40	
Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2010, 2009 and 2008	 	41	
Notes to Consolidated Financial Statements	 	42	
Financial Statement Schedule	 	 	
Schedule II –Valuation and Qualifying Accounts and Reserves	 	97	
36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Pitney Bowes Inc.

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Pitney Bowes Inc. and its subsidiaries at December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Stamford, Connecticut
February 25, 2011

37

PITNEY BOWES INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Revenue:	 	 	 	 	 	 	 	 	 	 	
Equipment sales	 	$	1,030,416	 	$	1,006,542	 	$	1,252,058	 	
Supplies	 	 	318,430	 	 	336,239	 	 	392,414	 	
Software	 	 	382,366	 	 	365,185	 	 	424,296	 	
Rentals	 	 	600,759	 	 	647,432	 	 	728,160	 	
Financing	 	 	637,948	 	 	694,444	 	 	772,711	 	
Support services	 	 	711,519	 	 	714,429	 	 	768,424	 	
Business services	 	 	1,743,816	 	 	1,804,900	 	 	1,924,242	 	

	

	 	

	

	 	

	

	 	
Total revenue	 	 	5,425,254	 	 	5,569,171	 	 	6,262,305	 	

	

	 	

	

	 	

	

	 	
Costs and expenses:	 	 	 	 	 	 	 	 	 	 	
Cost of equipment sales	 	 	476,390	 	 	455,976	 	 	574,201	 	
Cost of supplies	 	 	97,172	 	 	93,660	 	 	103,870	 	
Cost of software	 	 	86,159	 	 	82,241	 	 	101,357	 	
Cost of rentals	 	 	141,465	 	 	158,881	 	 	153,831	 	
Financing interest expense	 	 	88,292	 	 	97,586	 	 	110,136	 	
Cost of support services	 	 	451,609	 	 	467,279	 	 	536,974	 	
Cost of business services	 	 	1,337,236	 	 	1,382,401	 	 	1,485,703	 	
Selling, general and administrative	 	 	1,760,677	 	 	1,800,714	 	 	1,970,868	 	
Research and development	 	 	156,371	 	 	182,191	 	 	205,620	 	
Restructuring charges and asset impairments	 	 	182,274	 	 	48,746	 	 	200,254	 	
Other interest expense	 	 	115,619	 	 	111,269	 	 	119,207	 	
Interest income	 	 	(2,587	)	 	(4,949	)	 	(12,893	)	

	

	 	

	

	 	

	

	 	
Total costs and expenses	 	 	4,890,677	 	 	4,875,995	 	 	5,549,128	 	

	

	 	

	

	 	

	

	 	
Income from continuing operations before income taxes	 	 	534,577	 	 	693,176	 	 	713,177	 	
Provision for income taxes	 	 	205,770	 	 	240,154	 	 	244,929	 	

	

	 	

	

	 	

	

	 	
Income from continuing operations	 	 	328,807	 	 	453,022	 	 	468,248	 	
Loss from discontinued operations, net of income tax	 	 	(18,104	)	 	(8,109	)	 	(27,700	)	

	

	 	

	

	 	

	

	 	
Net income before attribution of noncontrolling interests	 	 	310,703	 	 	444,913	 	 	440,548	 	
Less: Preferred stock dividends of subsidiaries attributable to noncontrolling interests	 	 	18,324	 	 	21,468	 	 	20,755	 	

	

	 	

	

	 	

	

	 	
Net income	 	$	292,379	 	$	423,445	 	$	419,793	 	

	

	 	

	

	 	

	

	 	
Amounts attributable to common stockholders:	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$	310,483	 	$	431,554	 	$	447,493	 	
Loss from discontinued operations	 	 	(18,104	)	 	(8,109	)	 	(27,700	)	

	

	 	

	

	 	

	

	 	
Net income	 	$	292,379	 	$	423,445	 	$	419,793	 	

	

	 	

	

	 	

	

	 	
Basic earnings per share attributable to common stockholders (1):	 	 	 	 	 	 	 	 	 	 	
Continuing operations	 	$	1.51	 	$	2.09	 	$	2.15	 	
Discontinued operations	 	 	(0.09	)	 	(0.04	)	 	(0.13	)	

	

	 	

	

	 	

	

	 	
Net income	 	$	1.42	 	$	2.05	 	$	2.01	 	

	

	 	

	

	 	

	

	 	
Diluted earnings per share attributable to common stockholders (1):	 	 	 	 	 	 	 	 	 	 	
Continuing operations	 	$	1.50	 	$	2.08	 	$	2.13	 	
Discontinued operations	 	 	(0.09	)	 	(0.04	)	 	(0.13	)	

	

	 	

	

	 	

	

	 	
Net income	 	$	1.41	 	$	2.04	 	$	2.00	 	

	

	 	

	

	 	

	

	 	

(1)	The sum of the earnings per share amounts may not equal the totals due to rounding.	

See Notes to Consolidated Financial Statements

38

PITNEY BOWES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
 	 	 	 	 	 	 	 	
 	 	December 31, 2010	 	December 31, 2009	 	

	 	

	 	
ASSETS	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	484,363	 	$	412,737	 	
Short-term investments	 	 	30,609	 	 	14,682	 	
 	 	 	 	 	 	 	 	
Accounts receivables, gross	 	 	824,015	 	 	859,633	 	
Allowance for doubtful accounts receivables	 	 	(31,880	)	 	(42,781	)	

	

	 	

	

	 	
Accounts receivables, net	 	 	792,135	 	 	816,852	 	
 	 	 	 	 	 	 	 	
Finance receivables	 	 	1,370,305	 	 	1,417,708	 	
Allowance for credit losses	 	 	(48,709	)	 	(46,790	)	

	

	 	

	

	 	
Finance receivables, net	 	 	1,321,596	 	 	1,370,918	 	
 	 	 	 	 	 	 	 	
Inventories	 	 	168,967	 	 	156,502	 	
Current income taxes	 	 	103,542	 	 	101,248	 	
Other current assets and prepayments	 	 	107,029	 	 	98,297	 	

	

	 	

	

	 	
Total current assets	 	 	3,008,241	 	 	2,971,236	 	
 	 	 	 	 	 	 	 	
Property, plant and equipment, net	 	 	426,501	 	 	514,904	 	
Rental property and equipment, net	 	 	300,170	 	 	360,207	 	
 	 	 	 	 	 	 	 	
Finance receivables	 	 	1,265,220	 	 	1,380,810	 	
Allowance for credit losses	 	 	(20,721	)	 	(25,368	)	

	

	 	

	

	 	
Finance receivables, net	 	 	1,244,499	 	 	1,355,442	 	
 	 	 	 	 	 	 	 	
Investment in leveraged leases	 	 	251,006	 	 	233,359	 	
Goodwill	 	 	2,306,793	 	 	2,286,904	 	
Intangible assets, net	 	 	297,443	 	 	316,417	 	
Non-current income taxes	 	 	130,601	 	 	145,388	 	
Other assets	 	 	478,769	 	 	387,182	 	

	

	 	

	

	 	
Total assets	 	$	8,444,023	 	$	8,571,039	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
LIABILITIES, NONCONTROLLING INTERESTS AND STOCKHOLDERS’ DEFICIT	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	
Accounts payable and accrued liabilities	 	$	1,825,261	 	$	1,748,254	 	
Current income taxes	 	 	192,924	 	 	144,385	 	
Notes payable and current portion of long-term obligations	 	 	53,494	 	 	226,022	 	
Advance billings	 	 	481,900	 	 	447,786	 	

	

	 	

	

	 	
Total current liabilities	 	 	2,553,579	 	 	2,566,447	 	
 	 	 	 	 	 	 	 	
Deferred taxes on income	 	 	261,118	 	 	347,402	 	
Tax uncertainties and other income tax liabilities	 	 	536,531	 	 	525,253	 	
Long-term debt	 	 	4,239,248	 	 	4,213,640	 	
Other non-current liabilities	 	 	653,758	 	 	625,079	 	

	

	 	

	

	 	
Total liabilities	 	 	8,244,234	 	 	8,277,821	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Noncontrolling interests (Preferred stockholders’ equity in subsidiaries)	 	 	296,370	 	 	296,370	 	
Commitments and contingencies (See Note 15)	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Stockholders’ deficit:	 	 	 	 	 	 	 	
Cumulative preferred stock, $50 par value, 4% convertible	 	 	4	 	 	4	 	
Cumulative preference stock, no par value, $2.12 convertible	 	 	752	 	 	868	 	
Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued)	 	 	323,338	 	 	323,338	 	
Additional paid-in capital	 	 	250,928	 	 	256,133	 	
Retained earnings	 	 	4,282,316	 	 	4,291,393	 	
Accumulated other comprehensive loss	 	 	(473,806	)	 	(459,792	)	
Treasury stock, at cost (119,906,910 and 116,140,084 shares, respectively)	 	 	(4,480,113	)	 	(4,415,096	)	

	

	 	

	

	 	
Total Pitney Bowes Inc. stockholders’ deficit	 	 	(96,581	)	 	(3,152	)	

	

	 	

	

	 	
Total liabilities, noncontrolling interests and stockholders’ deficit	 	$	8,444,023	 	$	8,571,039	 	

	

	 	

	

	 	
See Notes to Consolidated Financial Statements

39

PITNEY BOWES INC.
C ONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 	 	 	 	 	 	 	 	 	 	 	
 	 	Twelve Months Ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	 	 	
Net income before attribution of noncontrolling interests	 	$	310,703	 	$	444,913	 	$	440,548	 	
 	 	 	 	 	 	 	 	 	 	 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	 	 	
Restructuring charges and asset impairments, net of tax	 	 	122,893	 	 	31,782	 	 	144,211	 	
Restructuring payments	 	 	(119,565	)	 	(105,090	)	 	(102,680	)	
Proceeds (payments) for settlement of derivative instruments	 	 	31,774	 	 	(20,281	)	 	43,991	 	
Depreciation and amortization	 	 	303,653	 	 	338,895	 	 	379,117	 	
Stock-based compensation	 	 	20,111	 	 	22,523	 	 	26,402	 	
Special pension plan contributions	 	 	—	 	 	(125,000	)	 	—	 	
Changes in operating assets and liabilities, excluding effects of acquisitions:	 	 	 	 	 	 	 	 	 	 	
(Increase) decrease in accounts receivables	 	 	43,204	 	 	84,182	 	 	(23,690	)	
(Increase) decrease in finance receivables	 	 	180,352	 	 	206,823	 	 	24,387	 	
(Increase) decrease in inventories	 	 	(11,913	)	 	12,187	 	 	2,018	 	
(Increase) decrease in prepaid, deferred expense and other assets	 	 	(8,658	)	 	(15,036	)	 	6,001	 	
Increase (decrease) in accounts payable and accrued liabilities	 	 	28,766	 	 	(127,256	)	 	(76,880	)	
Increase (decrease) in current and non-current income taxes	 	 	30,211	 	 	85,632	 	 	122,480	 	
Increase (decrease) in advance billings	 	 	11,430	 	 	(2,744	)	 	2,051	 	
Increase (decrease) in other operating capital, net	 	 	9,150	 	 	(7,462	)	 	21,459	 	

	

	 	

	

	 	

	

	 	
Net cash provided by operating activities	 	 	952,111	 	 	824,068	 	 	1,009,415	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	
Short-term and other investments	 	 	(122,464	)	 	(8,362	)	 	35,652	 	
Proceeds from the sale of a facility	 	 	12,595	 	 	—	 	 	—	 	
Capital expenditures	 	 	(119,768	)	 	(166,728	)	 	(237,308	)	
Net investment in external financing	 	 	(4,718	)	 	1,456	 	 	1,868	 	
Acquisitions, net of cash acquired	 	 	(77,537	)	 	—	 	 	(67,689	)	
Reserve account deposits	 	 	10,399	 	 	1,664	 	 	33,359	 	

	

	 	

	

	 	

	

	 	
Net cash used in investing activities	 	 	(301,493	)	 	(171,970	)	 	(234,118	)	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	
(Decrease) increase in notes payable, net	 	 	(170,794	)	 	(389,666	)	 	205,590	 	
Proceeds from long-term obligations	 	 	—	 	 	297,513	 	 	245,582	 	
Principal payments on long-term obligations	 	 	—	 	 	(150,000	)	 	(576,565	)	
Proceeds from issuance of common stock	 	 	11,423	 	 	11,962	 	 	20,154	 	
Payments to redeem preferred stock issued by a subsidiary	 	 	—	 	 	(375,000	)	 	(10,000	)	
Proceeds from issuance of preferred stock by a subsidiary	 	 	—	 	 	296,370	 	 	—	 	
Stock repurchases	 	 	(100,000	)	 	—	 	 	(333,231	)	
Dividends paid to stockholders	 	 	(301,456	)	 	(297,555	)	 	(291,611	)	
Dividends paid to noncontrolling interests	 	 	(19,141	)	 	(19,485	)	 	(20,755	)	

	

	 	

	

	 	

	

	 	
Net cash used in financing activities	 	 	(579,968	)	 	(625,861	)	 	(760,836	)	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Effect of exchange rate changes on cash and cash equivalents	 	 	976	 	 	9,829	 	 	(14,966	)	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Increase (decrease) in cash and cash equivalents	 	 	71,626	 	 	36,066	 	 	(505	)	
Cash and cash equivalents at beginning of period	 	 	412,737	 	 	376,671	 	 	377,176	 	

	

	 	

	

	 	

	

	 	
Cash and cash equivalents at end of period	 	$	484,363	 	$	412,737	 	$	376,671	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Cash interest paid	 	$	191,880	 	$	195,256	 	$	235,816	 	

	

	 	

	

	 	

	

	 	
Cash income taxes paid, net	 	$	231,550	 	$	197,925	 	$	164,354	 	

	

	 	

	

	 	

	

	 	
See Notes to Consolidated Financial Statements

40

PITNEY BOWES INC.
C ONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(In thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Preferred
stock	 	Preference
stock	 	Common
stock	 	Additional
paid-in capital	 	Comprehensive
income (loss)	 	Retained
earnings	 	Accumulated
other
comprehensive
(loss) income	 	Treasury
stock	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	

	 	
Balance, December 31, 2007	 	$	7	 	$	1,003	 	$	323,338	 	$	252,185	 	 	 	 	$	4,051,722	 	$	88,656	 	$	(4,155,642	)	
Tax adjustment (see Note 9)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(14,401	)	 	(2,414	)	 	 	 	

	

	 	

	

	 	 	 	 	
Adjusted balances	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	4,037,321	 	 	86,242	 	 	 	 	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	$	419,793	 	 	419,793	 	 	 	 	 	 	 	
Other comprehensive income, net of tax:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign currency translations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(305,452	)	 	 	 	 	(305,452	)	 	 	 	
Net unrealized loss on derivative instruments, net of tax of ($12.4) million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(18,670	)	 	 	 	 	(18,670	)	 	 	 	
Net unrealized gain on investment securities, net of tax of $0.4 million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	580	 	 	 	 	 	580	 	 	 	 	
Net unamortized loss on pension and postretirement plans, net of tax of ($216.1) million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(375,544	)	 	 	 	 	(375,544	)	 	 	 	
Amortization of pension and postretirement costs, net of tax of $8.6 million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	14,089	 	 	 	 	 	14,089	 	 	 	 	

	

	 	 	 	 	 	 	 	 	 	 	
Comprehensive loss	 	 	 	 	 	 	 	 	 	 	 	 	 	$	(265,204	)	 	 	 	 	 	 	 	 	 	

	

	 	 	 	 	 	 	 	 	 	 	
Cash dividends:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preference	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(77	)	 	 	 	 	 	 	
Common	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(291,534	)	 	 	 	 	 	 	
Issuances of common stock	 	 	 	 	 	 	 	 	 	 	 	(11,573	)	 	 	 	 	 	 	 	 	 	 	34,268	 	
Conversions to common stock	 	 	 	 	 	(27	)	 	 	 	 	(609	)	 	 	 	 	 	 	 	 	 	 	636	 	
Pre-tax stock-based compensation	 	 	 	 	 	 	 	 	 	 	 	26,402	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjustments to additional paid in capital, tax effect from share-based compensation	 	 	 	 	 	 	 	 	 	 	 	(7,099	)	 	 	 	 	 	 	 	 	 	 	 	 	
Repurchase of common stock	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(333,231	)	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	
Balance, December 31, 2008	 	 	7	 	 	976	 	 	323,338	 	 	259,306	 	 	 	 	 	4,165,503	 	 	(598,755	)	 	(4,453,969	)	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	$	423,445	 	 	423,445	 	 	 	 	 	 	 	
Other comprehensive income, net of tax:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign currency translations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	119,820	 	 	 	 	 	119,820	 	 	 	 	
Net unrealized gain on derivative instruments, net of tax of $4.9 million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	7,214	 	 	 	 	 	7,214	 	 	 	 	
Net unrealized loss on investment securities, net of tax of ($0.1) million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(283	)	 	 	 	 	(283	)	 	 	 	
Net unamortized loss on pension and postretirement plans, net of tax of $8.4 million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(5,116	)	 	 	 	 	(5,116	)	 	 	 	
Amortization of pension and postretirement costs, net of tax of $10.6 million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	17,328	 	 	 	 	 	17,328	 	 	 	 	

	

	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	$	562,408	 	 	 	 	 	 	 	 	 	 	

	

	 	 	 	 	 	 	 	 	 	 	
Cash dividends:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preference	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(72	)	 	 	 	 	 	 	
Common	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(297,483	)	 	 	 	 	 	 	
Issuances of common stock	 	 	 	 	 	 	 	 	 	 	 	(22,017	)	 	 	 	 	 	 	 	 	 	 	36,419	 	
Conversions to common stock	 	 	(3	)	 	(108	)	 	 	 	 	(2,343	)	 	 	 	 	 	 	 	 	 	 	2,454	 	
Pre-tax stock-based compensation	 	 	 	 	 	 	 	 	 	 	 	21,761	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjustments to additional paid in capital, tax effect from share-based compensation	 	 	 	 	 	 	 	 	 	 	 	(574	)	 	 	 	 	 	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	
Balance, December 31, 2009	 	 	4	 	 	868	 	 	323,338	 	 	256,133	 	 	 	 	 	4,291,393	 	 	(459,792	)	 	(4,415,096	)	
Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	$	292,379	 	 	292,379	 	 	 	 	 	 	 	
Other comprehensive income, net of tax:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign currency translations	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(15,685	)	 	 	 	 	(15,685	)	 	 	 	
Net unrealized gain on derivative instruments, net of tax of $0.8 million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,293	 	 	 	 	 	1,293	 	 	 	 	
Net unrealized loss on investment securities, net of tax of $0.5 million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	790	 	 	 	 	 	790	 	 	 	 	
Net unamortized loss on pension and postretirement plans, net of tax of $(17.2) million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(28,710	)	 	 	 	 	(28,710	)	 	 	 	
Amortization of pension and postretirement costs, net of tax of $16.0 million	 	 	 	 	 	 	 	 	 	 	 	 	 	 	28,298	 	 	 	 	 	28,298	 	 	 	 	

	

	 	 	 	 	 	 	 	 	 	 	
Comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	$	278,365	 	 	 	 	 	 	 	 	 	 	

	

	 	 	 	 	 	 	 	 	 	 	
Cash dividends:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preference	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(65	)	 	 	 	 	 	 	
Common	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(301,391	)	 	 	 	 	 	 	
Issuances of common stock	 	 	 	 	 	 	 	 	 	 	 	(24,039	)	 	 	 	 	 	 	 	 	 	 	33,249 	 	
Conversions to common stock	 	 	 	 	 	(116	)	 	 	 	 	(1,618	)	 	 	 	 	 	 	 	 	 	 	1,734 	 	
Pre-tax stock-based compensation	 	 	 	 	 	 	 	 	 	 	 	20,452	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjustments to additional paid in capital, tax effect from share-based compensation	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Repurchase of common stock	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(100,000	)	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	
Balance, December 31, 2010	 	$	4	 	$	752	 	$	323,338	 	$	250,928	 	 	 	 	$	4,282,316	 	$	(473,806	)	$	(4,480,113	)	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	

	

	 	

	

	 	

	

	 	

See Notes to Consolidated Financial Statements

41

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEM ENTS
(Tabular dollars in thousands, except per share data)

1. Description of Business and Summary of Significant Accounting Policies

Description of Business
We are a provider of mail processing equipment and integrated mail solutions to organizations of all sizes. We offer a full suite of equipment, supplies, software, services and solutions for managing and integrating physical and digital communication channels. We conduct our business activities in seven reporting segments within two business groups: Small & Medium Business Solutions and Enterprise Business Solutions. See Note 18 for information regarding our reportable segments.

Basis of Presentation and Consolidation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Operating results of acquired companies are included in the consolidated financial statements from the date of acquisition. Intercompany transactions and balances have been eliminated..

Reclassification
Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses that are reported in the consolidated financial statements and accompanying disclosures, including the disclosure of contingent assets and liabilities. These estimates are based on our best knowledge of current events, historical experience, actions that we may undertake in the future, and on various other assumptions that are believed to be reasonable under the circumstances. These estimates include, but are not limited to, allowance for doubtful accounts and credit losses, inventory obsolescence, residual values of leased assets, useful lives of long-lived assets and intangible assets, impairment of goodwill, allocation of purchase price to tangible and intangible assets acquired in business combinations, warranty obligations, restructuring costs, pensions and other postretirement benefits and loss contingencies. As a result, actual results could differ from those estimates and assumptions.

Cash Equivalents and Investments
Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the date of purchase. Short-term investments include highly liquid investments with maturities of greater than three months but less than one year from the reporting date. Investments with maturities greater than one year from the reporting date are recorded as Other assets. Our investments are predominantly classified as available-for-sale.

Accounts Receivable and Allowance for Doubtful Accounts
We estimate our accounts receivable risks and provide allowances for doubtful accounts accordingly. We believe that our credit risk for accounts receivable is limited because of our large number of customers, small account balances for most of our customers and customer geographic and industry diversification. We evaluate the adequacy of the allowance for doubtful accounts based on our historical loss experience, length of time receivables are past due, adverse situations that may affect a customer’s ability to pay and prevailing economic conditions, and make adjustments to our actual aggregate reserve as necessary. This evaluation is inherently subjective and actual results may differ significantly from estimated reserves.

Finance Receivables and Allowance for Credit Losses
Finance receivables are predominantly from the sales of products and are composed of sales-type lease receivables and unsecured revolving loan receivables. We estimate our finance receivables risks and provide allowances for credit losses accordingly. We establish credit approval limits based on the credit quality of the customer and the type of equipment financed. Finance receivables are written-off against the allowance for credit losses after collection efforts are exhausted and we deem the account uncollectible. We believe that our concentration of credit risk for finance receivables is limited because of our large number of customers, small account balances and customer geographic and industry diversification.

Our general policy is to discontinue revenue recognition for lease receivables that are delinquent more than 120 days, and to discontinue revenue recognition on unsecured loan receivables that are delinquent for more than 90 days. We resume revenue recognition when customer payments reduce the account balance aging to 60 days or less past due.

We evaluate the adequacy of the allowance for credit losses based on our historical loss experience, the nature and volume of the portfolios, adverse situations that may affect a customer’s ability to pay and prevailing economic conditions, and make adjustments to

42

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

our actual aggregate reserve as necessary. This evaluation is inherently subjective and actual results may differ significantly from estimated reserves. See Note 17 for further information.

Inventories
Inventories are stated at the lower of cost or market. Cost is determined on the last-in, first-out (LIFO) basis for most U.S. inventories, and on the first-in, first-out (FIFO) basis for most non-U.S. inventories.

Fixed Assets and Depreciation
Property, plant and equipment and rental equipment are stated at cost and depreciated principally using the straight-line method over their estimated useful lives. The estimated useful lives of depreciable fixed assets are as follows: buildings, up to 50 years; plant and equipment, three to 15 years; and computer equipment, three to five years. Major improvements which add to productive capacity or extend the life of an asset are capitalized while repairs and maintenance are charged to expense as incurred. Leasehold improvements are amortized over the shorter of the estimated useful life or their related lease term.

Fully depreciated assets are retained in fixed assets and accumulated depreciation until they are removed from service. In the case of disposals, assets and related accumulated depreciation are removed from the accounts, and the net amounts, less proceeds from disposal, are included in earnings.

Software Development Costs
We capitalize certain costs of software developed for internal use in accordance with the internal-use software accounting guidance. Capitalized costs include purchased materials and services, payroll and payroll-related costs and interest costs. The cost of internally developed software is amortized on a straight-line basis over its estimated useful life, principally three to 10 years.

Costs incurred for the development of software to be sold, leased, or otherwise marketed are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized until the product is available for general release to the public. Capitalized software development costs include purchased materials and services, and payroll and payroll-related costs attributable to programmers, software engineers, quality control and field certifiers. Capitalized software development costs are amortized over the product’s estimated useful life, principally three to five years, generally on a straight-line basis. Other assets on our Consolidated Balance Sheets include $19.9 million and $23.2 million of capitalized software development costs at December 31, 2010 and 2009, respectively. The Consolidated Statements of Income include the related amortization expense of $8.0 million, $10.4 million and $6.1 million for the years ended December 31, 2010, 2009, and 2008, respectively. Total software development costs capitalized in 2010 and 2009 were $6.3 million and $9.2 million, respectively.

Research and Development Costs
Research and product development costs are expensed as incurred. These costs primarily include personnel-related costs.

Business Combinations
We account for business combinations using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. The fair value of intangible assets is estimated using a cost, market or income approach. Goodwill represents the excess of the purchase price over the estimated fair values of net tangible and intangible assets acquired. Finite-lived intangible assets are amortized over their estimated useful lives, principally three to 15 years, using either the straight-line method or an accelerated attrition method.

Impairment Review for Long-lived Assets
Long-lived assets are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. If such a change in circumstances occurs, the related estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition is compared to the carrying amount. If the sum of the expected cash flows is less than the carrying amount, an impairment charge is recorded. The impairment charge is measured as the amount by which the carrying amount exceeds the fair value of the asset. The fair value of the impaired asset is determined using probability weighted expected cash flow estimates, quoted market prices when available and appraisals, as appropriate.

Impairment Review for Goodwill and Intangible Assets
Goodwill is tested annually for impairment, or sooner when circumstances indicate an impairment may exist, at the reporting unit level. A reporting unit is the operating segment, or a business, which is one level below that operating segment. Reporting units are aggregated as a single reporting unit if they have similar economic characteristics. Goodwill is tested for impairment using a two-step

43

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

approach. In the first step, the fair value of each reporting unit is determined. If the fair value of a reporting unit is less than its carrying value, the second step of the goodwill impairment test is performed to measure the amount of impairment, if any. In the second step, the fair value of the reporting unit is allocated to the assets and liabilities of the reporting unit as if it had just been acquired in a business combination, and as if the purchase price was equivalent to the fair value of the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is referred to as the implied fair value of goodwill. The implied fair value of the reporting unit’s goodwill is then compared to the actual carrying value of goodwill. If the implied fair value is less than the carrying value, an impairment loss is recognized for that excess. The fair values of our reporting units are determined based on a combination of various techniques, including the present value of future cash flows, multiples of competitors and multiples from sales of like businesses.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. If such a change in circumstances occurs, the related estimated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition is compared to the carrying amount. If the sum of the expected cash flows is less than the carrying amount, an impairment charge is recorded. The impairment charge is measured as the amount by which the carrying amount exceeds the fair value of the asset. The fair value of impaired asset is determined using probability weighted expected cash flow estimates, quoted market prices when available and appraisals as appropriate.

Retirement Plans
Actual pension plan results that differ from our assumptions and estimates are accumulated and amortized over the estimated future working life of the plan participants and will therefore affect future pension expense. Net pension expense includes current service costs, interest costs and returns on plan assets. We also base net pension expense primarily on a market related valuation of plan assets. Under this approach, differences between the actual and expected return on plan assets are recognized over a five-year period. We recognize the overfunded or underfunded status of pension and other postretirement benefit plans on the Consolidated Balance Sheets. Gains and losses, prior service costs and credits, and any remaining transition amounts that have not yet been recognized in net periodic benefit costs are recognized in accumulated other comprehensive income, net of tax, until they are amortized as a component of net periodic benefit cost. We use a measurement date of December 31 for all of our retirement plans. See Note 19 for further details.

During 2009, the Board of Directors approved and adopted a resolution amending both U.S. pension plans, the Pitney Bowes Pension Plan and the Pitney Bowes Pension Restoration Plan, to provide that benefit accruals as of December 31, 2014, will be determined and frozen and no future benefit accruals under the plans will occur after that date. See Note 19 to the Consolidated Financial Statements for further details.

Stock-based Compensation
We measure compensation cost for stock-based awards exchanged for employee service at grant date, based on the estimated fair value of the award, and recognize the cost as expense on a straight-line basis (net of estimated forfeitures) over the employee requisite service period. We estimate the fair value of stock options using a Black-Scholes valuation model. See Note 12 for further details.

We record deferred tax assets for awards that will result in deductions on our income tax returns, based on the amount of compensation cost recognized and our statutory tax rate in the jurisdiction in which we will receive a deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported in our income tax return are recorded in expense or in capital in excess of par value if the tax deduction exceeds the deferred tax asset or to the extent that previously recognized credits to paid-in-capital are still available if the tax deduction is less than the deferred tax asset.

Revenue Recognition
We derive our revenue from the sale of equipment, supplies, and software, rentals, financing, and support and business services. Certain of our transactions are consummated at the same time. The most common form of these transactions involves the sale or lease of equipment, a meter rental and/or an equipment maintenance agreement. In these cases, revenue is recognized for each of the elements based on their relative fair values in accordance with the revenue recognition accounting guidance. Fair values of any meter rental or equipment maintenance agreement are determined by reference to the prices charged in standalone and renewal transactions. Fair value of equipment is determined based upon the present value of the minimum lease payments. More specifically, revenue related to our offerings is recognized as follows:

44

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Sales Revenue

Sales of Equipment
We sell equipment to our customers, as well as to distributors and dealers (re-sellers) throughout the world. We recognize revenue from these sales upon the transfer of title, which is generally upon shipment. We recognize revenue from the sale of equipment under sales-type leases as equipment revenue at the inception of the lease. We do not typically offer any rights of return or stock balancing rights. Our sales revenue from customized equipment, mail creation equipment and shipping products is generally recognized when installed.

Embedded Software Sales
We sell equipment with embedded software to our customers. The embedded software is not sold separately, it is not a significant focus of the marketing effort and we do not provide post-contract customer support specific to the software or incur significant costs that are subject to capitalization. Additionally, the functionality that the software provides is marketed as part of the overall product. The software embedded in the equipment is incidental to the equipment as a whole such that the software revenue recognition accounting guidance is not applicable.

Sales of Supplies
Revenue related to supplies is recognized at the point of title transfer, which is generally upon shipment.

Standalone Software Sales and Integration Services
In accordance with software revenue accounting guidance, we recognize revenue from standalone software licenses upon delivery of the product when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectibility is probable. For software licenses that are included in a lease contract, we recognize revenue upon shipment of the software unless the lease contract specifies that the license expires at the end of the lease or the price of the software is deemed not fixed or determinable based on historical evidence of similar software leases. In these instances, revenue is recognized on a straight-line basis over the term of the lease contract. We recognize revenue from software requiring integration services at the point of customer acceptance. We recognize revenue related to off-the-shelf perpetual software licenses upon transfer of title, which is generally upon shipment.

Rentals Revenue
We rent equipment to our customers, primarily postage meters and mailing equipment, under short-term rental agreements, generally for periods of three months to five years. Rental revenue includes revenue from the subscription for digital meter services. We invoice in advance for postage meter rentals. We defer the billed revenue and include it initially in advance billings. Rental revenue is recognized on a straight-line basis over the term of the rental agreement. We defer certain initial direct costs incurred in consummating a transaction and amortize these costs over the term of the agreement. The initial direct costs are primarily personnel-related costs. Rental property and equipment, net on our Consolidated Balance Sheets include $36.7 million and $45.2 million of these deferred costs at December 31, 2010 and 2009, respectively. The Consolidated Statements of Income include the related amortization expense of $26.6 million, $25.1 million and $27.7 million for the years ended December 31, 2010, 2009 and 2008, respectively.

Financing Revenue
We provide financing to our customers for the purchase of our products. Equipment sales are financed primarily through sales-type leases. We also provide revolving lines of credit to our customers for the purchase of postage and related supplies. Financing revenue includes interest which is earned over the term of the lease or loan and related fees which are recognized as services are provided. When a sales-type lease is consummated, we record the finance receivable, unearned income and estimated residual value of the leased equipment. Residual values are estimated based upon the average expected proceeds to be received at the end of the lease term. We evaluate recorded residual values at least on an annual basis or as circumstances warrant. A reduction in estimated residual values could result in an impairment charge as well as a reduction in future financing income. Unearned income represents the excess of the finance receivable plus the estimated residual value over the sales price of the equipment. We recognize unearned income as financing revenue using the interest method over the lease term.

Support Services Revenue
We provide support services for our equipment primarily through maintenance contracts. Revenue related to these agreements is recognized on a straight-line basis over the term of the agreement, which typically is one to five years in length.

45

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Business Services Revenue
Business services revenue includes revenue from management services, mail services, and marketing services. Management services, which includes outsourcing of mailrooms, copy centers, or other document management functions, are typically one to five year contracts that contain a monthly service fee and in many cases a “click” charge based on the number of copies made, machines in use, etc. Revenue is recognized over the term of the agreement, based on monthly service charges, with the exception of the “click” charges, which are recognized as earned. Mail services include the preparation, sortation and aggregation of mail to earn postal discounts and expedite delivery and revenue is recognized as the services are provided. Marketing services include direct mail marketing services, and revenue is recognized over the term of the agreement as the services are provided.

Shipping and Handling
We include costs related to shipping and handling in cost of revenues for all periods presented.

Product Warranties
We provide product warranties in conjunction with the sale of certain products, generally for a period of 90 days from the date of installation. We estimate our liability for product warranties based on historical claims experience and other currently available evidence. Our product warranty liability at December 31, 2010 and 2009 was not material.

Deferred Marketing Costs
We capitalize certain direct mail, telemarketing, Internet, and retail marketing costs, associated with the acquisition of new customers. These costs are amortized over the expected revenue stream ranging from five to nine years. We review individual marketing programs for impairment on a periodic basis or as circumstances warrant. Other assets on the Consolidated Balance Sheets include deferred marketing costs of $106.3 million and $119.5 million at December 31, 2010 and 2009, respectively. The Consolidated Statements of Income include the related amortization expense of $38.5 million, $43.5 million and $43.1 million for the years ended December 31, 2010, 2009 and 2008, respectively.

Restructuring Charges
Costs associated with exit or disposal activities and restructurings are recognized when the liability is incurred. The cost and related liability for one-time benefit arrangements is recognized when the costs are probable and reasonably estimable. See Note 14 to the Consolidated Financial Statements.

Income Taxes
We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in this assessment. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change.

Earnings per Share
Basic earnings per share is based on the weighted average number of common shares outstanding during the year, whereas diluted earnings per share also gives effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares include preference stock, preferred stock, stock option and purchase plan shares.

Translation of Non-U.S. Currency Amounts
Assets and liabilities of subsidiaries operating outside the U.S. are translated at rates in effect at the end of the period and revenue and expenses are translated at average monthly rates during the period. Net deferred translation gains and losses are included in accumulated other comprehensive loss in stockholders’ deficit in the Consolidated Balance Sheets.

Derivative Instruments
In the normal course of business, we are exposed to the impact of changes in interest rates and foreign currency exchange rates. We limit these risks by following established risk management policies and procedures, including the use of derivatives.

46

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

We use derivative instruments to manage the related cost of debt and to limit the effects of foreign exchange rate fluctuations on financial results. Derivative instruments typically consist of forward contracts, interest-rate swaps, and currency swaps depending upon the underlying exposure. We do not use derivatives for trading or speculative purposes. We record our derivative instruments at fair value, and the accounting for changes in the fair value of the derivatives depends on the intended use of the derivative, the resulting designation, and the effectiveness of the instrument in offsetting the risk exposure it is designed to hedge.

To qualify as a hedge, a derivative must be highly effective in offsetting the risk designated for hedging purposes. The hedge relationship must be formally documented at inception, detailing the particular risk management objective and strategy for the hedge. The effectiveness of the hedge relationship is evaluated on a retrospective and prospective basis.

The use of derivative instruments exposes us to counterparty credit risk. To mitigate such risks, we enter into contracts with only those financial institutions that meet stringent credit requirements as set forth in our derivative policy. We regularly review our credit exposure balances as well as the creditworthiness of our counterparties. See Note 13 for additional disclosures on derivative instruments.

New Accounting Pronouncements
In 2010, we adopted guidance that increases disclosures regarding the credit quality of an entity’s financing receivables and its allowance for credit losses. The guidance also requires an entity to disclose credit quality indicators, past due information, and modifications of its financing receivables. The adoption of this guidance resulted in additional disclosures (see Note 17) but did not have an impact on our consolidated financial statements.

In September 2009, new guidance was introduced addressing the accounting for revenue arrangements with multiple elements and certain revenue arrangements that include software. The guidance allows companies to allocate consideration in a multiple element arrangement in a way that better reflects the economics of the transaction and eliminates the residual method. In addition, tangible products that have software components that are “essential to the functionality” of the tangible product will be scoped out of the software revenue guidance. The new guidance will also result in more expansive disclosures. The new guidance became effective on January 1, 2011 and is not expected to have a material impact on our financial position, results of operations or cash flows.

2. Discontinued Operations

The following table shows selected financial information included in discontinued operations for the years ended December 31, 2010, 2009 and 2008:
 	 	 	 	 	 	 	 	 	 	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Pre-tax income	 	$	754	 	$	20,624	 	$	—	 	
Tax provision	 	 	(18,858	)	 	(28,733	)	 	(27,700	)	

	

	 	

	

	 	

	

	 	
Loss from discontinued operations, net of tax	 	$	(18,104	)	$	(8,109	)	$	(27,700	)	

	

	 	

	

	 	

	

	 	
The net loss in 2010 primarily relates to the accrual of interest on uncertain tax positions and additional tax associated with the discontinued operations. The net loss in 2009 includes $9.8 million of pre-tax income ($6.0 million net of tax) for a bankruptcy settlement and $10.9 million of pre-tax income ($6.7 million net of tax) related to the expiration of an indemnity agreement associated with the sale of a former subsidiary. This income was more than offset by the accrual of interest on uncertain tax positions. The net loss in 2008 includes an accrual of tax and interest on uncertain tax positions.

47

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

3. Acquisitions

On July 5, 2010, we acquired Portrait Software plc (Portrait) for $65.2 million in cash, net of cash acquired. Portrait provides software to enhance existing customer relationship management systems, enabling clients to achieve improved customer retention and profitability. The preliminary allocation of the purchase price to the fair values of the assets acquired and liabilities assumed is shown below. The primary items that generated goodwill are the anticipated synergies from the compatibility of the acquired technology with our existing product and service offerings, and employees of Portrait, neither of which qualify as an amortizable intangible asset. None of the goodwill will be deductible for tax purposes.
 	 	 	 	 	
Purchase price allocation:	 	 	 	 	
Current assets	 	$	7,919	 	
Other non-current assets	 	 	2,352	 	
Intangible assets	 	 	31,332	 	
Goodwill	 	 	47,354	 	
Current liabilities	 	 	(13,014	)	
Non-current liabilities	 	 	(10,793	)	

	

	 	
Purchase price, net of cash acquired	 	$	65,150	 	

	

	 	
Intangible assets:	 	 	 	 	
Customer relationships	 	$	18,744	 	
Software and technology	 	 	11,497	 	
Trademarks and trade names	 	 	1,091	 	

	

	 	
Total intangible assets	 	$	31,332	 	

	

	 	
Intangible assets amortization period:	 	 	 	 	
Customer relationships	 	 	10 years	 	
Software and technology	 	 	6 years	 	
Trademarks and trade names	 	 	6 years	 	

	

	 	
Total weighted average	 	 	8 years	 	

	

	 	
During 2010, we also completed smaller acquisitions for aggregate cash payments of $12.3 million. These acquisitions did not have a material impact on our financial results.

The Consolidated Financial Statements include the results of operations of the acquired businesses from their respective dates of acquisition. Assuming these acquisitions occurred on January 1, 2010 and 2009, total pro forma revenue would have been $5,452 million and $5,620 million for 2010 and 2009, respectively. The pro forma earnings results of these acquisitions were not material to net income or earnings per share. The pro forma consolidated amounts do not purport to be indicative of actual results that would have occurred had the acquisitions been completed on January 1, 2010 and 2009, nor do they purport to be indicative of the results that will be obtained in the future.

There were no acquisitions during 2009.

48

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

4. Inventories

Inventories at December 31, 2010 and 2009 consisted of the following:
 	 	 	 	 	 	 	 	
 	 	December 31,	 	

	 	
 	 	2010	 	2009	 	

	 	

	 	
Raw materials and work in process	 	$	46,664	 	$	36,331 	 	
Supplies and service parts	 	 	63,991	 	 	69,506 	 	
Finished products	 	 	58,312	 	 	50,665 	 	

	

	 	

	

	 	
Total	 	$	168,967	 	$	156,502 	 	

	

	 	

	

	 	
If all inventories valued at LIFO had been stated at current costs, inventories would have been $26.3 million and $25.8 million higher than reported at December 31, 2010 and 2009, respectively.

5. Fixed Assets

Fixed assets at December 31, 2010 and 2009 consist of property, plant and equipment and rental equipment, primarily postage meters, as follows:
 	 	 	 	 	 	 	 	
 	 	December 31,	 	

	 	
 	 	2010	 	2009	 	

	 	

	 	
Land	 	$	26,710	 	$	32,517	 	
Buildings	 	 	361,463	 	 	391,627	 	
Machinery and equipment	 	 	1,352,295	 	 	1,404,023	 	

	

	 	

	

	 	
 	 	 	1,740,468	 	 	1,828,167	 	
Accumulated depreciation	 	 	(1,313,967	)	 	(1,313,263	)	

	

	 	

	

	 	
Property, plant and equipment, net	 	$	426,501	 	$	514,904	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Rental property and equipment	 	$	618,839	 	$	728,537	 	
Accumulated depreciation	 	 	(318,669	)	 	(368,330	)	

	

	 	

	

	 	
Rental property and equipment, net	 	$	300,170	 	$	360,207 	 	

	

	 	

	

	 	
Depreciation expense was $242.9 million, $269.8 million and $306.8 million for the years ended December 31, 2010, 2009, and 2008, respectively. Rental equipment is primarily comprised of postage meters. In 2010, we recorded asset impairment charges of $9.8 million associated with a restructuring program and included these charges in restructuring charges and asset impairments in the Consolidated Statements of Income. See Note 14 for further details.

49

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

6. Intangible Assets and Goodwill

The components of our purchased intangible assets are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2010	 	December 31, 2009	 	

	 	

	 	
 	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net
Carrying
Amount	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net
Carrying
Amount	 	

	 	

	 	

	 	

	 	

	 	

	 	
Customer relationships	 	$	453,523	 	$	(229,143	)	$	224,380	 	$	428,888	 	$	(197,497	)	$	231,391	 	
Supplier relationships	 	 	29,000	 	 	(16,192	)	 	12,808	 	 	29,000	 	 	(13,292	)	 	15,708	 	
Mailing software and technology	 	 	172,188	 	 	(118,390	)	 	53,798	 	 	164,211	 	 	(103,388	)	 	60,823	 	
Trademarks and trade names	 	 	36,322	 	 	(30,224	)	 	6,098	 	 	35,855	 	 	(27,898	)	 	7,957	 	
Non-compete agreements	 	 	7,845	 	 	(7,486	)	 	359	 	 	7,753	 	 	(7,215	)	 	538	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	$	698,878	 	$	(401,435	)	$	297,443	 	$	665,707	 	$	(349,290	)	$	316,417	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Amortization expense for intangible assets was $60.8 million, $69.1 million and $72.3 million for the years ended December 31, 2010, 2009 and 2008, respectively. The future amortization expense related to intangible assets as of December 31, 2010 is as follows:
 	 	 	 	 	
Year ended December 31,	 	Amount	 	

	 	
2011	 	$	58,865 	 	
2012	 	 	50,983 	 	
2013	 	 	47,343 	 	
2014	 	 	42,191 	 	
2015	 	 	35,044 	 	
Thereafter	 	 	63,017 	 	

	

	 	
 	 	$	297,443 	 	

	

	 	
Actual amortization expense may differ from the amounts above due to, among other things, future acquisitions, impairments of intangible assets, accelerated amortization and changes in foreign currency exchange rates.

In 2010, we recorded impairment charges of $4.7 million and included these charges in restructuring charges and asset impairments in the Consolidated Statements of Income. See Note 14 for further details.

Intangible assets acquired during 2010 are shown in the table below. There were no additions in 2009.
 	 	 	 	 	 	 	 	
 	 	December 31, 2010	 	

	 	
 	 	Amount	 	Weighted
Average
Life (in
years)	 	

	 	

	 	
Customer relationships	 	$	36,763	 	 	11	 	
Mailing software and technology	 	 	13,954	 	 	6	 	
Trademarks and trade names	 	 	1,125	 	 	6	 	
Non-compete agreements	 	 	110	 	 	5	 	

	

	 	

	

	 	
 	 	$	51,952	 	 	10	 	

	

	 	

	

	 	
50

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The changes in the carrying amount of goodwill, by reporting segment, for the years ended December 31, 2010 and 2009 are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Balance at
December 31,
2009 (1)	 	Acquired
during the
period	 	Other (2)	 	Balance at
December 31,
2010	 	

	 	

	 	

	 	

	 	
U.S. Mailing	 	$	217,459	 	$	—	 	$	(887	)	$	216,572	 	
International Mailing	 	 	342,549	 	 	—	 	 	(14,528	)	 	328,021	 	

	

	 	

	

	 	

	

	 	

	

	 	
Small & Medium Business Solutions	 	 	560,008	 	 	—	 	 	(15,415	)	 	544,593	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Production Mail	 	 	138,474	 	 	—	 	 	(2,143	)	 	136,331	 	
Software	 	 	633,938	 	 	47,354	 	 	(3,191	)	 	678,101	 	
Management Services	 	 	500,055	 	 	—	 	 	(5,622	)	 	494,433	 	
Mail Services	 	 	259,632	 	 	—	 	 	(530	)	 	259,102	 	
Marketing Services	 	 	194,797	 	 	—	 	 	(564	)	 	194,233	 	

	

	 	

	

	 	

	

	 	

	

	 	
Enterprise Business Solutions	 	 	1,726,896	 	 	47,354	 	 	(12,050	)	 	1,762,200	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total	 	$	2,286,904	 	$	47,354	 	$	(27,465	)	$	2,306,793	 	

	

	 	

	

	 	

	

	 	

	

	 	

 	 	Balance at
December 31,
2008 (1)	 	Acquired
during the
period	 	Other (2)	 	Balance at
December 31,
2009	 	

	 	

	 	

	 	

	 	
U.S. Mailing	 	$	220,207	 	$	—	 	$	(2,748	)	$	217,459	 	
International Mailing	 	 	322,230	 	 	—	 	 	20,319	 	 	342,549	 	

	

	 	

	

	 	

	

	 	

	

	 	
Small & Medium Business Solutions	 	 	542,437	 	 	—	 	 	17,571	 	 	560,008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Production Mail	 	 	138,175	 	 	—	 	 	299	 	 	138,474	 	
Software	 	 	623,995	 	 	—	 	 	9,943	 	 	633,938	 	
Management Services	 	 	491,633	 	 	—	 	 	8,422	 	 	500,055	 	
Mail Services	 	 	260,793	 	 	—	 	 	(1,161	)	 	259,632	 	
Marketing Services	 	 	194,797	 	 	—	 	 	—	 	 	194,797	 	

	

	 	

	

	 	

	

	 	

	

	 	
Enterprise Business Solutions	 	 	1,709,393	 	 	—	 	 	17,503	 	 	1,726,896	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total	 	$	2,251,830	 	$	—	 	$	35,074	 	$	2,286,904	 	

	

	 	

	

	 	

	

	 	

	

	 	

(1)	Prior year amounts have been reclassified to conform to the current year presentation.	
 	 	
(2)	“Other” primarily includes foreign currency translation adjustments.	
51

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

7. Current Liabilities

Accounts payable, accrued liabilities, notes payable and current portion of long-term obligations are composed of the following:
 	 	 	 	 	 	 	 	
 	 	December 31,	 	

	 	
 	 	2010	 	2009	 	

	 	

	 	
Accounts payable - trade	 	$	333,220	 	$	308,505	 	
Reserve account deposits	 	 	567,620	 	 	557,221	 	
Accrued salaries, wages and commissions	 	 	246,237	 	 	244,170	 	
Accrued restructuring charges	 	 	113,200	 	 	88,626	 	
Miscellaneous accounts payable and accrued liabilities	 	 	564,984	 	 	549,732	 	

	

	 	

	

	 	
Accounts payable and accrued liabilities	 	$	1,825,261	 	$	1,748,254	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Notes payable	 	$	50,000	 	$	220,794	 	
Current portion of long-term obligations	 	 	3,494	 	 	5,228	 	

	

	 	

	

	 	
Notes payable & current portion of long-term obligations	 	$	53,494	 	$	226,022	 	

	

	 	

	

	 	
Reserve account deposits represent customers’ prepayment of postage held by our subsidiary, Pitney Bowes Bank. See Note 17 for further details.

Notes payable at December 31, 2010 and 2009 consists of commercial paper issuances. The weighted average interest rates for notes payable were 0.32% and 0.09% at December 31, 2010 and 2009, respectively.

We had unused credit facilities of $1.25 billion at December 31, 2010, primarily to support commercial paper issuances. Fees paid to maintain lines of credit were $1.6 million, $0.8 million and $0.8 million in 2010, 2009 and 2008, respectively.

52

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

8. Long-term Debt
 	 	 	 	 	 	 	 	
 	 	December 31,	 	

	 	
 	 	2010	 	2009	 	

	 	

	 	
 	 	 	 	 	 	 	 	
Term loan due 2012	 	$	150,000	 	$	150,000	 	
4.625% notes due 2012 (1)	 	 	400,000	 	 	400,000	 	
3.875% notes due 2013	 	 	375,000	 	 	375,000	 	
4.875% notes due 2014	 	 	450,000	 	 	450,000	 	
  5.00% notes due 2015	 	 	400,000	 	 	400,000	 	
  4.75% notes due 2016	 	 	500,000	 	 	500,000	 	
  5.75% notes due 2017	 	 	500,000	 	 	500,000	 	
  4.75% notes due 2018 (2)	 	 	350,000	 	 	350,000	 	
  5.60% notes due 2018 (3)	 	 	250,000	 	 	250,000	 	
  6.25% notes due 2019 (4)	 	 	300,000	 	 	300,000	 	
  5.25% notes due 2037	 	 	500,000	 	 	500,000	 	
 	 	 	 	 	 	 	 	
Basis adjustment - Fair value hedges	 	 	76,022	 	 	52,788	 	
Other	 	 	(11,774	)	 	(14,148	)	

	

	 	

	

	 	
Total long-term debt	 	$	4,239,248	 	$	4,213,640	 	

	

	 	

	

	 	
Interest under the Term Loan is based on three month LIBOR plus 42 basis points. Interest is payable and the interest rate resets every three months.
 	 	
(1)	We have entered into interest rate swap agreements with an aggregate notional value of $400 million that effectively convert fixed rate interest payments on the $400 million, 4.625% notes due in 2012, into variable interest rates. We pay a weighted-average variable rate based on one-month LIBOR plus 249 basis points and receive a fixed rate of 4.625%. The weighted average rate paid during 2010 and 2009 was 2.8% and 4.3%, respectively.	
 	 	
(2)	In 2008, we unwound an interest rate swap that effectively converted the fixed rate interest payments on the $350 million, 4.75% notes due in 2018, into variable interest rates and received $44 million, excluding accrued interest. This amount is being amortized as a reduction of interest expense over the remaining term of the notes, which reduces the effective interest rate on these notes to 3.2%.	
 	 	
(3)	In August 2010, we unwound two interest rate swaps with an aggregate notional amount of $250 million that were entered into in March 2008. These interest rate swaps effectively converted the fixed rate interest payments on the $250 million, 5.6% notes due in 2018, into variable interest rates. In connection with unwinding these interest rate swaps, we received $31.8 million, excluding accrued interest. The transaction was not undertaken for liquidity purposes, but rather to fix our effective interest rate at 3.7% for the remaining term of the notes as the amount received will be recognized as a reduction in interest expense over the remaining term of the notes.	
 	 	
(4)	In 2009, we issued $300 million, 6.25% 10-year fixed rate notes and simultaneously unwound four forward starting swap agreements (forward swaps) used to hedge the interest rate risk associated with the forecasted issuance of this fixed-rate debt. In connection with the unwind of these swaps, we paid $20.3 million, which was recorded to other comprehensive income. This amount is being amortized as additional interest expense over the term of the notes, which increases the effective interest rate on these notes to 6.9%.	
The basis adjustment of fair value hedges represents the unamortized net proceeds received from unwinding of interest rate swaps which is being amortized to interest expense over the remaining term of the respective notes and the mark to market adjustment of our interest rate swaps (fair value hedges – See Note 13). Other consists primarily of debt discounts and premiums.

We are a Well-Known Seasoned Issuer with the SEC which allows us to issue debt securities, preferred stock, preference stock, common stock, purchase contracts, depositary shares, warrants and units.

53

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Annual maturities of outstanding long-term debt at December 31, 2010 are as follows: 2011 – $0 million; 2012 – $550 million; 2013 – $375 million; 2014 – $450 million; 2015 – $400 million; and $2,400 million thereafter.

9. Income Taxes

The provision for income taxes from continuing operations consists of the following:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
U.S. Federal:	 	 	 	 	 	 	 	 	 	 	
Current	 	$	170,175	 	$	188,272	 	$	85,231	 	
Deferred	 	 	(24,632	)	 	18,979	 	 	81,936	 	

	

	 	

	

	 	

	

	 	
 	 	 	145,543	 	 	207,251	 	 	167,167	 	

	

	 	

	

	 	

	

	 	
U.S. State and Local:	 	 	 	 	 	 	 	 	 	 	
Current	 	 	26,523	 	 	30,981	 	 	17,058	 	
Deferred	 	 	(17,518	)	 	(13,067	)	 	13,434	 	

	

	 	

	

	 	

	

	 	
 	 	 	9,005	 	 	17,914	 	 	30,492	 	

	

	 	

	

	 	

	

	 	
International:	 	 	 	 	 	 	 	 	 	 	
Current	 	 	43,459	 	 	31,848	 	 	39,974	 	
Deferred	 	 	7,763	 	 	(16,859	)	 	7,296	 	

	

	 	

	

	 	

	

	 	
 	 	 	51,222	 	 	14,989	 	 	47,270	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Total Current	 	 	240,157	 	 	251,101	 	 	142,263	 	
Total Deferred	 	 	(34,387	)	 	(10,947	)	 	102,666	 	

	

	 	

	

	 	

	

	 	
Total provision for income taxes	 	$	205,770	 	$	240,154	 	$	244,929	 	

	

	 	

	

	 	

	

	 	
The components of income from continuing operations are as follows:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	
U.S.	 	$	390,911	 	$	552,636	 	$	573,066	 	
International	 	 	143,666	 	 	140,540	 	 	140,111	 	

	

	 	

	

	 	

	

	 	
Total	 	$	534,577	 	$	693,176	 	$	713,177	 	

	

	 	

	

	 	

	

	 	
The effective tax rate for continuing operations for 2010, 2009 and 2008 was 38.5%, 34.6% and 34.3%, respectively. The effective tax rate for 2010 includes $16 million of tax benefits associated with previously unrecognized deferred taxes on outside basis differences, a $15 million charge for the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock units previously granted to our employees and a $9 million charge for the write-off of deferred tax assets related to the U.S. health care reform legislation that eliminated the tax deduction for retiree health care costs to the extent of federal subsidies received by companies that provide retiree prescription drug benefits equivalent to Medicare Part D coverage.

The effective rate for 2009 included a charge of $13 million for the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock, offset by $13 million of tax benefits from retirement of inter-company obligations and the repricing of leveraged lease transactions. The effective tax rate for 2008 included $12 million of tax increases related to the low tax benefit associated with restructuring expenses recorded during 2008, offset by adjustments of $10 million related to deferred tax assets associated with certain U.S. leasing transactions.

54

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The items accounting for the difference between income taxes computed at the federal statutory rate and our provision for income taxes consist of the following:
 	 	 	 	 	 	 	 	 	 	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Federal statutory provision	 	$	187,103	 	$	242,612	 	$	249,612	 	
State and local income taxes	 	 	5,853	 	 	11,109	 	 	19,820	 	
Impact of foreign operations	 	 	13,938	 	 	(18,037	)	 	1,955	 	
Tax exempt income/reimbursement	 	 	(2,352	)	 	(2,748	)	 	(5,404	)	
Federal income tax credits/incentives	 	 	(7,580	)	 	(4,792	)	 	(15,118	)	
Unrealized stock compensation benefits	 	 	15,149	 	 	12,852	 	 	—	 	
Certain leasing transactions	 	 	—	 	 	—	 	 	(9,550	)	
U.S. health care reform tax change	 	 	9,070	 	 	—	 	 	—	 	
Outside basis differences	 	 	(15,798	)	 	—	 	 	—	 	
Other, net	 	 	387	 	 	(842	)	 	3,614	 	

	

	 	

	

	 	

	

	 	
Provision for income taxes	 	$	205,770	 	$	240,154	 	$	244,929	 	

	

	 	

	

	 	

	

	 	
The components of our deferred tax liabilities and assets are as follows:
 	 	 	 	 	 	 	 	
 	 	December 31,	 	

	 	
 	 	2010	 	2009	 	

	 	

	 	
Deferred tax liabilities:	 	 	 	 	 	 	 	
Depreciation	 	$	49,351	 	$	67,639	 	
Deferred profit (for tax purposes) on sales to finance subsidiaries	 	 	229,364	 	 	287,928	 	
Lease revenue and related depreciation	 	 	480,611	 	 	443,855	 	
Amortizable intangibles	 	 	117,207	 	 	115,793	 	
Other	 	 	43,813	 	 	46,144	 	

	

	 	

	

	 	
Deferred tax liabilities	 	 	920,346	 	 	961,359	 	

	

	 	

	

	 	
Deferred tax (assets):	 	 	 	 	 	 	 	
Nonpension postretirement benefits	 	 	(104,847	)	 	(119,420	)	
Pension	 	 	(127,042	)	 	(127,046	)	
Inventory and equipment capitalization	 	 	(28,546	)	 	(29,595	)	
Restructuring charges	 	 	(22,348	)	 	(9,619	)	
Long-term incentives	 	 	(39,781	)	 	(50,666	)	
Net operating loss and tax credit carry forwards	 	 	(153,754	)	 	(151,094	)	
Tax uncertainties gross-up	 	 	(144,672	)	 	(133,293	)	
Other	 	 	(116,834	)	 	(101,994	)	
Valuation allowance	 	 	104,441	 	 	95,990	 	

	

	 	

	

	 	
Deferred tax (assets)	 	 	(633,383	)	 	(626,737	)	

	

	 	

	

	 	
Net deferred taxes	 	 	286,963	 	 	334,622	 	
Amounts included in other balance sheet tax accounts	 	 	(25,846	)	 	12,780	 	

	

	 	

	

	 	
Deferred taxes on income	 	$	261,117	 	$	347,402	 	

	

	 	

	

	 	
As of December 31, 2010 and 2009, approximately $266 million and $285 million, respectively, of foreign net operating loss carry forwards were available to us. Most of these losses can be carried forward indefinitely.

It has not been necessary to provide for income taxes on $850 million of cumulative undistributed earnings of subsidiaries outside the U.S. These earnings will be either indefinitely reinvested or remitted substantially free of additional tax. Determination of the

55

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

liability that would result in the event all of these earnings were remitted to the U.S. is not practicable. It is estimated, however, that withholding taxes on such remittances would approximate $15 million.

Uncertain Tax Positions

A reconciliation of the amount of unrecognized tax benefits at December 31, 2010, 2009 and 2008 is as follows:
 	 	 	 	 	 	 	 	 	 	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Balance at beginning of year	 	$	515,565	 	$	434,164	 	$	398,878	 	
Increases from prior period positions	 	 	17,775	 	 	65,540	 	 	21,623	 	
Decreases from prior period positions	 	 	(27,669	)	 	(7,741	)	 	(8,899	)	
Increases from current period positions	 	 	43,804	 	 	42,696	 	 	33,028	 	
Decreases from current period positions	 	 	(8,689	)	 	—	 	 	—	 	
Decreases relating to settlements with tax authorities	 	 	(1,434	)	 	(3,173	)	 	(7,426	)	
Reductions as a result of a lapse of the applicable statute of limitations	 	 	(7,562	)	 	(15,921	)	 	(3,040	)	

	

	 	

	

	 	

	

	 	
Balance at end of year	 	$	531,790	 	$	515,565	 	$	434,164	 	

	

	 	

	

	 	

	

	 	
The amount of the unrecognized tax benefits at December 31, 2010, 2009 and 2008 that would affect the effective tax rate if recognized was $434 million, $411 million and $371 million, respectively.

Tax authorities continually examine our tax filings. On a regular basis, we conclude tax return examinations, statutes of limitations expire, and court decisions interpret tax law. We regularly assess tax uncertainties in light of these developments. As a result, it is reasonably possible that the amount of our unrecognized tax benefits will decrease in the next 12 months, and we expect this change could be up to one-third of our unrecognized tax benefits. Any such change will likely be arising from the completion of tax return examinations, including the resolution of certain issues related to our former Capital Services third party leasing business. We recognize interest and penalties related to uncertain tax positions in our provision for income taxes or discontinued operations as appropriate. During the years ended December 31, 2010, 2009 and 2008, we recorded $9 million, $23 million and $26 million, respectively, in interest and penalties primarily in discontinued operations. We had $202 million and $186 million accrued for the payment of interest and penalties at December 31, 2010 and 2009, respectively.

Other Tax Matters

We regularly assess the likelihood of tax adjustments in each of the tax jurisdictions in which we have operations and account for the related financial statement implications. Tax reserves have been established which we believe to be appropriate given the possibility of tax adjustments. Determining the appropriate level of tax reserves requires us to exercise judgment regarding the uncertain application of tax law. The amount of reserves is adjusted when information becomes available or when an event occurs indicating a change in the reserve is appropriate. Future changes in tax reserve requirements could have a material impact on our results of operations.

We are continually under examination by tax authorities in the United States, other countries and local jurisdictions in which we have operations. The years under examination vary by jurisdiction. The current IRS exam of tax years 2001-2004 is estimated to be completed within the next year and the examination of years 2005-2008 within the next two years. In connection with the 2001-2004 exam, we have received notices of proposed adjustments to our filed returns and the IRS has withdrawn a civil summons to provide certain Company workpapers. Tax reserves have been established which we believe to be appropriate given the possibility of tax adjustments. A variety of post-2000 tax years remain subject to examination by other tax authorities, including the U.K., Canada, France, Germany and various U.S. states. Tax reserves have been established which we believe to be appropriate given the possibility of tax adjustments. However, the resolution of such matters could have a material impact on our results of operations, financial position and cash flows.

During 2010, an analysis of prior year non-U.S. income tax returns indicated that lease rental income associated with certain leveraged lease transactions was not properly captured. As a result, the 2010 tax provision includes additional tax expense of $3.3 million for

56

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

the periods 2007 through 2009. A $14.4 million adjustment was also made to opening retained earnings to establish the related tax liabilities for earlier years. The impact of the adjustments was not material to any previously reported period.

At December 31, 2010, our current tax accounts included a $36 million tax receivable for uncertain tax positions, which was received in February 2011.

10. Noncontrolling Interests (Preferred Stockholders’ Equity in Subsidiaries)

Pitney Bowes International Holdings, Inc. (PBIH), a subsidiary, had 3,750,000 shares outstanding or $375 million of variable term voting preferred stock owned by certain outside institutional investors. These preferred shares were entitled as a group to 25% of the combined voting power of all classes of capital stock of PBIH. All outstanding common stock of PBIH, representing the remaining 75% of the combined voting power of all classes of capital stock, was owned directly or indirectly by the Company. The preferred stock was entitled to cumulative dividends at rates set at auction. The weighted average dividend rate was 4.8% during 2009 and 2008. During the fourth quarter, PBIH redeemed all of the outstanding variable term voting preferred stock, which was funded by the combined proceeds from the issuance of the Preferred Stock (see below), cash flows from operations and commercial paper.

In 2009, PBIH issued 300,000 shares, or $300 million, of perpetual voting preferred stock (the Preferred Stock) to certain outside institutional investors. The holders of the Preferred Stock are entitled as a group to 25% of the combined voting power of all classes of capital stock of PBIH. All outstanding common stock of PBIH, representing the remaining 75% of the combined voting power of all classes of capital stock, is owned directly or indirectly by the Company. The Preferred Stock is entitled to cumulative dividends at a rate of 6.125% for a period of seven years after which it becomes callable and, if it remains outstanding, will yield a dividend that increases by 150% every six months thereafter.

Preferred dividends are included in Preferred stock dividends of subsidiaries attributable to noncontrolling interests in the Consolidated Statements of Income. No dividends were in arrears at December 31, 2010 or December 31, 2009.

Activity in the noncontrolling interests account for the years ended December 31, 2009 and 2010 is below.
 	 	 	 	 	
Beginning balance January 1, 2009	 	$	374,165	 	
Share issuances, net of issuance costs of $3.6 million	 	 	296,370	 	
Share redemptions	 	 	(374,165	)	

	

	 	
Ending balance at December 31, 2009	 	 	296,370	 	
Share issuances	 	 	—	 	
Share redemptions	 	 	—	 	

	

	 	
Ending balance at December 31, 2010	 	$	296,370	 	

	

	 	
57

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

11. Stockholders’ Deficit

At December 31, 2010, 480,000,000 shares of common stock, 600,000 shares of cumulative preferred stock, and 5,000,000 shares of preference stock were authorized. The following table summarizes the preferred, preference and common stock, net of treasury shares, outstanding.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	Common Stock	 	

	 	
 	 	Preferred
Stock	 	Preference
Stock	 	Issued	 	Treasury	 	Outstanding	 	

	 	

	 	

	 	

	 	

	 	
Balance, December 31, 2007	 	 	135	 	 	37,069	 	 	323,337,912	 	 	(108,822,953	)	 	214,514,959	 	
Repurchase of common stock	 	 	—	 	 	—	 	 	—	 	 	(9,246,535	)	 	 	 	
Issuances of common stock	 	 	—	 	 	—	 	 	—	 	 	896,030	 	 	 	 	
Conversions to common stock	 	 	—	 	 	(1,013	)	 	—	 	 	16,739	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	
Balance, December 31, 2008	 	 	135	 	 	36,056	 	 	323,337,912	 	 	(117,156,719	)	 	206,181,193	 	

	

	 	
Repurchase of common stock	 	 	—	 	 	—	 	 	—	 	 	—	 	 	 	 	
Issuances of common stock	 	 	—	 	 	—	 	 	—	 	 	949,689	 	 	 	 	
Conversions to common stock	 	 	(50	)	 	(3,977	)	 	—	 	 	66,946	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	
Balance, December 31, 2009	 	 	85	 	 	32,079	 	 	323,337,912	 	 	(116,140,084	)	 	207,197,828	 	

	

	 	
Repurchase of common stock	 	 	—	 	 	—	 	 	—	 	 	(4,687,304	)	 	 	 	
Issuances of common stock	 	 	—	 	 	—	 	 	—	 	 	876,794	 	 	 	 	
Conversions to common stock	 	 	—	 	 	(4,296	)	 	—	 	 	43,684	 	 	 	 	

	

	 	

	

	 	

	

	 	

	

	 	 	 	 	
Balance, December 31, 2010	 	 	85	 	 	27,783	 	 	323,337,912	 	 	(119,906,910	)	 	203,431,002	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Unissued and unreserved shares at December 31, 2010	 	 	599,915	 	 	4,972,217	 	 	116,473,634	 	 	 	 	 	 	 	

	

	 	

	

	 	

	

	 	 	 	 	 	 	 	
At December 31, 2010, preferred stock (4% preferred stock) outstanding was entitled to cumulative dividends at a rate of $2 per year. The preferred stock is redeemable at our option, in whole or in part at any time, at a price of $50 per share, plus dividends accrued to the redemption date. Each share of the 4% preferred stock can be converted into 24.24 shares of common stock, subject to adjustment in certain events.

At December 31, 2010, preference stock ($2.12 preference stock) was entitled to cumulative dividends at a rate of $2.12 per year. The preference stock is redeemable at our option at the rate of $28 per share. Each share of the $2.12 preference stock can be converted into 16.53 shares of common stock, subject to adjustment in certain events.

The Board of Directors will determine the dividend rate, terms of redemption, terms of conversion (if any) and other pertinent features of future issuances of preferred stock or preference stock.

Cash dividends paid on common stock were $1.46 per share, $1.44 per share and $1.40 per share for 2010, 2009, and 2008, respectively.

At December 31, 2010, 2,060 shares of common stock were reserved for issuance upon conversion of the 4% preferred stock and 459,253 shares of common stock were reserved for issuance upon conversion of the $2.12 preference stock. In addition, 39,727,141 shares of common stock were reserved for issuance under our dividend reinvestment and other corporate plans.

58

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follow:
 	 	 	 	 	 	 	 	 	 	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Foreign currency translation adjustments	 	$	137,521	 	$	153,206	 	$	33,386	 	
Net unrealized loss on derivatives	 	 	(10,445	)	 	(11,738	)	 	(18,952	)	
Net unrealized gain on investment securities	 	 	1,439	 	 	649	 	 	932	 	
Amortization of pension and postretirement costs	 	 	81,887	 	 	53,589	 	 	36,261	 	
Net unamortized loss on pension and postretirement plans	 	 	(684,208	)	 	(655,498	)	 	(650,382	)	

	

	 	

	

	 	

	

	 	
Accumulated other comprehensive loss	 	$	(473,806	)	$	(459,792	)	$	(598,755	)	

	

	 	

	

	 	

	

	 	
12. Stock Plans

Stock-based compensation expense was as follows:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Stock options	 	$	5,371	 	$	6,649	 	$	11,851	 	
Restricted stock units	 	 	15,081	 	 	14,888	 	 	11,168	 	
Employee stock purchase plans	 	 	—	 	 	224	 	 	3,383	 	

	

	 	

	

	 	

	

	 	
Pre-tax stock-based compensation	 	$	20,452	 	$	21,761	 	$	26,402	 	

	

	 	

	

	 	

	

	 	
The following table shows stock-based compensation expense as included in the Consolidated Statements of Income:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Cost of equipment sales	 	$	1,397	 	$	1,486	 	$	1,802	 	
Cost of support services	 	 	602	 	 	640	 	 	777	 	
Cost of business services	 	 	831	 	 	884	 	 	1,073	 	
Selling, general and administrative	 	 	16,936	 	 	18,020	 	 	21,862	 	
Research and development	 	 	686	 	 	731	 	 	888	 	

	

	 	

	

	 	

	

	 	
Pre-tax stock-based compensation	 	 	20,452	 	 	21,761	 	 	26,402	 	
Income tax	 	 	(7,265	)	 	(7,458	)	 	(9,109	)	

	

	 	

	

	 	

	

	 	
Stock-based compensation expense, net	 	$	13,187	 	$	14,303	 	$	17,293	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share impact	 	$	0.06	 	$	0.07	 	$	0.08	 	

	

	 	

	

	 	

	

	 	
Diluted earnings per share impact	 	$	0.06	 	$	0.07	 	$	0.08	 	

	

	 	

	

	 	

	

	 	
At December 31, 2010, $3.3 million of unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted average period of 0.4 years and $19.6 million of unrecognized compensation cost related to non-vested restricted stock units is expected to be recognized over a weighted average period of 0.7 years.

59

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Stock Plans

Long-term incentive awards are provided to employees under the terms of our plans. The Executive Compensation Committee of the Board of Directors administers these plans. Awards granted under these plans may include stock options, restricted stock units, other stock-based awards, cash or any combination thereof. We settle employee stock compensation awards with treasury shares. Our stock-based compensation awards require a minimum requisite service period of one year for retirement eligible employees to vest. At December 31, 2010, there were 17,458,044 shares available for future grants of stock options and restricted stock units under our stock plans.

Stock Options

Under our stock option plan, certain officers and employees are granted options at prices equal to the market value of our common shares at the date of grant. Options granted from 2005 through 2008 generally become exercisable in four equal installments during the first four years following their grant and expire ten years from the date of grant. Options granted on or after 2009 generally become exercisable in three equal installments during the first three years following their grant and expire ten years from the date of grant.

The following tables summarize information about stock option activity during 2010:
 	 	 	 	 	 	 	 	
 	 	Shares	 	 	Per share weighted
average exercise price	 	

	 	

	 	
Options outstanding at December 31, 2009	 	 	17,580,079	 	 	$38.59	 	
Granted	 	 	1,714,731	 	 	$22.09	 	
Exercised	 	 	—	 	 	—	 	
Cancelled	 	 	(4,350,018	)	 	$37.34	 	
Forfeited	 	 	(438,270	)	 	$26.58	 	

	

	 	 	 	 	
Options outstanding at December 31, 2010	 	 	14,506,522	 	 	$37.38	 	

	

	 	 	 	 	
 	 	 	 	 	 	 	 	
Options exercisable at December 31, 2010	 	 	10,986,577	 	 	$40.35	 	

	

	 	 	 	 	
The weighted-average remaining contractual life of options outstanding and options exercisable at December 31, 2010 was 4.9 years and 3.8 years, respectively. The options exercisable at December 31, 2010 had no intrinsic value. No options were exercised during 2010 and 2009. The total intrinsic value of options exercised during 2008 was $1.1 million.

We granted 1,638,709 and 2,126,310 options in 2009 and 2008, respectively. The weighted average exercise price of the options granted was $24.75 and $36.74 in 2009 and 2008, respectively. The weighted average remaining contractual life of the options outstanding and options exercisable at December 31, 2009 was 4.3 years and 3.2 years, respectively. The total options outstanding and exercisable at December 31, 2009 had no intrinsic value.

60

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The following table summarizes information about stock options outstanding and exercisable at December 31, 2010:
 	 	 	 	 	 	 	 	 	 	 	
Options Outstanding	

	 	
Range of per share
exercise prices	 	Number	 	Per share weighted
average exercise
price	 	Weighted
average
remaining
contractual
life	 	

	 	

	 	

	 	

	 	
$22.09 - $30.99	 	 	  2,872,713	 	$	23.33	 	 	8.5 years	 	
$31.00 - $36.99	 	 	  3,743,413	 	$	34.64	 	 	4.1 years	 	
$37.00 - $42.99	 	 	  4,265,081	 	$	41.13	 	 	3.2 years	 	
$43.00 - $48.03	 	 	  3,625,315	 	$	46.92	 	 	4.7 years	 	

	

	 	 	 	 	 	 	 	
 	 	 	14,506,522	 	$	37.38	 	 	4.9 years	 	

	

	 	 	 	 	 	 	 	

Options Outstanding	 	 	 	

	

	

	

	

	 	 	 	
Range of per share
exercise prices	 	Number	 	Per share weighted
average exercise
price	 	 	 	

	 	

	 	

	 	 	 	
$22.09 - $30.99	 	 	     453,899	 	$	24.76	 	 	  	 	
$31.00 - $36.99	 	 	  2,892,499	 	$	33.99	 	 	 	 	
$37.00 - $42.99	 	 	  4,265,081	 	$	41.13	 	 	 	 	
$43.00 - $48.03	 	 	  3,375,098	 	$	46.90	 	 	 	 	

	

	 	 	 	 	 	 	 	
 	 	 	10,986,577	 	$	40.35	 	 	 	 	

	

	 	 	 	 	 	 	 	
We estimate the fair value of stock options using a Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the volatility of our stock, the risk-free interest rate and our dividend yield. Our estimates of stock volatility are based on historical price changes of our stock. The risk-free interest rate is based on U.S. treasuries with a term equal to the expected option term. The expected life, or holding period, of the award is based on historical experience.

We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in estimating the fair value of our stock option grants. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value.

The fair value of stock options granted and related assumptions are as follows:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Expected dividend yield	 	 	6.1%	 	 	4.5%	 	 	3.0%	 	
Expected stock price volatility	 	 	25.6%	 	 	21.4%	 	 	12.3%	 	
Risk-free interest rate	 	 	3.2%	 	 	2.4%	 	 	2.7%	 	
Expected life – years	 	 	7.3	 	 	7.5	 	 	5.0	 	
Weighted-average fair value per option granted	 	$	2.82	 	$	3.04	 	$	3.22	 	
Restricted Stock Awards and Restricted Stock Units

Our stock plan permits the issuance of restricted stock awards and restricted stock units. Restricted stock awards are subject to one or more restrictions, which may include continued employment over a specified period or the attainment of specified financial performance goals. Where a restricted stock award is subject to attainment of financial performance goals and subsequent tenure, if the performance objectives are achieved, the restrictions would be released, in total or in part, only if the executive is still employed by us at the end of the service period. Where the sole restriction of a restricted stock award is continued employment over a specified

61

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

period, such period may not be less than three years. The compensation expense for each award is recognized over the service period. We did not issue any shares for restricted stock awards during 2010 and 2009 and issued 10,000 restricted stock awards in 2008.

Restricted stock units are granted to employees and entitle the holder to shares of common stock as the units vest, typically over a four year service period. The fair value of the units is determined on the grant date based on our stock price at that date. The following table summarizes information about restricted stock units during 2010:
 	 	 	 	 	 	 	 	
 	 	Units / Shares	 	Weighted average
grant date fair value	

	 	

	

	
Restricted stock units outstanding at December 31, 2009	 	 	1,341,729	 	$	30.55	 	
Granted	 	 	923,676	 	$	22.09	 	
Vested	 	 	(430,340	)	$	33.17	 	
Forfeited	 	 	(197,823	)	$	26.77	 	

	

	 	 	 	 	
Restricted stock units outstanding at December 31, 2010	 	 	1,637,242	 	$	25.55	 	

	

	 	 	 	 	
We granted 867,129 shares and 512,415 shares of restricted stock units in 2009 and 2008, respectively. The weighted average grant price was $24.39 and $36.91 for 2009 and 2008, respectively. The intrinsic value of the outstanding restricted stock units at December 31, 2010 was $39.6 million, with a weighted average remaining term of 2.5 years. The total intrinsic value of restricted stock units converted during 2010, 2009 and 2008 was $8.8 million, $5.2 million and $4.2 million, respectively.

Employee Stock Purchase Plans (ESPP)

Substantially all U.S. and Canadian employees can purchase shares of our common stock at an offering price of 95% of the average price of our common stock on the New York Stock Exchange on the offering date. At no time will the exercise price be less than the lowest price permitted under Section 423 of the Internal Revenue Code. We may grant rights to purchase up to 5,367,461 common shares under the ESPP. We granted rights to purchase 318,556 shares, 540,660 shares and 437,350 shares in 2010, 2009 and 2008, respectively.

Directors’ Stock Plan

Under this plan, each non-employee director is granted 2,200 shares of restricted common stock annually. We granted 26,400 shares to non-employee directors in 2010, 2009 and 2008. Compensation expense, net of taxes, was $0.4 million, $0.4 million and $0.6 million for 2010, 2009 and 2008, respectively. The shares carry full voting and dividend rights but, except as provided herein, may not be transferred or alienated until the later of (1) termination of service as a director, or, if earlier, the date of a change of control, or (2) the expiration of the six-month period following the grant of such shares. If a director terminates service as a director prior to the expiration of the six-month period following a grant of restricted stock, that award will be forfeited. The Directors’ Stock Plan permits certain limited dispositions of restricted common stock to family members, family trusts or partnerships, as well as donations to charity after the expiration of the six-month holding period, provided the director retains a minimum of 7,500 shares of restricted common stock.

62

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

13. Fair Value Measurements and Derivative Instruments

We measure certain financial assets and liabilities at fair value on a recurring basis. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. An entity is required to classify certain assets and liabilities measured at fair value based on the following fair value hierarchy that prioritizes the inputs used to measure fair value:

Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity, may be derived from internally developed methodologies based on management’s best estimate of fair value and that are significant to the fair value of the asset or liability.

The following tables show, by level within the fair value hierarchy, our financial assets and liabilities that are accounted for at fair value on a recurring basis at December 31, 2010 and December 31, 2009, respectively. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy.

63

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Recurring Fair Value Measurements at December 31, 2010	 	

	 	
 	 	Level 1	 	Level 2	 	Level 3	 	Total	 	

	 	

	 	

	 	

	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment securities	 	 	 	 	 	 	 	 	 	 	 	 	 	
Money market funds / commercial paper	 	$	281,865	 	$	1,531	 	$	—	 	$	283,396	 	
Equity securities	 	 	—	 	 	23,410	 	 	—	 	 	23,410	 	
Debt securities - U.S. and foreign governments, agencies, and municipalities	 	 	74,425	 	 	30,725	 	 	—	 	 	105,150	 	
Corporate notes and bonds	 	 	—	 	 	22,262	 	 	—	 	 	22,262	 	
Asset-backed securities	 	 	—	 	 	1,490	 	 	—	 	 	1,490	 	
Mortgage-backed securities	 	 	—	 	 	104,989	 	 	—	 	 	104,989	 	
Derivatives	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps	 	 	—	 	 	10,280	 	 	—	 	 	10,280	 	
Foreign exchange contracts	 	 	—	 	 	2,887	 	 	—	 	 	2,887	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total assets	 	$	356,290	 	$	197,574	 	$	—	 	$	553,864	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivatives	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange contracts	 	$	—	 	$	6,907	 	$	—	 	$	6,907	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total liabilities	 	$	—	 	$	6,907	 	$	—	 	$	6,907	 	

	

	 	

	

	 	

	

	 	

	

	 	

 	 	Recurring Fair Value Measurements at December 31, 2009	 	

	 	
 	 	Level 1	 	Level 2	 	Level 3	 	Total	 	

	 	

	 	

	 	

	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment securities	 	 	 	 	 	 	 	 	 	 	 	 	 	
Money market funds / commercial paper	 	$	225,581	 	$	—	 	$	—	 	$	225,581	 	
Equity securities	 	 	—	 	 	21,027	 	 	—	 	 	21,027	 	
Debt securities - U.S. and foreign governments, agencies, and municipalities	 	 	53,173	 	 	28,754	 	 	—	 	 	81,927	 	
Corporate notes and bonds	 	 	—	 	 	13,305	 	 	—	 	 	13,305	 	
Asset-backed securities	 	 	—	 	 	296	 	 	—	 	 	296	 	
Mortgage-backed securities	 	 	—	 	 	19,708	 	 	—	 	 	19,708	 	
Derivatives	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest rate swaps	 	 	 	 	 	13,284	 	 	 	 	 	13,284	 	
Foreign exchange contracts	 	 	—	 	 	2,390	 	 	—	 	 	2,390	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total assets	 	$	278,754	 	$	98,764	 	$	—	 	$	377,518	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivatives	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange contracts	 	$	—	 	$	3,050	 	$	—	 	$	3,050	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total liabilities	 	$	—	 	$	3,050	 	$	—	 	$	3,050	 	

	

	 	

	

	 	

	

	 	

	

	 	
64

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Investment Securities

For our investments, we use the market approach for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace. The following information relates to our classification into the fair value hierarchy:

     •     Money Market Funds / Commercial Paper: Money market funds typically invest in government securities, certificates of deposit, commercial paper of companies and other highly liquid and low-risk securities. Money market funds are principally used for overnight deposits and are classified as Level 1 when unadjusted quoted prices in active markets are available and as Level 2 when they are not actively traded on an exchange. Direct investments in commercial paper are not listed on an exchange in an active market and are classified as Level 2.

     •     Equity Securities: Equity securities are comprised of mutual funds investing in U.S. and foreign common stock. These mutual funds are not separately listed on an exchange and are valued based on quoted market prices of similar securities. Accordingly, these securities are classified as Level 2.

     •     Debt Securities – U.S. and Foreign Governments, Agencies and Municipalities: Debt securities are classified as Level 1 where active, high volume trades for identical securities exist. Valuation adjustments are not applied to these securities. Debt securities valued using quoted market prices for similar securities or benchmarking model derived prices to quoted market prices and trade data for identical or comparable securities are classified as Level 2.

     •     Debt Securities – Corporate: Corporate debt securities are valued using recently executed transactions, market price quotations where observable, or bond spreads. The spread data used are for the same maturity as the security. These securities are classified as Level 2.

     •     Asset-Backed Securities (ABS) and Mortgage-Backed Securities (MBS): These securities are valued based on external pricing indices. When external index pricing is not observable, ABS and MBS are valued based on external price/spread data. These securities are classified as Level 2.

Investment securities include investments by The Pitney Bowes Bank (PBB). PBB is a wholly-owned subsidiary and a Utah-chartered Industrial Loan Company (ILC). The bank’s investments at December 31, 2010 were $246.4 million and were reported in the Consolidated Balance Sheets as cash and cash equivalents of $60.5 million, short-term investments of $27.2 million and long-term investments, which are presented within other assets, of $158.7 million. The bank’s investments at December 31, 2009 were $222.4 million and were reported in the Consolidated Balance Sheets as cash and cash equivalents of $151.3 million, short-term investments of $14.2 million and long-term investments, which are presented within other assets, of $56.9 million.

We have not experienced any other than temporary impairments in our investment portfolio. The majority of our MBS are guaranteed by the U.S. government. Market events have not caused our money market funds to experience declines in their net asset value below $1.00 per share or to impose limits on redemptions. We have no investments in inactive markets which would warrant a possible change in our pricing methods or classification within the fair value hierarchy. Further, we have no investments in auction rate securities.

Derivative Instruments

As required by the fair value measurements guidance, we have incorporated counterparty credit risk and our credit risk into the fair value measurement of our derivative assets and liabilities, respectively. We derive credit risk from observable data related to credit default swaps. We have not seen a material change in the creditworthiness of those banks acting as derivative counterparties.

The valuation of our interest rate swaps is based on the income approach using a model with inputs that are observable or that can be derived from or corroborated by observable market data. The valuation of our foreign exchange derivatives are based on the market approach using observable market inputs, such as forward rates.

65

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The following is a summary of our derivative fair values at December 31, 2010 and 2009:
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Fair Value at December 31,	 	

	 	
Designation of Derivatives	 	Balance Sheet Location	 	2010	 	2009	 	

	 	

	 	

	 	

	 	
Derivatives designated as hedging instruments	 	Other current assets and prepayments:	 	 	 	 	 	 	 	
 	 	Foreign exchange contracts	 	$	160	 	$	456	 	
 	 	Other assets:	 	 	 	 	 	 	 	
 	 	Interest rate swaps	 	 	10,280	 	 	13,284	 	
 	 	Accounts payable and accrued liabilities:	 	 	 	 	 	 	 	
 	 	Foreign exchange contracts	 	 	716	 	 	1,114	 	
Derivatives not designated as hedging instruments	 	Other current assets and prepayments:	 	 	 	 	 	 	 	
 	 	Foreign exchange contracts	 	 	2,727	 	 	1,934	 	
 	 	Accounts payable and accrued liabilities:	 	 	 	 	 	 	 	
 	 	Foreign exchange contracts	 	 	6,191	 	 	1,936	 	
 	 	Total Derivative Assets	 	$	13,167	 	$	15,674	 	
 	 	Total Derivative Liabilities	 	 	6,907	 	 	3,050	 	

	

	 	

	

	 	
 	 	Total Net Derivative Assets	 	$	6,260	 	$	12,624	 	

	

	 	

	

	 	
Interest Rate Swaps

Derivatives designated as fair value hedges include interest rate swaps related to fixed rate debt. Changes in the fair value of both the derivative and item being hedged are recognized in earnings.

We have outstanding interest rate swaps with an aggregate notional value of $400 million that effectively convert fixed rate interest payments on $400 million, 4.625% notes due in 2012, into variable interest rates. We pay a weighted-average variable rate based on one month LIBOR plus 249 basis points and receive a fixed rate of 4.625%. At December 31, 2010 and 2009, the fair value of the interest rate swaps was an asset of $10.3 million and $4.7 million, respectively.

At December 31, 2009, we had outstanding interest rate swaps with an aggregate notional value of $250 million that effectively converted fixed rate interest payments on $250 million, 5.6% notes due in 2018, into variable interest rates. The fair value of these interest rate swaps at December 31, 2009 was an asset of $8.6 million. In August 2010, we unwound these interest rate swaps. See Note 8 for further details.

The following represents the results of fair value hedging relationships for the years ended December 31, 2010 and 2009:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Derivative Gain Recognized
in Earnings	 	Hedged Item Expense
Recognized in Earnings	 	

	 	

	 	
Derivative Instrument	 	Location of Gain (Loss)	 	2010	 	2009	 	2010	 	2009	 	

	 	

	 	

	 	

	 	

	 	

	 	
Interest rate swaps	 	Interest expense	 	$	13,261	 	$	12,180	 	$	(26,667	)	$	(23,250	)	
Foreign Exchange Contracts

We enter into foreign currency exchange contracts arising from the anticipated purchase of inventory between affiliates and from third parties. These contracts are designated as cash flow hedges. The effective portion of the gain or loss on the cash flow hedges is included in other comprehensive income in the period that the change in fair value occurs and is reclassified to earnings in the period that the hedged item is recorded in earnings. At December 31, 2010 and 2009, we had outstanding contracts with a notional amount of $24.5 million and $27.8 million, respectively. The fair value of these contracts at December 31, 2010 and 2009 was a liability of $0.6 million and $0.7 million, respectively.

66

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

As of December 31, 2010, substantially all of the derivative loss recognized in accumulated other comprehensive income (AOCI) will be recognized in earnings within the next 12 months. No amount of ineffectiveness was recorded in earnings for these designated cash flow hedges for the years ended December 31, 2010 and 2009.

The following represents the results of cash flow hedging relationships for the years ended December 31, 2010 and 2009:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Derivative Gain (Loss)
Recognized in OCI
(Effective Portion)	 	Location of Gain (Loss)
(Effective Portion)	 	Gain (Loss) Reclassified
from AOCI to Earnings
(Effective Portion)	 	 	

	 	 	 	

	 	 	 	
Derivative Instrument	 	2010	 	2009	 	 	 	2010	 	2009	 	 	 	

	 	

	 	

	 	

	 	

	 	

	 	 	 	
Foreign exchange contracts	 	$	(470	)	$	(658	)	Revenue	 	$	1,024	 	$	—	 	 	 	
 	 	 	 	 	 	 	 	Cost of sales	 	 	(452	)	 	—	 	 	 	

	

	 	

	

	 	 	 	
 	 	 	 	 	 	 	 	 	 	$	572	 	$	—	 	 	 	

	

	 	

	

	 	 	 	
We also enter into foreign exchange contracts to minimize the impact of exchange rate fluctuations on short-term intercompany loans and related interest that are denominated in a foreign currency. The revaluation of the intercompany loans and interest and the mark-to-market on the derivatives are both recorded to earnings. At December 31, 2010, outstanding foreign exchange contracts to buy or sell various currencies had a net liability value of $3.5 million. The contracts mature by March 31, 2011. At December 31, 2009, the net liability value of these derivatives was less than $0.1 million.

The following represents the results of our non-designated derivative instruments for the years ended December 31, 2010 and 2009:
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Derivative Gain (Loss)
Recognized in Earnings	 	

	 	
Derivative Instrument	 	Location of Derivative Gain (Loss)	 	2010	 	2009	 	

	 	

	 	

	 	

	 	
Foreign exchange contracts	 	Selling, general and administrative expense	 	$	(22,158	)	$	(59,244	)	
Credit-Risk-Related Contingent Features

Certain of our derivative instruments contain provisions that would require us to post collateral upon a significant downgrade in our long-term senior unsecured debt ratings. At December 31, 2010, our long-term senior unsecured debt ratings were BBB+ / A2. Based on derivative values at December 31, 2010, we would have been required to post $3.0 million in collateral if our long-term senior unsecured debt ratings had fallen below BB- / Ba3.

Fair Value of Financial Instruments

Our financial instruments include cash and cash equivalents, investment securities, accounts receivable, loans receivable, accounts payable, notes payable, long-term debt and derivative instruments. The carrying value for cash, cash equivalents, accounts receivable, accounts payable and notes payable approximate fair value because of the short maturity of these instruments.

The carrying values and estimated fair value of our remaining financial instruments at December 31, 2010 and 2009 was as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2010	 	December 31, 2009	 	

	 	

	 	
 	 	Carrying
value (1)	 	Fair value	 	Carrying
value (1)	 	Fair value	 	

	 	

	 	

	 	

	 	
Investment securities	 	$	538,562	 	$	540,697	 	$	360,800	 	$	361,845	 	
Loans receivable	 	$	459,499	 	$	459,499	 	$	478,191	 	$	478,191	 	
Derivatives, net	 	$	6,260	 	$	6,260	 	$	12,624	 	$	12,624	 	
Long-term debt	 	$	(4,301,337	)	$	(4,388,923	)	$	(4,271,555	)	$	(4,409,961	)	
(1) Carrying value includes accrued interest and deferred fee income, where applicable.

67

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The fair value of long-term debt is estimated based on quoted market prices for the identical issue when traded in an active market. When a quoted market price is not available, the fair value is determined using rates currently available to the company for debt with similar terms and remaining maturities.

14. Restructuring Charges and Asset Impairments

2009 Program

In 2009, we announced that we were undertaking a series of initiatives designed to transform and enhance the way we operate as a global company. In order to enhance our responsiveness to changing market conditions, we are executing a strategic transformation program designed to create improved processes and systems to further enable us to invest in future growth in areas such as our global customer interactions and product development processes. This program is expected to continue into 2012 and will result in the reduction of 10 percent of the positions in the company. Total pre-tax costs of this program are expected to be between $300 million to $350 million primarily related to severance and benefit costs, including pension and retiree medical charges, incurred in connection with such workforce reductions. Most of the total pre-tax costs will be cash-related charges. Currently, we are targeting annualized pre-tax benefits, net of system and related investments, in the range of $250 million to $300 million by 2012. These costs and the related benefits will be recognized as different actions are approved and implemented.

During 2010, we recorded pre-tax restructuring and asset impairment charges of 183.0 million, which included $115.6 million for employee severance and benefits costs, a $23.6 million pension and retiree medical charge as workforce reductions caused the elimination of a significant amount of future service requiring us to recognize a portion of the prior service costs and actuarial losses and other exit costs of $38.2 million. Asset impairment charges of $14.5 million include $9.8 million fixed asset write-offs associated with the restructuring program and $4.7 million impairment of certain intangible assets unrelated to the restructuring program. The cumulative charges for this program since inception through December 31, 2010 were $250 million. As of December 31, 2010, approximately 2,000 employee terminations have occurred under this program. The majority of the liability at December 31, 2010 is expected to be paid from cash generated from operations.

Activity in the reserves for the restructuring actions taken in connection with the 2009 Program and asset impairments for the years ended December 31, 2010 and 2009 is as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Severance
and benefits
costs	 	Pension
and Retiree
Medical	 	Asset
impairments,
net	 	Other exit
costs	 	Total	 	

	 	

	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at January 1, 2009	 	$	—	 	$	—	 	$	—	 	$	—	 	$	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses	 	 	55,836	 	 	—	 	 	18	 	 	11,492	 	 	67,346	 	
Cash payments	 	 	(9,941	)	 	—	 	 	—	 	 	(4,685	)	 	(14,626	)	
Non-cash charges	 	 	—	 	 	—	 	 	(18	)	 	—	 	 	(18	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Balance at December 31, 2009	 	 	45,895	 	 	—	 	 	—	 	 	6,807	 	 	52,702	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses	 	 	115,557	 	 	23,620	 	 	14,515	 	 	38,233	 	 	191,925	 	
Gain on sale of facility	 	 	 	 	 	 	 	 	(8,897	)	 	 	 	 	(8,897	)	
Cash (payments) receipts	 	 	(73,283	)	 	—	 	 	8,897	 	 	(38,253	)	 	(102,639	)	
Non-cash charges	 	 	—	 	 	(23,620	)	 	(14,515	)	 	—	 	 	(38,135	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Balance at December 31, 2010	 	$	88,169	 	$	—	 	$	—	 	$	6,787	 	$	94,956	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
2007 Program

In 2007, we announced a program to lower our cost structure, accelerate efforts to improve operational efficiencies, and transition our product line. The program included charges primarily associated with older equipment that we had stopped selling upon transition to the new generation of fully digital, networked, and remotely-downloadable equipment.

68

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

In 2010, we recorded pre-tax adjustments of $0.8 million due to lower than anticipated charges associated with this program. Cumulative charges for this program since inception through December 31, 2010 were $445 million. As of December 31, 2010, approximately 3,000 terminations have occurred under this program. The majority of the liability at December 31, 2010 is expected to be paid from cash generated from operations.

Activity in the reserves for restructuring actions taken in connection with the 2007 Program for years ended December 31, 2010 and 2009 is as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Severance
and benefits
costs	 	Asset
impairments	 	Other exit
costs	 	Total	 	

	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	
Balance at January 1, 2009	 	 	119,063	 	 	—	 	 	22,046	 	 	141,109	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses	 	 	(14,721	)	 	(3,879	)	 	—	 	 	(18,600	)	
Cash payments	 	 	(76,445	)	 	—	 	 	(14,019	)	 	(90,464	)	
Non-cash charges	 	 	—	 	 	3,879	 	 	—	 	 	3,879	 	

	

	 	

	

	 	

	

	 	

	

	 	
Balance at December 31, 2009	 	 	27,897	 	 	—	 	 	8,027	 	 	35,924	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses	 	 	(684	)	 	—	 	 	(70	)	 	(754	)	
Cash payments	 	 	(13,743	)	 	—	 	 	(3,183	)	 	(16,926	)	
Non-cash charges	 	 	—	 	 	—	 	 	—	 	 	—	 	

	

	 	

	

	 	

	

	 	

	

	 	
Balance at December 31, 2010	 	$	13,470	 	$	—	 	$	4,774	 	$	18,244	 	

	

	 	

	

	 	

	

	 	

	

	 	
15. Commitments and Contingencies

Legal Proceedings

In the ordinary course of business, we are routinely defendants in or party to a number of pending and threatened legal actions. These may involve litigation by or against us relating to, among other things, contractual rights under vendor, insurance or other contracts; intellectual property or patent rights; equipment, service, payment or other disputes with customers; or disputes with employees. Some of these actions may be brought as a purported class action on behalf of a purported class of employees, customers or others.

Our wholly-owned subsidiary, Imagitas, Inc., is a defendant in several purported class actions initially filed in five different states. These lawsuits have been coordinated in the United States District Court for the Middle District of Florida,  In re: Imagitas, Driver’s Privacy Protection Act Litigation (Coordinated, May 28, 2007). Each of these lawsuits alleges that the Imagitas DriverSource program violates the federal Drivers Privacy Protection Act (DPPA). Under the DriverSource program, Imagitas entered into contracts with state governments to mail out automobile registration renewal materials along with third party advertisements, without revealing the personal information of any state resident to any advertiser. The DriverSource program assisted the state in performing its governmental function of delivering these mailings and funding the costs of them. The plaintiffs in these actions were seeking statutory damages under the DPPA. On December 21, 2009, the Eleventh Circuit Court affirmed the District Court’s summary judgment decision in  Rine, et al. v. Imagitas, Inc . (United States District Court, Middle District of Florida, filed August 1, 2006), which ruled in Imagitas’ favor and dismissed that litigation. That decision is now final, with no further appeals available. With respect to the remaining state cases, Imagitas filed its motion to dismiss these cases on October 8, 2010. Plaintiff’s opposition brief was filed on December 6, 2010, and Imagitas filed its reply brief on December 22, 2010. Although the plaintiffs are still contending that the cases filed in Ohio and Missouri can proceed, they have admitted in their response that the reasoning in the Rine decision does require that actions based on Minnesota and New York laws be dismissed. We are awaiting a decision by the District Court on the motion to dismiss.

On October 28, 2009, the Company and certain of its current and former officers were named as defendants in NECA-IBEW Health & Welfare Fund v. Pitney Bowes Inc. et al. ,  a class action lawsuit filed in the U.S. District Court for the District of Connecticut. The complaint asserts claims under the Securities Exchange Act of 1934 on behalf of those who purchased the common stock of the Company during the period between July 30, 2007 and October 29, 2007 alleging that the Company, in essence, missed two financial

69

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

projections. Plaintiffs filed an amended complaint on September 20, 2010. On December 3, 2010, defendants moved to dismiss the complaint. Oral argument on that motion is scheduled for April 15, 2011.

We expect to prevail in the legal actions above; however, as litigation is inherently unpredictable, there can be no assurance in this regard. If the plaintiffs do prevail, the results may have a material effect on our financial position, future results of operations or cash flows, including, for example, our ability to offer certain types of goods or services in the future.

16. Leases

We lease office facilities, sales and service offices, equipment and other properties, generally under operating lease agreements extending from three to 25 years. Rental expense was $118 million, $125 million and $129 million in 2010, 2009 and 2008, respectively. Future minimum lease payments under non-cancelable operating leases at December 31, 2010 are as follows:
 	 	 	 	 	
Years ending December 31,	 	 	 	 	
2011	 	$	99,225	 	
2012	 	 	74,408	 	
2013	 	 	44,440	 	
2014	 	 	27,167	 	
2015	 	 	17,498	 	
Thereafter	 	 	26,632	 	

	

	 	
Total minimum lease payments	 	$	289,370	 	

	

	 	
70

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

17. Finance Assets

Finance Receivables

Finance receivables are comprised of sales-type lease receivables and unsecured revolving loan receivables. Sales-type leases are generally due in monthly, quarterly or semi-annual installments over periods ranging from three to five years. Loan receivables arise primarily from financing services offered to our customers for postage and related supplies. Loan receivables are generally due each month; however, customers may rollover outstanding balances. The components of sales-type lease and loan receivables at December 31, 2010 and 2009 were as follows:
 	 	 	 	 	 	 	 	 	 	 	
 	 	U.S.	 	International	 	Total	 	

	 	

	 	

	 	
December 31, 2010	 	 	 	 	 	 	 	 	 	 	
Sales-type lease receivables	 	 	 	 	 	 	 	 	 	 	
Gross finance receivables	 	$	1,669,963	 	$	745,765	 	$	2,415,728	 	
Unguaranteed residual values	 	 	217,394	 	 	38,331	 	 	255,725	 	
Unearned income	 	 	(357,970	)	 	(165,513	)	 	(523,483	)	
Allowance for credit losses	 	 	(24,261	)	 	(16,849	)	 	(41,110	)	

	

	 	

	

	 	

	

	 	
Net investment in sales-type lease receivables	 	 	1,505,126	 	 	601,734	 	 	2,106,860	 	
 	 	 	 	 	 	 	 	 	 	 	
Loan receivables	 	 	 	 	 	 	 	 	 	 	
Loan receivables	 	 	432,137	 	 	55,418	 	 	487,555	 	
Allowance for credit losses	 	 	(25,552	)	 	(2,768	)	 	(28,320	)	

	

	 	

	

	 	

	

	 	
Net investment in loan receivables	 	 	406,585	 	 	52,650	 	 	459,235	 	

	

	 	

	

	 	

	

	 	
Net investment in finance receivables	 	$	1,911,711	 	$	654,384	 	$	2,566,095	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
December 31, 2009	 	 	 	 	 	 	 	 	 	 	
Sales-type lease Receivables	 	 	 	 	 	 	 	 	 	 	
Gross finance receivables	 	$	1,836,899	 	$	774,971	 	$	2,611,870	 	
Unguaranteed residual values	 	 	245,086	 	 	37,122	 	 	282,208	 	
Unearned income	 	 	(423,290	)	 	(178,141	)	 	(601,431	)	
Allowance for credit losses	 	 	(26,629	)	 	(17,453	)	 	(44,082	)	

	

	 	

	

	 	

	

	 	
Net investment in sales-type lease receivables	 	 	1,632,066	 	 	616,499	 	 	2,248,565	 	
 	 	 	 	 	 	 	 	 	 	 	
Loan receivables	 	 	 	 	 	 	 	 	 	 	
Loan receivables	 	 	456,308	 	 	49,563	 	 	505,871	 	
Allowance for credit losses	 	 	(25,889	)	 	(2,187	)	 	(28,076	)	

	

	 	

	

	 	

	

	 	
Net investment in loan receivables	 	 	430,419	 	 	47,376	 	 	477,795	 	

	

	 	

	

	 	

	

	 	
Net investment in finance receivables	 	$	2,062,485	 	$	663,875	 	$	2,726,360	 	

	

	 	

	

	 	

	

	 	
71

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Maturities of gross sales-type lease and loan receivables at December 31, 2010 were as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Sales-type Lease Receivables	 	Loan Receivables	 	

	 	

	
 	 	U.S.	 	International	 	Total	 	U.S.	 	International	 	Total	 	

	 	

	 	

	 	

	 	

	 	

	 	
2011	 	$	723,567	 	$	233,509	 	$	957,076	 	$	432,137	 	$	55,418	 	$	487,555	 	
2012	 	 	461,222	 	 	191,822	 	 	653,044	 	 	—	 	 	—	 	 	—	 	
2013	 	 	291,280	 	 	156,570	 	 	447,850	 	 	—	 	 	—	 	 	—	 	
2014	 	 	147,509	 	 	118,566	 	 	266,075	 	 	—	 	 	—	 	 	—	 	
2015	 	 	41,614	 	 	40,649	 	 	82,263	 	 	—	 	 	—	 	 	—	 	
Thereafter	 	 	4,771	 	 	4,649	 	 	9,420	 	 	—	 	 	—	 	 	—	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	1,669,963	 	$	745,765	 	$	2,415,728	 	$	432,137	 	$	55,418	 	$	487,555	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Activity in the allowance for credit losses for sales-type lease and loan receivables for each of the three years ended December 31, 2010, 2009 and 2008 is as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Allowance for Credit Losses	 	

	 	
 	 	Sales-type Lease Receivables	 	Loan Receivables	 	 	 	

	 	

	 	 	 	
 	 	U.S.	 	International	 	U.S.	 	International	 	Total	 	

	 	

	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance January 1, 2008	 	$	31,173	 	$	21,384	 	$	23,110	 	$	2,704	 	$	78,371	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amounts charged to expense	 	 	10,015	 	 	6,592	 	 	32,117	 	 	3,012	 	 	51,736	 	
Accounts written off	 	 	(14,481	)	 	(11,269	)	 	(29,782	)	 	(2,785	)	 	(58,317	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Balance December 31, 2008	 	 	26,707	 	 	16,707	 	 	25,445	 	 	2,931	 	 	71,790	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amounts charged to expense	 	 	15,304	 	 	12,437	 	 	31,894	 	 	2,120	 	 	61,755	 	
Accounts written off	 	 	(15,382	)	 	(11,691	)	 	(31,450	)	 	(2,864	)	 	(61,387	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Balance December 31, 2009	 	 	26,629	 	 	17,453	 	 	25,889	 	 	2,187	 	 	72,158	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amounts charged to expense	 	 	12,076	 	 	7,854	 	 	19,360	 	 	2,710	 	 	42,000	 	
Accounts written off	 	 	(14,444	)	 	(8,458	)	 	(19,697	)	 	(2,129	)	 	(44,728	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Balance December 31, 2010	 	$	24,261	 	$	16,849	 	$	25,552	 	$	2,768	 	$	69,430	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
72

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The aging of sales-type lease and loan receivables at December 31, 2010 and 2009 was as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Sales-type Lease Receivables	 	Loan Receivables	 	 	 	 	

	 	

	 	 	 	 	
 	 	U.S.	 	International	 	U.S.	 	International	 	Total	 	

	 	

	 	

	 	

	 	

	 	
December 31, 2010	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
< 31 days past due	 	$	1,575,968	 	$	703,146	 	$	409,583	 	$	52,848	 	$	2,741,545	 	
> 30 days and < 61 days	 	 	40,129	 	 	15,123	 	 	11,586	 	 	1,644	 	 	68,482	 	
> 60 days and < 91 days	 	 	27,052	 	 	7,071	 	 	4,517	 	 	519	 	 	39,159	 	
> 90 days and < 121 days	 	 	8,109	 	 	4,530	 	 	2,650	 	 	254	 	 	15,543	 	
> 120 days	 	 	18,705	 	 	15,895	 	 	3,801	 	 	153	 	 	38,554	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
TOTAL	 	$	1,669,963	 	$	745,765	 	$	432,137	 	$	55,418	 	$	2,903,283	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Past due amounts > 90 days	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Still accruing interest	 	$	8,109	 	$	4,530	 	$	—	 	$	—	 	$	12,639	 	
Not accruing interest	 	 	18,705	 	 	15,895	 	 	6,451	 	 	407	 	 	41,458	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
TOTAL	 	$	26,814	 	$	20,425	 	$	6,451	 	$	407	 	$	54,097	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
December 31, 2009	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
< 31 days past due	 	$	1,730,355	 	$	725,643	 	$	428,769	 	$	47,009	 	$	2,931,776	 	
> 30 days and < 61 days	 	 	45,946	 	 	16,006	 	 	13,783	 	 	1,254	 	 	76,989	 	
> 60 days and < 91 days	 	 	28,872	 	 	7,547	 	 	5,207	 	 	495	 	 	42,121	 	
> 90 days and < 121 days	 	 	8,139	 	 	7,441	 	 	3,261	 	 	253	 	 	19,094	 	
> 120 days	 	 	23,587	 	 	18,334	 	 	5,288	 	 	552	 	 	47,761	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
TOTAL	 	$	1,836,899	 	$	774,971	 	$	456,308	 	$	49,563	 	$	3,117,741	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Past due amounts > 90 days	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Still accruing interest	 	$	8,139	 	$	7,441	 	$	—	 	$	—	 	$	15,580	 	
Not accruing interest	 	 	23,587	 	 	18,334	 	 	8,549	 	 	805	 	 	51,275	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
TOTAL	 	$	31,726	 	$	25,775	 	$	8,549	 	$	805	 	$	66,855	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Credit Quality

We use credit scores as one of many data elements in making the decision to grant credit at inception, setting credit lines at inception, managing credit lines through the life of the customer, and to assist in collections strategy.

We use a third party to score the majority of the North American portfolio on a quarterly basis using a commercial credit score. Accounts may not receive a score because of data issues related to SIC information, customer identification mismatches between the various data sources and other reasons. We do not currently score the portfolios outside of North America because the cost to do so is prohibitive, it is a fragmented process and there is no single credit score model that covers all countries. However, credit policies are similar to those in North America.

73

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The table below shows the portfolio at December 31, 2010 and December 31 2009 by relative risk class (low, medium and high) based on the relative scores of the accounts within each class. A fourth class is shown for accounts that are not scored. The degree of risk, as defined by the third party, refers to the likelihood that an account in the next 12 month period may become delinquent. Absence of a score is not indicative of the credit quality of the account.
 	 	 	
 	•	Low risk accounts are companies with very good credit risk	
 	 	 	
 	•	Medium risk accounts are companies with average to good credit risk	
 	 	 	
 	•	High risk accounts are companies with poor credit risk, are delinquent, or are at risk of becoming delinquent	
Although the relative score of accounts within each class is used as a factor for determining the establishment of a customer credit limit, it is not indicative of our actual history of losses due to the business essential nature of our products and services.

The aging schedule included above, showing approximately 1.9% of the portfolio as greater than 90 days past due, and the roll-forward schedule of the allowance for credit losses, showing the actual history of losses for the three most recent years ended December 31, 2010 are more representative of the potential loss performance of our portfolio than relative risk based on scores, as defined by the third party.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2010	 	

	 	
 	 	U.S.	 	International	 	Total	 	U.S.	 	International	 	Total	 	

	 	

	 	

	 	

	 	

	 	

	 	
Sales-type lease receivables	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Risk Level	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Low	 	$	1,001,663	 	$	190,018	 	$	1,191,681	 	 	60.0	% 	 	25.5	% 	 	49.3	%	
Medium	 	 	443,139	 	 	69,280	 	 	512,419	 	 	26.5	%	 	9.3	%	 	21.2	%	
High	 	 	49,183	 	 	11,572	 	 	60,755	 	 	2.9	%	 	1.6	%	 	2.5	%	
Not Scored	 	 	175,978	 	 	474,895	 	 	650,873	 	 	10.5	%	 	63.7	%	 	26.9	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total	 	$	1,669,963	 	$	745,765	 	$	2,415,728	 	 	100	%	 	100	%	 	100	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loan receivables	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Risk Level	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Low	 	$	21,808	 	$	12,002	 	$	33,810	 	 	5.0	%	 	21.7	%	 	6.9	%	
Medium	 	 	260,708	 	 	7,640	 	 	268,348	 	 	60.3	%	 	13.8	%	 	55.0	%	
High	 	 	147,975	 	 	1,406	 	 	149,381	 	 	34.2	%	 	2.5	%	 	30.6	%	
Not Scored	 	 	1,646	 	 	34,370	 	 	36,016	 	 	0.4	%	 	62.0	%	 	7.4	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total	 	$	432,137	 	$	55,418	 	$	487,555	 	 	100	%	 	100	%	 	100	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Risk Level	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Low	 	$	1,023,471	 	$	202,020	 	$	1,225,491	 	 	48.7	%	 	25.2	%	 	42.2	%	
Medium	 	 	703,847	 	 	76,920	 	 	780,767	 	 	33.5	%	 	9.6	%	 	26.9	%	
High	 	 	197,158	 	 	12,978	 	 	210,136	 	 	9.4	%	 	1.6	%	 	7.2	%	
Not Scored	 	 	177,624	 	 	509,265	 	 	686,889	 	 	8.4	%	 	63.6	%	 	23.7	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total	 	$	2,102,100	 	$	801,183	 	$	2,903,283	 	 	100	%	 	100	%	 	100	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
74

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2009	 	

	 	
 	 	U.S.	 	International	 	Total	 	U.S.	 	International	 	Total	 	

	 	

	 	

	 	

	 	

	 	

	 	
Sales-type lease receivables	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Risk Level	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Low	 	$	1,142,945	 	$	207,214	 	$	1,350,159	 	 	62.2	% 	 	26.7	% 	 	51.7	%	
Medium	 	 	466,616	 	 	89,606	 	 	556,222	 	 	25.4	%	 	11.6	%	 	21.3	%	
High	 	 	51,211	 	 	3,042	 	 	54,253	 	 	2.8	%	 	0.4	%	 	2.1	%	
Not Scored	 	 	176,127	 	 	475,109	 	 	651,236	 	 	9.6	%	 	61.3	%	 	24.9	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total	 	$	1,836,899	 	$	774,971	 	$	2,611,870	 	 	100	%	 	100	%	 	100	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Loan receivables	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Risk Level	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Low	 	$	20,688	 	$	10,382	 	$	31,070	 	 	4.5	%	 	20.9	%	 	6.1	%	
Medium	 	 	288,062	 	 	5,675	 	 	293,737	 	 	63.1	%	 	11.5	%	 	58.1	%	
High	 	 	147,558	 	 	201	 	 	147,759	 	 	32.3	%	 	0.4	%	 	29.2	%	
Not Scored	 	 	—	 	 	33,305	 	 	33,305	 	 	0.0	%	 	67.2	%	 	6.6	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total	 	$	456,308	 	$	49,563	 	$	505,871	 	 	100	%	 	100	%	 	100	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Risk Level	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Low	 	$	1,163,633	 	$	217,596	 	$	1,381,229	 	 	50.7	%	 	26.4	%	 	44.3	%	
Medium	 	 	754,678	 	 	95,281	 	 	849,959	 	 	32.9	%	 	11.6	%	 	27.3	%	
High	 	 	198,769	 	 	3,243	 	 	202,012	 	 	8.7	%	 	0.4	%	 	6.5	%	
Not Scored	 	 	176,127	 	 	508,414	 	 	684,541	 	 	7.7	%	 	61.7	%	 	22.0	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total	 	$	2,293,207	 	$	824,534	 	$	3,117,741	 	 	100	%	 	100	%	 	100	%	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Pitney Bowes Bank

At December 31, 2010, PBB had assets of $675 million and liabilities of $626 million. The bank’s assets consist of finance receivables, short and long-term investments and cash. PBB’s key product offering, Purchase Power, is a revolving credit solution, which enables customers to finance their postage costs when they refill their meter. PBB earns revenue through transaction fees, finance charges on outstanding balances, and other fees for services. The bank’s liabilities consist primarily of PBB’s deposit solution, Reserve Account, which provides value to large-volume mailers who prefer to prepay postage and earn interest on their deposits. PBB is regulated by the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions.

Leveraged Leases

Our investment in leveraged lease assets consists of the following:
 	 	 	 	 	 	 	 	
 	 	December 31,	 	

	 	
 	 	2010	 	2009	 	

	 	

	 	
Rental receivables	 	$	1,802,107	 	$	1,747,811	 	
Unguaranteed residual values	 	 	14,141	 	 	13,399	 	
Principal and interest on non-recourse loans	 	 	(1,373,651	)	 	(1,341,820	)	
Unearned income	 	 	(191,591	)	 	(186,031	)	

	

	 	

	

	 	
Investment in leveraged leases	 	 	251,006	 	 	233,359	 	
Less: deferred taxes related to leveraged leases	 	 	(192,128	)	 	(175,329	)	

	

	 	

	

	 	
Net investment in leveraged leases	 	$	58,878	 	$	58,030	 	

	

	 	

	

	 	
75

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The following is a summary of the components of income from leveraged leases:
 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Pre-tax leveraged lease income	 	$	8,334	 	$	918	 	$	316	 	
Income tax effect	 	 	(863	)	 	6,676	 	 	7,063	 	

	

	 	

	

	 	

	

	 	
Income from leveraged leases	 	$	7,471	 	$	7,594	 	$	7,379	 	

	

	 	

	

	 	

	

	 	
Income from leveraged leases was positively impacted by $2.2 million, $2.8 million and $2.6 million in 2010, 2009 and 2008, respectively, due to changes in statutory tax rates.

18. Business Segment Information

We conduct our business activities in seven reporting segments within two business groups, Small & Medium Business Solutions and Enterprise Business Solutions. The principal products and services of each of our reporting segments are as follows:

Small & Medium Business Solutions:
 	 	
 	U.S. Mailing: Includes the U.S. revenue and related expenses from the sale, rental and financing of our mail finishing, mail creation, shipping equipment and software; supplies; support and other professional services; and payment solutions.	
 	 	
 	International Mailing: Includes the non-U.S. revenue and related expenses from the sale, rental and financing of our mail finishing, mail creation, shipping equipment and software; supplies; support and other professional services; and payment solutions.	
Enterprise Business Solutions:
 	 	
 	Production Mail: Includes the worldwide revenue and related expenses from the sale, support and other professional services of our high-speed, production mail systems, sorting and production print equipment.	
 	 	
 	Software: Includes the worldwide revenue and related expenses from the sale and support services of non-equipment-based mailing, customer relationship and communication and location intelligence software.	
 	 	
 	Management Services: Includes worldwide revenue and related expenses from facilities management services; secure mail services; reprographic, document management services; and litigation support and eDiscovery services.	
 	 	
 	Mail Services: Includes worldwide revenue and related expenses from presort mail services and cross-border mail services.	
 	 	
 	Marketing Services: Includes revenue and related expenses from direct marketing services for targeted customers.	
The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Earnings before interest and taxes (EBIT), a non-GAAP measure, is useful to management in demonstrating the operational profitability of the segments by excluding interest and taxes, which are generally managed across the entire company on a consolidated basis. EBIT is determined by deducting from revenue the related costs and expenses attributable to the segment. Segment EBIT also excludes general corporate expenses, restructuring charges and asset impairments. Identifiable assets are those used in our operations and exclude cash and cash equivalents, short-term investments and general corporate assets. Long-lived assets exclude finance receivables and investment in leveraged leases.

76

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Revenue and EBIT by business segment and geographic area is as follows:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Revenue	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
U.S. Mailing	 	$	1,879,298	 	$	2,016,259	 	$	2,250,399	 	
International Mailing	 	 	922,471	 	 	920,398	 	 	1,133,652	 	

	

	 	

	

	 	

	

	 	
Small & Medium Business Solutions	 	 	2,801,769	 	 	2,936,657	 	 	3,384,051	 	
 	 	 	 	 	 	 	 	 	 	 	
Production Mail	 	 	557,219	 	 	525,745	 	 	616,255	 	
Software	 	 	362,914	 	 	345,739	 	 	399,814	 	
Management Services	 	 	999,288	 	 	1,060,907	 	 	1,172,170	 	
Mail Services	 	 	562,526	 	 	559,200	 	 	541,776	 	
Marketing Services	 	 	141,538	 	 	140,923	 	 	148,239	 	

	

	 	

	

	 	

	

	 	
Enterprise Business Solutions	 	 	2,623,485	 	 	2,632,514	 	 	2,878,254	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Total Revenue	 	$	5,425,254	 	$	5,569,171	 	$	6,262,305	 	

	

	 	

	

	 	

	

	 	
Geographic areas:	 	 	 	 	 	 	 	 	 	 	
United States	 	$	3,804,489	 	$	3,979,493	 	$	4,335,650	 	
Outside the United States	 	 	1,620,765	 	 	1,589,678	 	 	1,926,655	 	

	

	 	

	

	 	

	

	 	
Total	 	$	5,425,254	 	$	5,569,171	 	$	6,262,305	 	

	

	 	

	

	 	

	

	 	

 	 	EBIT	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
U.S. Mailing	 	$	689,363	 	$	743,108	 	$	890,356	 	
International Mailing	 	 	142,875	 	 	128,084	 	 	184,667	 	

	

	 	

	

	 	

	

	 	
Small & Medium Business Solutions	 	 	832,238	 	 	871,192	 	 	1,075,023	 	
 	 	 	 	 	 	 	 	 	 	 	
Production Mail	 	 	60,373	 	 	51,037	 	 	81,514	 	
Software	 	 	42,206	 	 	37,335	 	 	28,335	 	
Management Services	 	 	92,671	 	 	72,307	 	 	70,173	 	
Mail Services	 	 	63,330	 	 	82,723	 	 	68,800	 	
Marketing Services	 	 	26,133	 	 	22,938	 	 	21,291	 	

	

	 	

	

	 	

	

	 	
Enterprise Business Solutions	 	 	284,713	 	 	266,340	 	 	270,113	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	1,116,951	 	$	1,137,532	 	$	1,345,136	 	

	

	 	

	

	 	

	

	 	
Geographic areas:	 	 	 	 	 	 	 	 	 	 	
United States	 	$	931,129	 	$	971,725	 	$	1,100,900	 	
Outside the United States	 	 	185,822	 	 	165,807	 	 	244,236	 	

	

	 	

	

	 	

	

	 	
Total	 	$	1,116,951	 	$	1,137,532	 	$	1,345,136	 	

	

	 	

	

	 	

	

	 	
77

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Additional segment information is as follows:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Depreciation and amortization:	 	 	 	 	 	 	 	 	 	 	
U.S. Mailing	 	$	122,748	 	$	139,176	 	$	146,422	 	
International Mailing	 	 	55,673	 	 	53,667	 	 	63,389	 	

	

	 	

	

	 	

	

	 	
Small & Medium Business Solutions	 	 	178,421	 	 	192,843	 	 	209,811	 	
 	 	 	 	 	 	 	 	 	 	 	
Production Mail	 	 	5,257	 	 	7,079	 	 	7,358	 	
Software	 	 	36,559	 	 	34,505	 	 	37,317	 	
Management Services	 	 	33,398	 	 	44,809	 	 	65,320	 	
Mail Services	 	 	27,924	 	 	31,071	 	 	32,045	 	
Marketing Services	 	 	5,479	 	 	8,876	 	 	8,380	 	

	

	 	

	

	 	

	

	 	
Enterprise Business Solutions	 	 	108,617	 	 	126,340	 	 	150,420	 	

	

	 	

	

	 	

	

	 	
Total	 	$	287,038	 	$	319,183	 	$	360,231	 	

	

	 	

	

	 	

	

	 	

 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Capital expenditures:	 	 	 	 	 	 	 	 	 	 	
U.S. Mailing	 	$	60,919	 	$	78,808	 	$	100,783	 	
International Mailing	 	 	15,528	 	 	25,448	 	 	45,473	 	

	

	 	

	

	 	

	

	 	
Small & Medium Business Solutions	 	 	76,447	 	 	104,256	 	 	146,256	 	
 	 	 	 	 	 	 	 	 	 	 	
Production Mail	 	 	609	 	 	1,292	 	 	3,613	 	
Software	 	 	4,215	 	 	4,371	 	 	12,519	 	
Management Services	 	 	17,307	 	 	19,766	 	 	28,152	 	
Mail Services	 	 	7,243	 	 	21,058	 	 	30,344	 	
Marketing Services	 	 	626	 	 	514	 	 	1,730	 	

	

	 	

	

	 	

	

	 	
Enterprise Business Solutions	 	 	30,000	 	 	47,001	 	 	76,358	 	

	

	 	

	

	 	

	

	 	
Total	 	$	106,447	 	$	151,257	 	$	222,614	 	

	

	 	

	

	 	

	

	 	

 	 	December 31,	 	

	 	
 	 	2010	 	2009	 	

	 	

	 	
Identifiable assets:	 	 	 	 	 	 	 	
U.S. Mailing	 	$	2,894,074	 	$	2,948,520	 	
International Mailing	 	 	1,607,190	 	 	1,677,082	 	

	

	 	

	

	 	
Small & Medium Business Solutions	 	 	4,501,264	 	 	4,625,602	 	
 	 	 	 	 	 	 	 	
Production Mail	 	 	547,002	 	 	617,483	 	
Software	 	 	1,008,088	 	 	944,248	 	
Management Services	 	 	799,290	 	 	879,390	 	
Mail Services	 	 	512,785	 	 	516,274	 	
Marketing Services	 	 	230,995	 	 	234,216	 	

	

	 	

	

	 	
Enterprise Business Solutions	 	 	3,098,160	 	 	3,191,611	 	

	

	 	

	

	 	
Total	 	$	7,599,424	 	$	7,817,213	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Identifiable long-lived assets by geographic areas:	 	 	 	 	 	 	 	
United States	 	$	2,939,467	 	$	2,846,443	 	
Outside the United States	 	 	996,963	 	 	909,099	 	

	

	 	

	

	 	
Total	 	$	3,936,430	 	$	3,755,542	 	

	

	 	

	

	 	
78

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Reconciliation of Segment Amounts to Consolidated Totals:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
EBIT:	 	 	 	 	 	 	 	 	 	 	
Total for reportable segments	 	$	1,116,951	 	$	1,137,532	 	$	1,345,136	 	
Unallocated amounts:	 	 	 	 	 	 	 	 	 	 	
Interest, net	 	 	(201,324	)	 	(203,906	)	 	(216,450	)	
Corporate expense	 	 	(198,776	)	 	(187,254	)	 	(209,543	)	
Restructuring charges and asset impairments	 	 	(182,274	)	 	(48,746	)	 	(200,254	)	
Other items	 	 	—	 	 	(4,450	)	 	(5,712	)	

	

	 	

	

	 	

	

	 	
Income from continuing operations before income taxes	 	$	534,577	 	$	693,176	 	$	713,177	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization:	 	 	 	 	 	 	 	 	 	 	
Total for reportable segments	 	$	287,038	 	$	319,183	 	$	360,231	 	
Corporate depreciation	 	 	16,615	 	 	19,712	 	 	18,886	 	

	

	 	

	

	 	

	

	 	
Consolidated depreciation and amortization	 	$	303,653	 	$	338,895	 	$	379,117	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures:	 	 	 	 	 	 	 	 	 	 	
Total for reportable segments	 	$	106,447	 	$	151,257	 	$	222,614	 	
Unallocated amounts	 	 	13,321	 	 	15,471	 	 	14,694	 	

	

	 	

	

	 	

	

	 	
Consolidated capital expenditures	 	$	119,768	 	$	166,728	 	$	237,308	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Total assets:	 	 	 	 	 	 	 	 	 	 	
Total for reportable segments	 	$	7,599,424	 	$	7,817,213	 	 	 	 	
Cash and cash equivalents and short-term investments	 	 	514,972	 	 	427,419	 	 	 	 	
General corporate assets	 	 	329,627	 	 	326,407	 	 	 	 	

	

	 	

	

	 	 	 	 	
Consolidated assets	 	$	8,444,023	 	$	8,571,039	 	 	 	 	

	

	 	

	

	 	 	 	 	
79

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

19. Retirement Plans and Postretirement Medical Benefits

We have several defined benefit retirement plans. Benefits are primarily based on employees’ compensation and years of service. Our contributions are determined based on the funding requirements of U.S. federal and other governmental laws and regulations. We use a measurement date of December 31 for all of our retirement plans.

U.S. employees hired after January 1, 2005, Canadian employees hired after April 1, 2005, and U.K. employees hired after July 1, 2005, are not eligible for our defined benefit retirement plans. As of December 31, 2014, benefit accruals for our U.S. pension plans, the Pitney Bowes Pension Plan and the Pitney Bowes Pension Restoration Plan, will be determined and frozen and no future benefit accruals under these plans will occur after that date.

The change in benefit obligation, plan assets and the funded status of defined benefit pension plans are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	United States	 	Foreign	 	

	 	

	 	
 	 	2010	 	2009	 	2010	 	2009	 	

	 	

	 	

	 	

	 	
Change in benefit obligation:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Benefit obligation at beginning of year	 	$	1,599,506	 	$	1,605,380	 	$	507,932	 	$	384,507	 	
Service cost	 	 	23,157	 	 	24,274	 	 	6,907	 	 	6,853	 	
Interest cost	 	 	89,602	 	 	93,997	 	 	27,507	 	 	25,200	 	
Plan participants’ contributions	 	 	—	 	 	—	 	 	1,962	 	 	2,231	 	
Actuarial loss	 	 	39,971	 	 	17,698	 	 	27,129	 	 	63,325	 	
Foreign currency changes	 	 	—	 	 	—	 	 	(5,257	)	 	45,858	 	
Settlement / curtailment	 	 	6,419	 	 	(24,297	)	 	(3,396	)	 	(1,579	)	
Special termination benefits	 	 	8,148	 	 	112	 	 	557	 	 	2,012	 	
Benefits paid	 	 	(134,517	)	 	(117,658	)	 	(22,100	)	 	(20,475	)	

	

	 	

	

	 	

	

	 	

	

	 	
Benefit obligation at end of year	 	$	1,632,286	 	$	1,599,506	 	$	541,241	 	$	507,932	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Change in plan assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value of plan assets at beginning of year	 	$	1,350,045	 	$	1,175,271	 	$	414,313	 	$	312,206	 	
Actual return on plan assets	 	 	149,599	 	 	177,119	 	 	50,609	 	 	48,128	 	
Company contributions	 	 	20,047	 	 	115,313	 	 	9,291	 	 	32,755	 	
Plan participants’ contributions	 	 	—	 	 	—	 	 	1,962	 	 	2,231	 	
Foreign currency changes	 	 	—	 	 	—	 	 	(3,392	)	 	39,468	 	
Benefits paid	 	 	(134,517	)	 	(117,658	)	 	(22,100	)	 	(20,475	)	

	

	 	

	

	 	

	

	 	

	

	 	
Fair value of plan assets at end of year	 	$	1,385,174	 	$	1,350,045	 	$	450,683	 	$	414,313	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Funded status, end of year:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fair value of plan assets at end of year	 	$	1,385,174	 	$	1,350,045	 	$	450,683	 	$	414,313	 	
Benefit obligations at end of year	 	 	1,632,286	 	 	1,599,506	 	 	541,241	 	 	507,932	 	

	

	 	

	

	 	

	

	 	

	

	 	
Funded status	 	$	(247,112	)	$	(249,461	)	$	(90,558	)	$	(93,619	)	

	

	 	

	

	 	

	

	 	

	

	 	

 	 	United States	 	Foreign	 	

	 	

	 	
 	 	2010	 	2009	 	2010	 	2009	 	

	 	

	 	

	 	

	 	
Amounts recognized in the Consolidated Balance Sheets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Non-current asset	 	$	29	 	$	—	 	$	508	 	$	484	 	
Current liability	 	 	(6,962	)	 	(19,424	)	 	(901	)	 	(957	)	
Non-current liability	 	 	(240,179	)	 	(230,037	)	 	(90,165	)	 	(93,146	)	

	

	 	

	

	 	

	

	 	

	

	 	
Net amount recognized	 	$	(247,112	)	$	(249,461	)	$	(90,558	)	$	(93,619	)	

	

	 	

	

	 	

	

	 	

	

	 	
80

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Information provided in the table below is only for pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2010 and 2009:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	United States	 	Foreign	 	

	 	

	 	
 	 	2010	 	2009	 	2010	 	2009	 	

	 	

	 	

	 	

	 	
Projected benefit obligation	 	$	1,630,712	 	$	1,599,506	 	$	538,637	 	$	505,673	 	
Accumulated benefit obligation	 	$	1,601,746	 	$	1,568,618	 	$	502,317	 	$	464,362	 	
Fair value of plan assets	 	$	1,383,571	 	$	1,350,045	 	$	447,569	 	$	411,573	 	
The accumulated benefit obligation for all U.S. defined benefit plans at December 31, 2010 and 2009 was $1,603 million and $1,569 million, respectively. The accumulated benefit obligation for all foreign defined benefit plans at December 31, 2010 and 2009 was $504 million and $466 million, respectively.

81

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Pre-tax amounts recognized in accumulated other comprehensive income (AOCI) consist of:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	United States	 	Foreign	 	

	 	

	 	
 	 	2010	 	2009	 	2010	 	2009	 	

	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net actuarial loss	 	$	719,890	 	$	742,921	 	$	168,376	 	$	161,441 	 	
Prior service cost/(credit)	 	 	2,400	 	 	(40	)	 	541	 	 	756 	 	
Transition obligation (asset)	 	 	—	 	 	—	 	 	(282	)	 	(196	)	

	

	 	

	

	 	

	

	 	

	

	 	
Total	 	$	722,290	 	$	742,881	 	$	168,635	 	$	162,001 	 	

	

	 	

	

	 	

	

	 	

	

	 	
The estimated amounts that will be amortized from AOCI into net periodic benefits cost in 2011 are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net actuarial loss	 	$	37,394	 	 	 	 	$	12,448	 	 	 	 	
Prior service cost/(credit)	 	 	82	 	 	 	 	 	163	 	 	 	 	
Transition obligation (asset)	 	 	—	 	 	 	 	 	(9	)	 	 	 	

	

	 	 	 	 	

	

	 	 	 	 	
Total	 	$	37,476	 	 	 	 	$	12,602	 	 	 	 	

	

	 	 	 	 	

	

	 	 	 	 	
Weighted average assumptions used to determine end of year benefit obligations:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Discount rate	 	 	5.60	%	 	5.75	%	 	2.25% - 5.50	%	 	2.25% - 6.00	%	
Rate of compensation increase	 	 	3.50	%	 	3.50	%	 	2.50% - 5.50	%	 	2.50% - 5.60	%	
A discount rate is used to determine the present value of our future benefit obligations. The discount rate for our U.S. pension and postretirement medical benefit plans is determined by matching the expected cash flows associated with our benefit obligations to a yield curve based on long-term, high quality fixed income debt instruments available as of the measurement date. In 2010, we reduced the population of bonds used to derive this yield curve with the adoption of a bond matching approach which incorporates a selection of bonds that align with our projected benefit obligations. We believe this bond matching approach more closely reflects the process we would employ to settle our pension and postretirement benefit obligations. As a result of this modification, the pension benefits discount rate increased 45 basis points resulting in a decrease in the projected benefit obligation of $78 million, and the postretirement medical benefits discount rate increased 40 basis points resulting in a decrease in the projected benefit obligation of $8 million.

For the U.K. retirement benefit plan, our largest foreign plan, the discount rate is determined by discounting each year’s estimated benefit payments by an applicable spot rate, derived from a yield curve created from a large number of high quality corporate bonds. For our other smaller foreign pension plans, the discount rate is selected based on high quality fixed income indices available in the country in which the plan is domiciled.

At December 31, 2010 there were no shares of our common stock included in the plan assets of our pension plans.

We anticipate making contributions of approximately $130 million and $15 million to our U.S. and foreign pension plans, respectively during 2011. We will reassess our funding alternatives as the year progresses.

82

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The components of the net periodic benefit cost for defined pension plans are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	United States	 	Foreign	 	

	 	

	 	
 	 	2010	 	2009	 	2008	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	

	 	

	 	

	 	
Service cost	 	$	23,157	 	$	24,274	 	$	29,699	 	$	6,907	 	$	6,853	 	$	10,562	 	
Interest cost	 	 	89,602	 	 	93,997	 	 	96,205	 	 	27,507	 	 	25,200	 	 	29,140	 	
Expected return on plan assets	 	 	(123,095	)	 	(120,662	)	 	(132,748	)	 	(28,838	)	 	(27,193	)	 	(36,713	)	
Amortization of transition cost	 	 	—	 	 	—	 	 	—	 	 	(9	)	 	(61	)	 	142	 	
Amortization of prior service (cost) credit	 	 	(2,555	)	 	(2,547	)	 	(2,560	)	 	214	 	 	446	 	 	628	 	
Recognized net actuarial loss	 	 	32,323	 	 	26,063	 	 	18,944	 	 	10,205	 	 	2,486	 	 	3,981	 	
Special termination benefits	 	 	8,148	 	 	112	 	 	2,105	 	 	291	 	 	2,385	 	 	632	 	
Settlement / curtailment	 	 	10,712	 	 	4,107	 	 	—	 	 	1,285	 	 	202	 	 	—	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net periodic benefit cost (1)	 	$	38,292	 	$	25,344	 	$	11,645	 	$	17,562	 	$	10,318	 	$	8,372	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
83

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

(1) Includes $14.9 million and $1.6 million charged to our restructuring reserves in 2010 for the U.S. and foreign plans, respectively. See Note 14 for further information.

Other changes in plan assets and benefit obligations for defined benefit pension plans recognized in other comprehensive income are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	United States	 	Foreign	 	

	 	

	 	
 	 	2010	 	2009	 	2010	 	2009	 	

	 	

	 	

	 	

	 	
Curtailments effects and settlements	 	$	(4,290	)	$	(28,404	)	$	(464	)	$	—	 	
Net actuarial loss (gain)	 	 	13,467	 	 	(38,407	)	 	5,748	 	 	44,124	 	
Prior service credit	 	 	—	 	 	(353	)	 	(3,790	)	 	—	 	
Amortization of net actuarial (loss) gain	 	 	(32,343	)	 	(26,063	)	 	5,441	 	 	(2,059	)	
Amortization of prior service (cost) credit	 	 	2,575	 	 	2,547	 	 	(215	)	 	(512	)	
Net transitional obligation (asset)	 	 	—	 	 	—	 	 	(86	)	 	(99	)	

	

	 	

	

	 	

	

	 	

	

	 	
Total recognized in other comprehensive income	 	$	(20,591	)	$	(90,680	)	$	6,634	 	$	41,454	 	

	

	 	

	

	 	

	

	 	

	

	 	
Weighted average assumptions used to determine net periodic benefit costs:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	United States	 	Foreign	 	

	 	

	 	
 	 	2010	 	2009	 	2008	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	

	 	

	 	

	 	
Discount rate	 	 	5.75	%   	 	 	6.05	%   	 	 	6.15	%   	 	 	2.25% - 6.00	%	 	2.25% - 6.60	%	 	2.25% - 5.80	%	
Expected return on plan assets	 	 	8.00	%	 	 	8.00	%	 	 	8.50	%	 	 	4.50% - 7.75	%	 	4.49% - 7.75	%	 	3.50% - 7.75	%	
Rate of compensation increase	 	 	3.50	%	 	 	4.25	%	 	 	4.50	%	 	 	2.50% - 5.60	%	 	2.50% - 5.10	%	 	2.50% - 5.50	%	
The expected return on plan assets is based on historical and projected rates of return for current and planned asset classes in the plans’ investment portfolio after analyzing historical experience and future expectations of the returns and volatility of the various asset classes. The overall expected rate of return for the portfolio was determined based on the target asset allocations for each asset class, adjusted for historical and expected experience of active portfolio management results, when compared to the benchmark returns. When assessing the expected future returns for the portfolio, management placed more emphasis on the expected future returns than historical returns.

U.S. Pension Plans’ Investment Strategy and Asset Allocation

Our U.S. pension plans’ investment strategy is to maximize returns within reasonable and prudent levels of risk, to achieve and maintain full funding of the accumulated benefit obligations and the actuarial liabilities, and to earn a nominal rate of return of at least 8%. The fund has established a strategic asset allocation policy to achieve these objectives. Investments are diversified across asset classes and within each class to reduce the risk of large losses and are periodically rebalanced. Derivatives, such as swaps, options, forwards and futures contracts may be used for market exposure, to alter risk/return characteristics and to manage foreign currency exposure. Investments within the private equity and real estate portfolios are comprised of limited partnership units in primary and secondary fund of funds and units in open-ended commingled real estate funds, respectively. These types of investment vehicles are used in an effort to gain greater asset diversification. We have no hedge fund investments. We do not have any significant concentrations of credit risk within the plan assets. The pension plans’ liabilities, investment objectives and investment managers are reviewed periodically.

84

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The target allocation for 2011 and the asset allocation for the U.S. pension plan at December 31, 2010 and 2009, by asset category, are as follows:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Target
Allocation	 	Percentage of Plan Assets at
December 31,	 	

	 	

	 	
Asset category	 	2011	 	2010	 	2009	 	

	 	

	 	

	 	
U.S. equities	 	 	37	%   	 	 	37	%   	 	 	35	%   	 	
Non-U.S. equities	 	 	19	%	 	 	20	%	 	 	19	%	 	
Fixed income	 	 	32	%	 	 	34	%	 	 	38	%	 	
Real estate	 	 	5	%	 	 	4	%	 	 	4	%	 	
Private equity	 	 	7	%	 	 	5	%	 	 	4	%	 	

	

	 	

	

	 	

	

	 	
Total	 	 	100	%	 	 	100	%	 	 	100	%	 	

	

	 	

	

	 	

	

	 	
The long-term asset allocation targets we use to manage the investment portfolio are based on the broad asset categories shown above. The plan asset categories presented in the fair value hierarchy are subsets of the broad asset categories.

Foreign Pension Plans’ Investment Strategy and Asset Allocation

Our foreign pension plan assets are managed by outside investment managers and monitored regularly by local trustees, in conjunction with our corporate personnel. The investment strategies adopted by our foreign plans vary by country and plan, with each strategy tailored to achieve the expected rate of return within an acceptable or appropriate level of risk, depending upon the liability profile of plan participants, local funding requirements, investment markets and restrictions. Our largest foreign pension plan is the U.K. plan, which represents 75% of the non-U.S. pension assets. The U.K. pension plan’s investment strategy supports the objectives of the fund, which are to maximize returns within reasonable and prudent levels of risk, to achieve and maintain full funding of the accumulated benefit obligations and the actuarial liabilities, and to earn a nominal rate of return of at least 7.25%. The fund has established a strategic asset allocation policy to achieve these objectives. Investments are diversified across asset classes and within each class to minimize the risk of large losses and are periodically rebalanced. Derivatives, such as swaps, options, forwards and futures contracts may be used for market exposure, to alter risk/return characteristics and to manage foreign currency exposure. We do not have any significant concentrations of credit risk within the plan assets. The pension plans’ liabilities, investment objectives and investment managers are reviewed periodically.

The target allocation for 2011 and the asset allocation for the U.K. pension plan at December 31, 2010 and 2009, by asset category, are as follows:
 	 	 	 	 	 	 	 	 	 	 	
 	 	Target
Allocation	 	Percentage of Plan Assets at
December 31,	 	

	 	

	 	
Asset category	 	2011	 	2010	 	2009	 	

	 	

	 	

	 	
U.K. equities	 	 	32	%   	 	 	33	%   	 	 	35	%   	 	
Non-U.K. equities	 	 	33	%	 	 	35	%	 	 	32	%	 	
Fixed income	 	 	35	%	 	 	29	%	 	 	32	%	 	
Cash	 	 	—	%	 	 	3	%	 	 	1	%	 	

	

	 	

	

	 	

	

	 	
Total	 	 	100	%	 	 	100	%	 	 	100	%	 	

	

	 	

	

	 	

	

	 	
The long-term asset allocation targets we use to manage the investment portfolio are based on the broad asset categories shown above. The plan asset categories presented in the fair value hierarchy are subsets of the broad asset categories.

The fair value of the U.K. plan assets was $338 million and $312 million at December 31, 2010 and 2009, respectively, and the expected long-term rate of return on these plan assets was 7.25% and 7.50% and in 2010 and 2009, respectively.

85

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Fair Value Measurements of Plan Assets

The following tables show, by level within the fair value hierarchy, the financial assets and liabilities that are accounted for at fair value on a recurring basis at December 31, 2010 and 2009, respectively, for the U.S. and foreign pension plans. As required by the fair value measurements guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	U.S. Pension Plans - Fair Value Measurements at December 31, 2010	 	

	 	
 	 	Level 1	 	Level 2	 	Level 3	 	Total	 	

	 	

	 	

	 	

	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment securities	 	 	 	 	 	 	 	 	 	 	 	 	 	
Money market funds	 	$	—	 	$	20,571	 	$	—	 	$	20,571	 	
Equity securities	 	 	431,098	 	 	346,126	 	 	—	 	 	777,224	 	
Debt securities - U.S. and foreign governments, agencies, and municipalities	 	 	104,097	 	 	9,878	 	 	—	 	 	113,975	 	
Corporate debt securities	 	 	—	 	 	172,722	 	 	—	 	 	172,722	 	
Mortgage-backed securities	 	 	—	 	 	156,516	 	 	5,389	 	 	161,905	 	
Asset-backed securities	 	 	—	 	 	18,698	 	 	—	 	 	18,698	 	
Private equity	 	 	—	 	 	—	 	 	69,495	 	 	69,495	 	
Real estate	 	 	—	 	 	—	 	 	52,553	 	 	52,553	 	
Derivatives	 	 	21	 	 	—	 	 	—	 	 	21	 	
Securities lending fund *	 	 	—	 	 	158,155	 	 	—	 	 	158,155	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total assets	 	$	535,216	 	$	882,666	 	$	127,437	 	$	1,545,319	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment securities	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivatives	 	$	51	 	$	—	 	$	—	 	$	51	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total liabilities	 	$	51	 	$	—	 	$	—	 	$	51	 	

	

	 	

	

	 	

	

	 	

	

	 	

*	Securities lending fund at December 31, 2010 is offset by a liability of $158,155 recorded in the Pitney Bowes Pension Plan net assets available for benefits.	
86

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	U.S. Pension Plans - Fair Value Measurements at December 31, 2009	 	

	 	
 	 	Level 1	 	Level 2	 	Level 3	 	Total	 	

	 	

	 	

	 	

	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment securities	 	 	 	 	 	 	 	 	 	 	 	 	 	
Money market funds	 	$	—	 	$	95,534	 	$	—	 	$	95,534	 	
Equity securities	 	 	403,536	 	 	316,754	 	 	—	 	 	720,290	 	
Debt securities - U.S. and foreign governments, agencies, and municipalities	 	 	50,934	 	 	29,628	 	 	—	 	 	80,562	 	
Corporate debt securities	 	 	—	 	 	156,811	 	 	—	 	 	156,811	 	
Mortgage-backed securities	 	 	—	 	 	132,509	 	 	761	 	 	133,270	 	
Asset-backed securities	 	 	—	 	 	17,347	 	 	—	 	 	17,347	 	
Private equity	 	 	—	 	 	—	 	 	49,231	 	 	49,231	 	
Real estate	 	 	—	 	 	—	 	 	50,331	 	 	50,331	 	
Derivatives	 	 	135	 	 	—	 	 	—	 	 	135	 	
Securities lending fund *	 	 	—	 	 	139,416	 	 	—	 	 	139,416	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total assets	 	$	454,605	 	$	887,999	 	$	100,323	 	$	1,442,927	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment securities	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivatives	 	$	2,064	 	$	1	 	$	—	 	$	2,065	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total liabilities	 	$	2,064	 	$	1	 	$	—	 	$	2,065	 	

	

	 	

	

	 	

	

	 	

	

	 	

*	Securities lending fund at December 31, 2009 is offset by a liability of $139,416 recorded in the Pitney Bowes Pension Plan net assets available for benefits.	
87

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Foreign Pension Plans - Fair Value Measurements at December 31, 2010	 	

	 	
 	 	Level 1	 	Level 2	 	Level 3	 	Total	 	

	 	

	 	

	 	

	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment securities	 	 	 	 	 	 	 	 	 	 	 	 	 	
Money market funds	 	$	—	 	$	—	 	$	—	 	$	—	 	
Equity securities	 	 	128,859	 	 	164,389	 	 	—	 	 	293,248	 	
Debt securities - U.S. and foreign governments, agencies, and municipalities	 	 	10,751	 	 	50,355	 	 	—	 	 	61,106	 	
Corporate debt securities	 	 	—	 	 	78,387	 	 	—	 	 	78,387	 	
Mortgage-backed securities	 	 	—	 	 	—	 	 	—	 	 	—	 	
Asset-backed securities	 	 	—	 	 	—	 	 	—	 	 	—	 	
Private equity	 	 	—	 	 	—	 	 	—	 	 	—	 	
Real estate	 	 	—	 	 	—	 	 	—	 	 	—	 	
Derivatives	 	 	88	 	 	6,500	 	 	—	 	 	6,588	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total assets	 	$	139,698	 	$	299,631	 	$	—	 	$	439,329	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment securities	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivatives	 	$	—	 	$	6,873	 	$	—	 	$	6,873	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total liabilities	 	$	—	 	$	6,873	 	$	—	 	$	6,873	 	

	

	 	

	

	 	

	

	 	

	

	 	

 	 	Foreign Pension Plans - Fair Value Measurements at December 31, 2009	 	

	 	
 	 	Level 1	 	Level 2	 	Level 3	 	Total	 	

	 	

	 	

	 	

	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment securities	 	 	 	 	 	 	 	 	 	 	 	 	 	
Money market funds	 	$	—	 	$	—	 	$	—	 	$	—	 	
Equity securities	 	 	118,302	 	 	133,513	 	 	—	 	 	251,815	 	
Debt securities - U.S. and foreign governments, agencies, and municipalities	 	 	8,817	 	 	42,665	 	 	—	 	 	51,482	 	
Corporate debt securities	 	 	—	 	 	83,251	 	 	—	 	 	83,251	 	
Mortgage-backed securities	 	 	—	 	 	28	 	 	—	 	 	28	 	
Asset-backed securities	 	 	—	 	 	1,488	 	 	—	 	 	1,488	 	
Private equity	 	 	—	 	 	—	 	 	—	 	 	—	 	
Real estate	 	 	—	 	 	—	 	 	—	 	 	—	 	
Derivatives	 	 	—	 	 	—	 	 	—	 	 	—	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total assets	 	$	127,119	 	$	260,945	 	$	—	 	$	388,064	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment securities	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivatives	 	$	—	 	$	—	 	$	—	 	$	—	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total liabilities	 	$	—	 	$	—	 	$	—	 	$	—	 	

	

	 	

	

	 	

	

	 	

	

	 	
88

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

The following information relates to our classification of investments into the fair value hierarchy:
 	 	
•	Money Market Funds: Money market funds typically invest in government securities, certificates of deposit, commercial paper of companies and other highly liquid and low-risk securities. Money market funds are principally used for overnight deposits. The money market funds are classified as Level 2 since they are not actively traded on an exchange.	
 	 	
•	Equity Securities: Equity securities include U.S. and foreign common stock, American Depository Receipts, preferred stock and commingled funds. Equity securities classified as Level 1 are valued using active, high volume trades for identical securities. Equity securities classified as Level 2 represent those not listed on an exchange in an active market. These securities are valued based on quoted market prices of similar securities.	
 	 	
•	Debt Securities - U.S. and Foreign Governments and its Agencies and Municipalities: Government securities include treasury notes and bonds, foreign government issues, U.S. government sponsored agency debt and commingled funds. Municipal debt securities include general obligation securities and revenue-backed securities. Debt securities classified as Level 1 are valued using active, high volume trades for identical securities. Debt securities classified as Level 2 are valued through benchmarking model derived prices to quoted market prices and trade data for identical or comparable securities.	
 	 	
•	Corporate Debt Securities: Investments are comprised of both investment grade debt (≥BBB-) and high-yield debt (≤BBB-). The fair value of corporate debt securities is valued using recently executed transactions, market price quotations where observable, or bond spreads. The spread data used are for the same maturity as the security. These securities are classified as Level 2.	
 	 	
•	Mortgage-Backed Securities (MBS): Investments are comprised of agency-backed MBS, non-agency MBS, collateralized mortgage obligations, commercial MBS, and commingled funds. These securities are valued based on external pricing indices. When external index pricing is not observable, MBS are valued based on external price/spread data. If neither pricing method is available, broker quotes are utilized. When inputs are observable and supported by an active market, MBS are classified as Level 2 and when inputs are unobservable, MBS are classified as Level 3.	
 	 	
•	Asset-Backed Securities (ABS): Investments are primarily comprised of credit card receivables, auto loan receivables, student loan receivables, and Small Business Administration loans. These securities are valued based on external pricing indices or external price/spread data and are classified as Level 2.	
 	 	
•	Private Equity: Investments are comprised of units in fund-of-fund investment vehicles. Fund-of-funds consist of various private equity investments and are used in an effort to gain greater diversification. The investments are valued in accordance with the most appropriate valuation techniques, and are classified as Level 3 due to the unobservable inputs used to determine a fair value.	
 	 	
•	Real Estate: Investments include units in open-ended commingled real estate funds. Properties that comprise these funds are valued in accordance with the most appropriate valuation techniques, and are classified as Level 3 due to the unobservable inputs used to determine a fair value.	
 	 	
•	Derivatives: Instruments are comprised of futures, forwards, options and warrants and are used to gain exposure to a desired investment as well as for defensive hedging purposes against currency and interest rate fluctuations. Derivative instruments classified as Level 1 are valued through a readily available exchange listed price. Derivative instruments classified as Level 2 are valued using observable inputs but are not listed or traded on an exchange.	
 	 	
•	Securities Lending Fund: Investment represents a commingled fund through our custodian’s securities lending program. The U.S. pension plan lends securities that are held within the plan to other banks and/or brokers, for which we receive collateral. This collateral is invested in the commingled fund, which invests in short-term fixed income securities such as commercial paper, short-term ABS and other short-term issues. Since the commingled fund is not listed or traded on an exchange, the investment is classified as Level 2. The investment is offset by a liability of an equal amount representing assets that participate in securities lending program, which is reflected in the Pitney Bowes Pension Plan’s net assets available for benefits.	
89

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Level 3 Gains and Losses

The following table shows a summary of the changes in the fair value of Level 3 assets of the U.S. pension plans for the year ended December 31, 2010:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	MBS	 	Private
equity	 	Real estate	 	Total	 	

	 	

	 	

	 	

	 	
Balance at December 31, 2009	 	$	761	 	$	49,231	 	$	50,331	 	$	100,323	 	
Realized gains / (losses)	 	 	1	 	 	—	 	 	378	 	 	379	 	
Unrealized gains / (losses)	 	 	(139	)	 	5,652	 	 	2,374	 	 	7,887	 	
Purchases, sales, issuances and settlements (net)	 	 	4,766	 	 	14,612	 	 	(530	)	 	18,848	 	

	

	 	

	

	 	

	

	 	

	

	 	
Balance at December 31, 2010	 	$	5,389	 	$	69,495	 	$	52,553	 	$	127,437	 	

	

	 	

	

	 	

	

	 	

	

	 	
Reconciliation of Plan Assets to Fair Value Measurements Hierarchy

The following table provides a reconciliation of the total fair value of pension plan assets to the fair value of financial instruments presented in the fair value measurements hierarchy for the U.S. and foreign pension plans at December 31, 2010:
 	 	 	 	 	 	 	 	
 	 	United States	 	Foreign	 	

	 	

	 	
Fair Value of Plan Assets	 	$	1,385,174	 	$	450,683	 	
Cash	 	 	(675	)	 	(15,185	)	
Securities lending fund liability	 	 	158,155	 	 	—	 	
Receivables / Prepaid benefits	 	 	(24,041	)	 	—	 	
Payables / Accrued expenses	 	 	26,636	 	 	—	 	
Other	 	 	19	 	 	(3,042	)	

	

	 	

	

	 	
Fair Value Per Measurements Hierarchy	 	$	1,545,268	 	$	432,456	 	

	

	 	

	

	 	
Nonpension Postretirement Benefits

We provide certain health care and life insurance benefits to eligible retirees and their dependents. The cost of these benefits is recognized over the period the employee provides credited services to the Company. Substantially all of our U.S. and Canadian employees become eligible for retiree health care benefits after reaching age 55 or in the case of employees of Pitney Bowes Management Services after reaching age 60 and with the completion of the required service period. U.S. employees hired after January 1, 2005, and Canadian employees hired after April 1, 2005, are not eligible for retiree health care benefits.

The change in benefit obligation, plan assets and the funded status for nonpension postretirement benefit plans are as follows:
 	 	 	 	 	 	 	 	
 	 	December 31,	 	

	 	
 	 	2010	 	2009	 	

	 	

	 	
Change in benefit obligation:	 	 	 	 	 	 	 	
Benefit obligations at beginning of year	 	$	254,405	 	$	244,544	 	
Service cost	 	 	3,724	 	 	3,424	 	
Interest cost	 	 	13,828	 	 	14,437	 	
Plan participants’ contributions	 	 	9,182	 	 	8,778	 	
Actuarial loss	 	 	33,983	 	 	21,489	 	
Foreign currency changes	 	 	1,061	 	 	2,509	 	
Gross benefits paid	 	 	(45,971	)	 	(43,494	)	
Less federal subsidy on benefits paid	 	 	2,408	 	 	2,718	 	
Curtailment	 	 	7,575	 	 	—	 	
Special termination benefits	 	 	191	 	 	—	 	

	

	 	

	

	 	
Benefit obligations at end of year	 	$	280,386	 	$	254,405	 	

	

	 	

	

	 	
90

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	
 	 	December 31,	 	

	 	
 	 	2010	 	2009	 	

	 	

	 	
 	 	 	 	 	 	 	 	
Change in plan assets:	 	 	 	 	 	 	 	
Fair value of plan assets at beginning of year	 	$	—	 	$	—	 	
Company contribution	 	 	34,381	 	 	31,998	 	
Plan participants’ contributions	 	 	9,182	 	 	8,778	 	
Gross benefits paid	 	 	(45,971	)	 	(43,494	)	
Less federal subsidy on benefits paid	 	 	2,408	 	 	2,718	 	

	

	 	

	

	 	
Fair value of plan assets at end of year	 	$	—	 	$	—	 	

	

	 	

	

	 	
Funded status, end of year:	 	 	 	 	 	 	 	
Fair value of plan assets at end of year	 	$	—	 	$	—	 	
Benefit obligations at end of year	 	 	280,386	 	 	254,405	 	

	

	 	

	

	 	
Funded status	 	$	(280,386	)	$	(254,405	)	

	

	 	

	

	 	
Amounts recognized in the Consolidated Balance Sheets:	 	 	 	 	 	 	 	
Current liability	 	$	(29,374	)	$	(26,293	)	
Non-current liability	 	 	(251,012	)	 	(228,112	)	

	

	 	

	

	 	
Net amount recognized	 	$	(280,386	)	$	(254,405	)	

	

	 	

	

	 	
Pre-tax amounts recognized in AOCI consist of:	 	 	 	 	 	 	 	
Net actuarial loss	 	$	102,910	 	$	74,044	 	
Prior service credit	 	 	(5,886	)	 	(8,397	)	

	

	 	

	

	 	
Total	 	$	97,024	 	$	65,647	 	

	

	 	

	

	 	
The discount rates used in determining the accumulated postretirement benefit obligations for the U.S. plan were 5.15% in 2010 and 5.35% in 2009. The discount rates used in determining the accumulated postretirement benefit obligations for the Canadian plan were 5.15% in 2010 and 5.85% in 2009.

The components of the net periodic benefit cost for nonpension postretirement benefit plans are as follows:
 	 	 	 	 	 	 	 	 	 	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Service cost	 	$	3,724	 	$	3,424	 	$	3,613	 	
Interest cost	 	 	13,828	 	 	14,437	 	 	14,410	 	
Amortization of prior service benefit	 	 	(2,511	)	 	(2,475	)	 	(2,471	)	
Recognized net actuarial loss	 	 	6,793	 	 	4,092	 	 	3,386	 	
Curtailment	 	 	6,954	 	 	—	 	 	—	 	
Special termination benefits	 	 	191	 	 	—	 	 	—	 	

	

	 	

	

	 	

	

	 	
Net periodic benefit cost (1)	 	$	28,979	 	$	19,478	 	$	18,938	 	

	

	 	

	

	 	

	

	 	
(1) Includes $7.1 million charged to restructuring reserves. See Note 14 for further information.

91

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Other changes in plan assets and benefit obligation for nonpension postretirement benefit plans recognized in other comprehensive income are as follows:
 	 	 	 	 	 	 	 	
 	 	2010	 	2009	 	

	 	

	 	
Net actuarial loss	 	$	34,059	 	$	21,367	 	
Amortization of net actuarial loss	 	 	(6,793	)	 	(4,092	)	
Amortization of prior service credit	 	 	2,511	 	 	2,475	 	
Adjustment for actual Medicare Part D Premium	 	 	979	 	 	1,005	 	
Curtailment	 	 	621	 	 	—	 	

	

	 	

	

	 	
Total recognized in other comprehensive income	 	$	31,377	 	$	20,755	 	

	

	 	

	

	 	
Weighted average assumptions used to determine net periodic costs during the years:
 	 	 	 	 	 	 	 	 	 	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Discount rate – U.S.	 	 	5.35%	 	 	5.95%	 	 	5.90%	 	
Discount rate – Canada	 	 	5.85%	 	 	6.60%	 	 	5.25%	 	
The estimated amounts that will be amortized from AOCI into net periodic benefit cost in 2011 are as follows:
 	 	 	 	 	
Net actuarial loss	 	$	7,977	 	
Prior service credit	 	 	(2,259	)	

	

	 	
Total	 	$	5,718	 	

	

	 	
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligations for the U.S. plan was 7.5% for 2010 and 7.5% for 2009. The assumed health care trend rate is 7.5% for 2011 and will gradually decline to 5.0% by the year 2017 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1% change in the assumed health care cost trend rates would have the following effects:
 	 	 	 	 	 	 	 	
 	 	1% Increase	 	1% Decrease	 	

	 	

	 	
Effect on total of service and interest cost components	 	$	616	 	$	(527	)	
Effect on postretirement benefit obligations	 	$	9,366	 	$	(8,204	)	
 	 	 	 	 	 	 	 	
92

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

Estimated Future Benefit Payments

Benefit payments, which reflect expected future service, as appropriate, estimated to be paid during the years ended December 31 are as follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Nonpension	 	

	 	
 	 	Pension
Benefits	 	Gross	 	Medicare Part
D Subsidy	 	Net	 	

	 	

	 	

	 	

	 	
2011	 	$	191,476	 	$	31,978	 	$	(2,639	)	$	29,339	 	
2012	 	 	137,775	 	 	30,648	 	 	(2,883	)	 	27,765	 	
2013	 	 	126,910	 	 	29,277	 	 	(3,130	)	 	26,147	 	
2014	 	 	130,788	 	 	28,166	 	 	(3,339	)	 	24,827	 	
2015	 	 	132,588	 	 	27,018	 	 	(3,543	)	 	23,475	 	
2016-2020	 	 	688,055	 	 	123,020	 	 	(9,675	)	 	113,345	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	$	1,407,592	 	$	270,107	 	$	(25,209	)	$	244,898	 	

	

	 	

	

	 	

	

	 	

	

	 	
Savings Plans

Our U.S. employees are eligible to participate in 401(k) savings plans, which are voluntary defined contribution plans. These plans are designed to help employees accumulate additional savings for retirement. We make matching contributions on a portion of eligible pay. In 2010 and 2009, we made matching contributions of $28.6 million and $27.2 million, respectively.

93

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

20. Earnings per Share

The calculation of basic and diluted earnings per share for the years ended December 31, 2010, 2009 and 2008 is presented below. Note that the sum of the earnings per share amounts may not equal the total due to rounding.

	 	
 	 	2010	 	2009	 	2008	 	

	 	

	 	

	 	
Numerator:	 	 	 	 	 	 	 	 	 	 	
Amounts attributable to common stockholders:	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations, net of tax	 	$	310,483	 	$	431,554	 	$	447,493	 	
Loss from discontinued operations	 	 	(18,104	)	 	(8,109	)	 	(27,700	)	

	

	 	

	

	 	

	

	 	
Net income (numerator for diluted EPS)	 	 	292,379	 	 	423,445	 	 	419,793	 	
Less: Preference stock dividend	 	 	(65	)	 	(72	)	 	(77	)	

	

	 	

	

	 	

	

	 	
Income attributable to common stockholders (numerator for basic EPS)	 	$	292,314	 	$	423,373	 	$	419,716	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Denominator (in thousands):	 	 	 	 	 	 	 	 	 	 	
Weighted-average shares used in basic EPS	 	 	205,968	 	 	206,734	 	 	208,425	 	
Effect of dilutive shares:	 	 	 	 	 	 	 	 	 	 	
Preferred stock	 	 	2	 	 	3	 	 	3	 	
Preference stock	 	 	501	 	 	568	 	 	601	 	
Stock options and stock purchase plans	 	 	16	 	 	7	 	 	603	 	
Other stock plans	 	 	266	 	 	10	 	 	67	 	

	

	 	

	

	 	

	

	 	
Weighted-average shares used in diluted EPS	 	 	206,753	 	 	207,322	 	 	209,699	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share:	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$	1.51	 	$	2.09	 	$	2.15	 	
Loss from discontinued operations	 	 	(0.09	)	 	(0.04	)	 	(0.13	)	

	

	 	

	

	 	

	

	 	
Net income	 	$	1.42	 	$	2.05	 	$	2.01	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Diluted earnings per share:	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$	1.50	 	$	2.08	 	$	2.13	 	
Loss from discontinued operations	 	 	(0.09	)	 	(0.04	)	 	(0.13	)	

	

	 	

	

	 	

	

	 	
Net income	 	$	1.41	 	$	2.04	 	$	2.00	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	
Anti-dilutive shares (in thousands):	 	 	 	 	 	 	 	 	 	 	
Anti-dilutive shares not used in calculating diluted weighted-average shares	 	 	15,168	 	 	18,319	 	 	15,749	 	

	

	 	

	

	 	

	

	 	
94

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)

21. Quarterly Financial Data (unaudited)

Summarized quarterly financial data for 2010 and 2009 follows:
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2010	 	 	First
Quarter	 	Second
Quarter	 	Third
Quarter	 	Fourth
Quarter	 	Full
Year	 	

	 	 	

	 	

	 	

	 	

	 	

	 	
Total revenue	 	$	1,348,233	 	$	1,297,237	 	$	1,345,742	 	$	1,434,042	 	$	5,425,254	 	
Gross profit (1)	 	 	691,788	 	 	645,307	 	 	679,412	 	 	730,424	 	 	2,746,931	 	
Restructuring charges and asset impairments	 	 	20,722	 	 	48,512	 	 	33,805	 	 	79,235	 	 	182,274	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	 	86,763	 	 	68,590	 	 	96,064	 	 	77,390	 	 	328,807	 	
Loss from discontinued operations, net of income tax	 	 	(3,130	)	 	(2,666	)	 	(2,536	)	 	(9,772	)	 	(18,104	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income before attribution of noncontrolling interests	 	 	83,633	 	 	65,924	 	 	93,528	 	 	67,618	 	 	310,703	 	
Less: Preferred stock dividends of subsidiaries attributable to noncontrolling interests	 	 	4,594	 	 	4,543	 	 	4,593	 	 	4,594	 	 	18,324	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income	 	$	79,039	 	$	61,381	 	$	88,935	 	$	63,024	 	$	292,379	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amounts attributable to common stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$	82,169	 	$	64,047	 	$	91,471	 	$	72,796	 	$	310,483	 	
Loss from discontinued operations	 	 	(3,130	)	 	(2,666	)	 	(2,536	)	 	(9,772	)	 	(18,104	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income	 	$	79,039	 	$	61,381	 	$	88,935	 	$	63,024	 	$	292,379	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic earnings per share attributable to common stockholders (2):	 	 	 	 	 	 	 	 	
Continuing operations	 	$	0.40	 	$	0.31	 	$	0.44	 	$	0.36	 	$	1.51	 	
Discontinued operations	 	 	(0.02	)	 	(0.01	)	 	(0.01	)	 	(0.05	)	 	(0.09	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net Income	 	$	0.38	 	$	0.30	 	$	0.43	 	$	0.31	 	$	1.42	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	
Diluted earnings per share attributable to common stockholders (2):	 	 	 	 	 	 	 	
Continuing operations	 	$	0.40	 	$	0.31	 	$	0.44	 	$	0.36	 	$	1.50	 	
Discontinued operations	 	 	(0.02	)	 	(0.01	)	 	(0.01	)	 	(0.05	)	 	(0.09	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net Income	 	$	0.38	 	$	0.30	 	$	0.43	 	$	0.31	 	$	1.41	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
95

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
2009	 	First
Quarter	 	Second
Quarter	 	Third
Quarter	 	Fourth
Quarter	 	Full
Year	 	

	 	

	 	

	 	

	 	

	 	

	 	
Total revenue	 	$	1,379,584	 	$	1,378,462	 	$	1,356,820	 	$	1,454,305	 	$	5,569,171	 	
Gross profit (1)	 	 	701,988	 	 	685,596	 	 	688,373	 	 	755,190	 	 	2,831,147	 	
Restructuring charges and asset impairments	 	 	—	 	 	—	 	 	12,845	 	 	35,901	 	 	48,746	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	 	106,300	 	 	116,731	 	 	110,278	 	 	119,713	 	 	453,022	 	
Gain (loss) from discontinued operations, net of income tax	 	 	2,623	 	 	5,102	 	 	(2,429	)	 	(13,405	)	 	(8,109	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income before attribution of noncontrolling interests	 	 	108,923	 	 	121,833	 	 	107,849	 	 	106,308	 	 	444,913	 	
Less: Preferred stock dividends of subsidiaries attributable to noncontrolling interests	 	 	4,521	 	 	4,571	 	 	4,622	 	 	7,754	 	 	21,468	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income	 	$	104,402	 	$	117,262	 	$	103,227	 	$	98,554	 	$	423,445	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Amounts attributable to common stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from continuing operations	 	$	101,779	 	$	112,160	 	$	105,656	 	$	111,959	 	$	431,554	 	
Gain (loss) from discontinued operations	 	 	2,623	 	 	5,102	 	 	(2,429	)	 	(13,405	)	 	(8,109	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income	 	$	104,402	 	$	117,262	 	$	103,227	 	$	98,554	 	$	423,445	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Basic earnings per share attributable to common stockholders (2):	
Continuing operations	 	$	0.49	 	$	0.54	 	$	0.51	 	$	0.54	 	$	2.09	 	
Discontinued operations	 	 	0.01	 	 	0.02	 	 	(0.01	)	 	(0.06	)	 	(0.04	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income	 	$	0.51	 	$	0.57	 	$	0.50	 	$	0.48	 	$	2.05	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Diluted earnings per share attributable to common stockholders (2):	
Continuing operations	 	$	0.49	 	$	0.54	 	$	0.51	 	$	0.54	 	$	2.08	 	
Discontinued operations	 	 	0.01	 	 	0.02	 	 	(0.01	)	 	(0.06	)	 	(0.04	)	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Net income	 	$	0.50	 	$	0.57	 	$	0.50	 	$	0.47	 	$	2.04	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	

(1)	Gross profit is defined as total revenue less cost of equipment sales, cost of supplies, cost of software, cost of rentals, financing interest expense, cost of support services and cost of business services.	
 	 	
(2)	The sum of the quarterly earnings per share amounts may not equal the annual amount due to rounding.	
96

PITNEY BOWES INC.
S CHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES

FOR THE YEARS ENDED DECEMBER 31, 2008 TO 2010
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Dollars in thousands)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Description	 	Balance at
beginning of year	 	Additions	 	Deductions	 	Balance at
end of year	 	

	 	

	 	

	 	

	 	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance for doubtful accounts	 	 	 	 	 	 	 	 	 	 	 	 	 	
2010	 	$	42,781	 	$	9,266	(1)	$	(20,167	) (2)	$	31,880	 	
2009	 	$	45,264	 	$	10,516	(1)	$	(12,999	) (2)	$	42,781	 	
2008	 	$	49,324	 	$	17,134	(1)	$	(21,194	) (2)	$	45,264	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Valuation allowance for deferred tax asset (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	
2010	 	$	95,990	 	$	22,168	 	$	(13,717	)	$	104,441	 	
2009	 	$	91,405	 	$	5,628	 	$	(1,043	)	$	95,990	 	
2008	 	$	69,792	 	$	37,942	 	$	(16,329	)	$	91,405	 	

(1)	Includes additions charged to expenses, additions from acquisitions and impact of foreign exchange translation.	
 	 	
(2)	Includes uncollectible accounts written off.	
 	 	
(3)	Included in Consolidated Balance Sheet as a liability.	
97

Exhibit Index
 	 	 	 	 	 	 	
Reference
Number per Item
601 of Regulation
SK	 	Exhibit
Number in this
Form 10-K	 	Document Name	 	Page Number	

	

	

	

	

	

	

	
(12)	 	Exhibit (i)	 	Computation of Ratio of Earnings to Fixed Charges	 	99	
 	 	 	 	 	 	 	
(21)	 	Exhibit (ii)	 	Subsidiaries of the Registrant	 	100	
 	 	 	 	 	 	 	
(23)	 	Exhibit (iii)	 	Consent of Independent Registered Public Accounting Firm	 	103	
 	 	 	 	 	 	 	
(10)(p)	 	Exhibit (iv)	 	Separation (Compromise) Agreement dated December 30, 2010, by and between Patrick Keddy and Pitney Bowes Limited	 	104	
 	 	 	 	 	 	 	
(31.1)	 	Exhibit 31.1	 	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.	 	142	
 	 	 	 	 	 	 	
(31.2)	 	Exhibit 31.2	 	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended	 	143	
 	 	 	 	 	 	 	
(32.1)	 	Exhibit 32.1	 	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350	 	144	
 	 	 	 	 	 	 	
(32.2)	 	Exhibit 32.2	 	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350	 	145	
 	 	 	 	 	 	 	
101.INS	 	 	 	XBRL Report Instance Document	 	 	
 	 	 	 	 	 	 	
101.SCH	 	 	 	XBRL Taxonomy Extension Schema Document	 	 	
 	 	 	 	 	 	 	
101.CAL	 	 	 	XBRL Taxonomy Calculation Linkbase Document	 	 	
 	 	 	 	 	 	 	
101.DEF	 	 	 	XBRL Taxonomy Definition Linkbase Document	 	 	
 	 	 	 	 	 	 	
101.LAB	 	 	 	XBRL Taxonomy Label Linkbase Document	 	 	
 	 	 	 	 	 	 	
101.PRE	 	 	 	XBRL Taxonomy Presentation Linkbase Document	 	 	
98

EXHIBIT (i)

PITNEY BOWES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (1)
(Dollars in thousands)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Years ended December 31,	 	

	 	
 	 	2010	 	2009	 	2008	 	2007	 	2006	 	

	 	

	 	

	 	

	 	

	 	
Income from continuing operations before income taxes	 	$	534,577	 	$	693,176	 	$	713,177	 	$	660,711	 	$	914,490	 	
Add:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense (2)	 	 	203,911	 	 	208,855	 	 	229,343	 	 	250,540	 	 	228,418	 	
Portion of rents representative of the interest factor	 	 	39,219	 	 	41,499	 	 	43,030	 	 	48,969	 	 	46,255	 	
Amortization of capitalized interest	 	 	1,716	 	 	1,716	 	 	1,717	 	 	1,717	 	 	1,345	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Income as adjusted	 	$	779,423	 	$	945,246	 	$	987,267	 	$	961,937	 	$	1,190,508	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fixed charges:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense (2)	 	$	203,911	 	$	208,855	 	$	229,343	 	$	250,540	 	$	228,418	 	
Portion of rents representative of the interest factor	 	 	39,219	 	 	41,499	 	 	43,030	 	 	48,969	 	 	46,255	 	
Noncontrolling interests (preferred stock dividends of subsidiaries), excluding taxes	 	 	29,790	 	 	32,851	 	 	31,610	 	 	33,412	 	 	21,819	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
Total fixed charges	 	$	272,920	 	$	283,205	 	$	303,983	 	$	332,921	 	$	296,492	 	

	

	 	

	

	 	

	

	 	

	

	 	

	

	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Ratio of earnings to fixed charges	 	 	2.86	 	 	3.34	 	 	3.25	 	 	2.89	 	 	4.02	 	

(1)     The computation of the ratio of earnings to fixed charges has been computed by dividing income from continuing operations before income taxes as adjusted by fixed charges. Included in fixed charges is one-third of rental expense as the representative portion of interest.	
 	 	
(2)     Interest expense includes both financing interest expense and other interest expense.	
99

EXHIBIT (ii)
Page 1 of 3

PITNEY BOWES INC.
SUBSIDIARIES OF THE REGISTRANT

The Registrant, Pitney Bowes Inc., a Delaware Corporation, has no parent.

The following are subsidiaries of the Registrant
(as of December 31, 2010)
 	 	 	
Company name	 	Country or state
of incorporation	

	 	

	
 	 	 	
Addressing Systems International Holdings Limited	 	UK	
Adrema Leasing Corporation	 	Delaware	
Andean Enterprises, Inc.	 	Panama	
Alternative Mail & Parcel Investments Limited	 	UK	
Archiver Limited f/k/a Micromedia Limited	 	UK	
Asterion Direct SAS	 	France	
B. Williams Funding Corp.	 	Delaware	
B. Williams Holding Corp.	 	Delaware	
Canadian Office Services (Toronto) Limited	 	Canada	
Cascade Microfilm Systems, Inc.	 	California	
Digital Cement Inc.	 	Delaware	
Digital Cement Co.	 	Canada	
Elmcroft Road Realty Corporation	 	Connecticut	
Emtex Limited	 	UK	
Emtex Software, Inc.	 	Florida	
Emtex Software, Inc.	 	Canada	
Encom Europe Limited	 	UK	
FSL Holdings Inc.	 	Connecticut	
FSL Risk Managers Inc.	 	New York	
Group 1 Software China Ltd.	 	Hong Kong	
Harvey Company, L.L.C	 	Delaware	
Historic Boardwalk Hall, L.L.C.	 	Delaware	
Horizon Management AB	 	Sweden	
Horizon Scandinavia AB	 	Sweden	
Ibis Consulting, Inc.	 	Rhode Island	
Imagitas, Inc.	 	Delaware	
Imagitas Security Corporation	 	Massachusetts	
International Imaging Limited	 	UK	
Mag Systèmes SAS	 	France	
MapInfo Realty LLC	 	New York	
PB Australia Funding Pty. Limited	 	Australia	
PB Equipment Management Inc.	 	Delaware	
PB Forms, Inc.	 	Nebraska	
PB Historic Renovation LLC	 	Delaware	
PB Leasing Corporation	 	Delaware	
PB Miles Inc.	 	Delaware	
PB Nova Scotia II ULC	 	Canada	
PB Nova Scotia Holdings ULC	 	Canada	
PB Nova Scotia Holdings II ULC	 	Canada	
PB Nova Scotia LP	 	Delaware	
PB Partnership Financing Inc.	 	Delaware	
PB Professional Services Inc.	 	Delaware	
PBDorm Ireland Limited	 	Ireland	
Pitney Bowes (Asia Pacific) Pte. Ltd	 	Singapore	
Pitney Bowes Asterion SAS	 	France	
Pitney Bowes Australia FAS Pty. Limited	 	Australia	
Pitney Bowes Australia Pty Limited	 	Australia	
Pitney Bowes Austria Ges.m.b.H	 	Austria	
Pitney Bowes Batsumi Enterprise (Pty) Ltd.	 	South Africa	
Pitney Bowes Belgium NV	 	Belgium	
Pitney Bowes of Canada Ltd. - Pitney Bowes du Canada Ltee	 	Canada	
Pitney Bowes China Inc.	 	Delaware	
Pitney Bowes Credit Australia Limited	 	Australia	
Pitney Bowes Cross Border Services, Inc	 	Delaware	
Pitney Bowes Denmark A/S (formerly Haro Systemer AS)	 	Denmark	
Pitney Bowes de Mexico, S.A. de C.V.	 	Mexico	
Pitney Bowes Deutschland GmbH	 	Germany	
Pitney Bowes Document Messaging Technologies Limited (formerly Bell & Howell Limited)	 	UK	
Pitney Bowes (Dormant) Pte Ltd.	 	Singapore	
Pitney Bowes Espana, S.A.	 	Spain	
Pitney Bowes Finance Limited (formerly Pitney Bowes Finance plc)	 	UK	
Pitney Bowes Finance Ireland Limited	 	Ireland	
100

EXHIBIT (ii)
Page 2 of 3

PITNEY BOWES INC.
SUBSIDIARIES OF THE REGISTRANT
 	 	 	
Company name	 	Country or state
of incorporation	

	 	

	
 	 	 	
Pitney Bowes Global Financial Services LLC	 	Delaware	
Pitney Bowes Global Limited	 	UK	
Pitney Bowes Global LLC	 	Delaware	
Pitney Bowes Government Solutions, Inc.	 	Delaware	
Pitney Bowes Holding SNC	 	France	
Pitney Bowes Holdings B.V.	 	Netherlands	
Pitney Bowes Holdings Denmark ApS	 	Denmark	
Pitney Bowes Holdings Limited	 	UK	
Pitney Bowes Hong Kong Limited	 	Hong Kong	
Pitney Bowes India Inc.	 	Delaware	
Pitney Bowes India Private Limited	 	India	
Pitney Bowes International	 	Ireland	
Pitney Bowes International Funding	 	Ireland	
Pitney Bowes International Holdings, Inc.	 	Delaware	
Pitney Bowes Ireland Limited	 	Ireland	
Pitney Bowes Italia S.r.l.	 	Italy	
Pitney Bowes International Mail Services Limited	 	UK	
Pitney Bowes Japan KK	 	Japan	
Pitney Bowes Korea Ltd.	 	Korea	
Pitney Bowes Limited	 	UK	
Pitney Bowes Luxembourg Holding S.a.r.l.	 	Luxembourg	
Pitney Bowes Luxembourg SARL	 	Luxembourg	
Pitney Bowes Mail and Messaging Systems (Shanghai) Co., Ltd.	 	Shanghai	
Pitney Bowes (Malaysia) Sdn Bhd	 	Malaysia	
Pitney Bowes Management Services Belgium, NV	 	Belgium	
Pitney Bowes Management Services Canada, Inc Services de Gestion Pitney Bowes Canada, Inc.	 	Canada	
Pitney Bowes Management Services Denmark, A/S	 	Denmark	
Pitney Bowes Management Services Deutschland GmbH	 	Germany	
Pitney Bowes Management Services Italia S.r.l.	 	Italy	
Pitney Bowes Management Services Limited	 	UK	
Pitney Bowes Management Services Netherlands, B.V.	 	Netherlands	
Pitney Bowes Management Services Norway A.S.	 	Norway	
Pitney Bowes Management Services Sweden AB	 	Sweden	
Pitney Bowes Management Services, Inc.	 	Delaware	
Pitney Bowes MapInfo Business Applications Limited (formerly Southbank Systems Limited)	 	UK	
Pitney Bowes MapInfo GDC Limited (formerly Graphical Data Capture Limited)	 	UK	
Pitney Bowes Software India Private Limited (formerly Pitney Bowes MapInfo India Private Limited)	 	India	
Pitney Bowes MapInfo Scotland Limited (formerly Moleseye Limited)	 	UK	
Pitney Bowes Software Holdings Limited (formerly Pitney Bowes MapInfo UK Limited)	 	UK	
Pitney Bowes Netherlands B.V.	 	Netherlands	
Pitney Bowes New Zealand Limited	 	New Zealand	
Pitney Bowes Norge AS	 	Norway	
Pitney Bowes Nova Scotia ULC	 	Canada	
Pitney Bowes Oy	 	Finland	
Pitney Bowes PBS Ltd	 	Korea	
Pitney Bowes Polska Sp. z.o.o.	 	Poland	
Pitney Bowes Portugal Sociedade Unipessoal, Lda.	 	Portugal	
Pitney Bowes Properties Inc.	 	Connecticut	
Pitney Bowes Puerto Rico, Inc.	 	Puerto Rico	
Pitney Bowes SA (Pty) Ltd.	 	South Africa	
Pitney Bowes SAS	 	France	
Pitney Bowes Semco Equipamentos E Servicos Ltda	 	Brazil	
Pitney Bowes Servicios, S.A. de C.V.	 	Mexico	
Pitney Bowes Shelton Realty Inc.	 	Connecticut	
Pitney Bowes (Singapore) Pte Ltd.	 	Singapore	
Pitney Bowes Software (Beijing) Ltd	 	China	
Pitney Bowes Software Canada Inc.	 	Canada	
Pitney Bowes Software Europe GmbH	 	Germany	
Pitney Bowes Software Europe Limited	 	UK	
Pitney Bowes Software GmbH	 	Germany	
Pitney Bowes Software Inc.	 	Delaware	
Pitney Bowes Software K. K.	 	Japan	
Pitney Bowes Software Latin America Inc.	 	Delaware	
Pitney Bowes Software Limited	 	UK	
101

EXHIBIT (ii)
Page 3 of 3

PITNEY BOWES INC.
SUBSIDIARIES OF THE REGISTRANT

Company name	 	Country or state
of incorporation	

	 	

	
 	 	 	
Pitney Bowes Software Pte Ltd	 	Singapore	
Pitney Bowes Software Pty Ltd	 	Australia	
Pitney Bowes Software SAS	 	France	
Pitney Bowes Svenska Aktiebolag	 	Sweden	
Pitney Bowes (Switzerland) AG	 	Switzerland	
Pitney Bowes (Thailand) Limited	 	Thailand	
PitneyWorks.com Inc.	 	Delaware	
PitneyWorks.com L.L.C.	 	Delaware	
Print, Inc.	 	Washington	
PrintValue Solutions, Inc.	 	Arizona	
Pitney Bowes Presort Services, Inc. (formerly PSI Group, Inc.)	 	Delaware	
P. Technical Services Limited	 	UK	
Sagent (Malaysia) Sdn Bhd	 	Malaysia	
Sagent UK Limited	 	UK	
Secap Technologies Limited	 	UK	
Services Integrations Group, L.P.	 	Delaware	
SIG-GP, L.L.C.	 	Delaware	
Technopli SARL	 	France	
The Pitney Bowes Bank, Inc.	 	Utah	
Universal Postal Frankers Ltd.	 	UK	
Wheeler Insurance, Ltd.	 	Vermont	
 	 	 	
Pitney Bowes Europe Limited	 	UK	
Pitney Bowes Luxembourg Holding II S.a.r.l.	 	Luxembourg	
Pitney Bowes Software Private Limited	 	India	
Factor Humano y Cadena de Personal	 	Mexico	
Pitney Bowes Relief Fund, Inc.	 	Connecticut	
Pitney Bowes Middle East FZ-LLC	 	Dubai	
Portrait Software plc	 	UK	
Portrait Software International Ltd.	 	UK	
Portrait Software UK Ltd	 	UK	
Portrait International, Inc.	 	Ohio	
Portrait Million Handshakes AS	 	Norway	
Quadstone Paramics Ltd	 	Scotland	
Portrait Software International Ltd Branch Australia	 	Australia	
AIT Quest Trustee Ltd	 	UK	
Quadstone Trustee Company Ltd	 	Scotland	
PB European UK LLC	 	Delaware	
102

EXHIBIT (iii)

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form
 	 	 	 	
Form	 	Reference	 	

	 	

	 	
 	 	
Form S-8	No. 33-5291	
Form S-8	No. 33-4549	
Form S-8	No. 33-22238	
Form S-8	No. 33-5765	
Form S-8	No. 33-41182	
Form S-8	No. 333-66735	
Form S-8	No. 333-05731	
Form S-8	No. 333-132589	
Form S-8	No. 333-132590	
Form S-8	No. 333-132591	
Form S-8	No. 333-132592	
Form S-8	No. 333-145527	
Form S-3	No. 33-5289	
Form S-3	No. 33-5290	
Form S-3	No. 33-18280	
Form S-3	No. 33-25730	
Form S-3	No. 33-21723	
Form S-3	No. 33-27244	
Form S-3	No. 33-33948	
Form S-3	No. 333-72304	
Form S-3	No. 333-109966	
Form S-3	No. 333-120525	
Form S-3	No. 333-122481	
Form S-3	No. 333-151753	
Form S-3	No. 333-149474	
Form S-3	No. 333-161357	
of Pitney Bowes Inc. of our report dated February 25, 2011 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
 	 	
/s/ PricewaterhouseCoopers LLP	 	
PricewaterhouseCoopers LLP	 	
Stamford, Connecticut	 	
February 25, 2011	 	
103

 	 	 	 	
 	DATED	December 30, 2010	 	

 	 	 	 	
 	PITNEY BOWES LIMITED	 	 	
 	 	(1)	 	
 	 	 	 	
 	PATRICK KEDDY	 	 	
 	 	(2)	 	

 	 	 	 	
 	 	 	 	
 	Compromise Agreement	 	 	

 	

Brierly Place  New London Road
Chelmsford  Essex  CM2 0AP
dx 89703 Chelmsford 2
t: 01245 211211   f: 01245 354764
www.birketts.co.uk	
104

THIS AGREEMENT is dated December 30, 2010
 	 	
PARTIES	
 	 	
(1)	Pitney Bowes Limited incorporated and registered in England and Wales with company number 182037 whose registered office is at Elizabeth Way, The Pinnacles, Harlow, Essex CM19 5BD ( Company )	
(2)	Patrick Keddy of Trevonen, The Clump, Rickmansworth WD3 4BD (Employee)	
 	 	
BACKGROUND	
 	 	
(A)	The Employee has been employed by the Company from 2 May 1989, most recently as President of Pitney Bowes International under a service agreement dated 29 January 2003 ( Contract ).	
 	 	
(B)	The Employee’s employment with the Company shall terminate on 31 December 2011 unless such date is brought forward following a request from the Employee in accordance with this agreement.	
 	 	
(C)	The parties have entered into this agreement to record and implement the terms on which they have agreed to settle any claims which the Employee has or may have in connection with his employment or its termination or otherwise against any Group Company (as defined below) or their officers or employees whether or not those claims are, or could be, in the contemplation of the parties at the time of signing this agreement, and including, in particular, the statutory complaints which the Employee raises in this agreement.	
 	 	
(D)	The parties intend this agreement to be an effective waiver of any such claims and to satisfy the conditions relating to compromise agreements in the relevant legislation.	
 	 	
(E)	The Company enters into this agreement for itself and as agent and trustee for all Group Companies and it is authorised to do so. It is the parties’ intention that each Group Company should be able to enforce any rights it has under this agreement, subject to and in accordance with the Contracts (Rights of Third Parties) Act 1999.	
 	 	
AGREED TERMS	

1.	Interpretation	 	 	 	
 	 	 	 	 	
1.1	The definitions in this clause apply in this agreement.	
 	 	 	 	 	
 	Adviser	 	Richard Yeomans of Addleshaw Goddard LLP;	 	
 	Board	 	the board of directors of the Company (including any committee of the board duly appointed by it);	 	
 	Confidential Information	 	information in whatever form (including, without limitation, in written, oral, visual or electronic form or on any magnetic or optical disk or memory and wherever located) relating to the business, products, affairs and finances of any Group Company for the time being confidential to any Group Company and trade secrets including, without limitation, technical data and know-how relating to the business of any Group Company or any of their suppliers, clients, customers, agents, distributors, shareholders or management, including (but not limited to) information that the Employee created, developed, received or obtained in connection with his employment, whether or not such information (if in anything other than oral form) is marked confidential;	 	
 	Copies	 	copies or records of any Confidential Information in	 	
105

 	 	 	 	 	
 	 	 	whatever form (including, without limitation, in written, oral, visual or electronic form or on any magnetic or optical disk or memory and wherever located) including, without limitation, extracts, analysis, studies, plans, compilations or any other way of representing or recording and recalling information which contains, reflects or is derived or generated from Confidential Information;	 	
 	Group Company	 	the Company, its Subsidiaries or Holding Companies from time to time and any Subsidiary of any Holding Company from time to time;	 	
 	Subsidiary and Holding
Company	 	in relation to a company mean “subsidiary” and “holding company” as defined in section 1159 of the Companies Act 2006 and a company shall be treated, for the purposes only of the membership requirement contained in subsections 1159(b) and (c), as a member of another company even if its shares in that other company are registered in the name of (a) another person (or its nominee), whether by way of security or in connection with the taking of security, or (b) a nominee.	 	

1.2	The headings in this agreement are inserted for convenience only and shall not affect its construction.	
 	 	 	
1.3	A reference to a particular law is a reference to it as it is in force for the time being taking account of any amendment, extension, or re-enactment and includes any subordinate legislation for the time being in force made under it.	
 	 	 	
1.4	A reference to one gender includes a reference to other genders.	
 	 	 	
1.5	Unless the context otherwise requires, words in the singular include the plural and in the plural include the singular.	
 	 	 	
1.6	The schedules to this agreement form part of (and are incorporated into) this agreement.	
 	 	 	
2.	Arrangements up to and on Termination	
 	 	 	
2.1	The Employee’s employment with the Company shall terminate on:	
 	 	 	
 	2.1.1	31 December 2011; or	
 	 	 	
 	2.1.2	such earlier date as requested by the Employee on not less than one month’s written notice to David Denny,	
 	 	 	
 	such date being the Termination Date.	
 	 	 	
2.2	The Employee’s last day of work shall be 31 December 2010 and from then until the Termination Date the Employee will be on Garden Leave in accordance with clause 12 of this agreement.	
 	 	 	
2.3	The Company shall pay the Employee his salary up to the Termination Date in the usual way.	
 	 	 	
2.4	The Company shall continue to provide benefits including car allowance, pension contributions, medical insurance for the Employee and his immediate family, death in service and permanent health insurance to the Employee in the usual way up to the Termination Date.	
106

 	 	 	
2.5	Subject to clause 3.1, the Company shall pay the Employee a fuel allowance of £2,500 in twelve equal monthly instalments, the first of which shall be made in January 2011.	
 	 	 	
2.6	The Company shall pay the Employee US$88,750 in respect of the balance of the 2008 Retention Award in February 2011.	
 	 	 	
2.7	The Company agrees to procure that the Employee’s outstanding share awards, options and long term incentives shall be dealt with as follows as is summarised in Schedule 5:	
 	 	 	
 	2.7.1	the Employee’s outstanding stock options shall continue to vest in the usual way during Garden Leave. Any of the Employee’s outstanding unvested stock options which do not vest during Garden Leave shall vest on the Termination Date. Vested options shall be exercisable until the end of the option award term;	
 	 	 	
 	2.7.2	the three outstanding Cash Incentive Unit (CIU) grant cycles, each grant totalling 225,000 units, shall be pro-rated based on full calendar months worked in each cycle and the Employee shall be paid in respect of the CIUs at the end of each cycle under the plan based on achievement of pre-determined CIU performance. For the 2008/10 cycle the Employee shall be paid in respect of 225,000 CIUs. For the 2009/11 cycle the Employee shall be paid in respect of 150,000 CIUs. For the 2010/12 cycle the Employee shall be paid in respect of 75,000 CIUs; and	
 	 	 	
 	2.7.3	the Employee’s 4,545 partially vested RSUs awarded in 2009 and the 5,093 currently unvested RSUs awarded in 2010 shall continue to vest in the usual way during Garden Leave. Any of the Employee’s unvested RSUs awarded in 2009 or 2010 which do not vest during Garden Leave shall vest on the Termination Date.	
 	 	 	
2.8	The payments and benefits in this clause 2 shall be subject to the income tax and national insurance contributions that the Company is obliged by law to pay or deduct.	
 	 	 	
2.9	The Employee shall submit on or before 28 February 2011 his expenses claims in the usual way and the Company shall reimburse the Employee for any expenses properly incurred in the usual way.	
 	 	 	
2.10	The Employee shall provide, within 14 days of the Termination Date, a Compromise Agreement in the form set out at Schedule 4 (“ Additional Compromise ”) signed by the Employee together with a copy of the letter from the Adviser set out in Schedule 2 to the Additional Compromise.	
 	 	 	
3.	Compensation, PILON and Termination Payment	
 	 	 	
3.1	The Company shall pay to the Employee:	
 	 	 	
 	3.1.1	an ex-gratia payment of £283,613 in 12 equal monthly instalments commencing within 30 days of the Termination Date or receipt by the Company of a copy of this agreement signed by the Employee, a letter from the Adviser as set out in Schedule 2 and a copy of the Additional Compromise signed by the Employee and a letter from the Adviser as set out in Schedule 2 to the Additional Compromise, whichever is later (the  Compensation Payment ); and	
 	 	 	
 	3.1.2	in the event that the Termination Date is earlier than 31 December 2011 in accordance with clause 2.1.2:	
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 	 	3.1.2.1	a payment equal to the balance of the Employee’s salary that would have been paid through to 31 December 2011 in accordance with clause 2 had the Termination Date not been brought forward (the  PILON Payment ); and	
 	 	 	 	
 	 	3.1.2.2	a further ex-gratia payment equal to the balance of the Employee’s car allowance, Company’s pensions contributions, fuel allowance and private medical insurance contributions that would have been paid through to 31 December 2011 in accordance with clause 2 had the Termination Date not been brought forward (the  Termination Payment ), and	
 	 	 	 	
 	 	the PILON Payment and Termination Payment to be paid together in equal monthly instalments through to 31 December 2011 and commencing within 30 days of the Termination Date or receipt by the Company of a copy of this agreement signed by the Employee, a letter from the Adviser as set out in Schedule 2 and a copy of the Additional Compromise signed by the Employee and a letter from the Adviser as set out in Schedule 2 to the Additional Compromise, whichever is later; and	
 	 	 	 	
 	3.1.3	additional ex gratia payments (Ex Gratia Payments) as follows:	
 	 	3.1.3.1	£175,203 payable on or before 31 January 2011; and	
 	 	3.1.3.2	£175,203 payable on or before 31 January 2012.	
 	 	 	 	
3.2	The Company and the Employee believe that:	
 	 	 	 	
 	3.2.1	the first £30,000 of the Compensation Payment and, if applicable, the Termination Payment in aggregate will be tax free and the Company shall therefore pay that amount to the Employee without deductions. The remainder shall be subject to deductions for basic rate income tax;	
 	 	 	 	
 	3.2.2	the Ex Gratia payments shall be subject to income tax deductions (at basic rate only if the relevant payment is made after the Termination Date); and	
 	 	 	 	
 	3.2.3	if applicable, the PILON Payment will be subject to tax and National Insurance in the normal way and the Company shall therefore pay that amount to the Employee after those deductions.	
 	 	 	 	
 	In either case, the Employee shall be responsible for any further tax and employee’s National Insurance contributions due in respect of the Compensation Payment, PILON Payment and Termination Payment which shall all be paid to the Employee after receipt by him of his P45.	
 	 	 	 	
4.	Pension	
 	 	 	 	
4.1	The Company confirms that, in its opinion, the Employee is leaving Service on the grounds of redundancy and confirms that, in its opinion, he should be entitled to benefits calculated in accordance with Rule 65.3 of the Trust Deed & Rules of the Pitney Bowes Pension Fund (Pension Fund) (set out at Schedule 6). The Company will use its reasonable endeavours to procure that the trustees of the Pension Fund will allow the Employee to draw (at the Employee’s option exercised at any time within 3 months following the Termination Date or such longer period as may be agreed) the pension calculated in accordance with Rule 65.3, such pension to be payable with effect from the Employee’s date of ceasing Pensionable Service as defined under the Rules of the Pension Fund. The Company confirms that the Employee is retiring from Service with the consent of the Company and, if and to the extent that early retirement factors apply to the calculation, the Company consents to the use of the more generous early retirement factors that are in force at the date of calculation.	
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4.2	The Company shall notify the trustees of the Pension Fund of the terms of clause 4.1 above when the Employee’s employment has terminated and request written confirmation of the Employee’s accrued entitlement under the Pension Fund and the options available to him, both taking account of the above terms.	
 	 	
5.	Outplacement	
 	 	
 	The Company agrees to meet the cost of outplacement consultancy services up to a maximum of £16,000 plus VAT from a provider to be agreed with the Company. Payment will be made directly to the outplacement company within 30 days of receipt by the Company of an appropriate invoice sent under private and confidential cover to David Denney VP HR International at Pitney Bowes Ltd in Harlow.	
 	 	
6.	Legal and Financial Counselling Fees	
 	 	
6.1	Subject to clause 6.3, the Company shall pay the reasonable legal fees incurred by the Employee in obtaining advice on the termination of his employment and the terms of this agreement, such fees to be payable to the Adviser on production of an invoice.	
 	 	
6.2	Subject to clause 6.3, the Company shall pay for financial counselling for the Employee, such payment fees to be payable to an appropriate financial adviser on production of an invoice sent under private and confidential cover to David Denney VP HR International at Pitney Bowes Ltd in Harlow.	
 	 	
6.3	The aggregate of legal and financial counselling fees payable by the Company under this clause 6 shall not exceed £12,000 which shall be invoiced in 2011 and/or 2012.	
 	 	
7.	Waiver of Claims	
 	 	
7.1	The Employee agrees that the terms of this agreement are offered by the Company without any admission of liability on the part of the Company and are in full and final settlement of all and any claims or rights of action that the Employee has or may have against any Group Company or their officers or employees whether arising out of his employment with the Company or its termination including events occurring after this agreement has been entered into, whether under common law, contract, statute or otherwise, whether such claims are, or could be, known to the parties or in their contemplation at the date of this agreement in any jurisdiction and including, but not limited to, the claims specified in Schedule 1 (each of which is hereby intimated and waived).	
 	 	
7.2	The waiver in clause 7.1 shall not apply to the following:	

 	7.2.1	any claims by the Employee to enforce this agreement;	
 	 	 	
 	7.2.2	any personal injury claims which have not arisen at the date of this agreement and any personal injury claims of which the Employee is not aware at the date of this agreement; and	
 	 	 	
 	7.2.3	any claims in relation to accrued entitlements under the Pension Scheme.	
 	 	
7.3	The Employee warrants that:	
 	 	 	
 	7.3.1	before entering into this agreement he received independent advice from the Adviser as to the terms and effect of this agreement and, in particular, on its effect on his ability to pursue any complaint before an employment tribunal or other court;	
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 	7.3.2	the Adviser has confirmed to the Employee that they are a solicitor of the Senior Courts of England and Wales holding a current practising certificate and that there is in force a policy of insurance covering the risk of a claim by the Employee in respect of any loss arising in consequence of their advice;	
 	 	 	
 	7.3.3	the Adviser shall sign and deliver to the Company a letter in the form attached as Schedule 2 to this agreement;	
 	 	 	
 	7.3.4	before receiving the advice he disclosed to the Adviser all facts or circumstances that may give rise to a claim against any Group Company or their officers or employees and that he is not aware of any other facts or circumstances that may give rise to any claim against any Group Company or their officers or employees other than those claims specified in clause 7.1; and	
 	 	 	
 	7.3.5	the only claims that he has or may have against any Group Company or their officers or employees (whether at the time of entering into this agreement or in the future) relating to his employment with the Company or its termination are specified in clause 7.1.	
 	 	
 	The Employee acknowledges that the Company acted in reliance on these warranties when entering into this agreement.	
 	 	
7.4	The Employee acknowledges that the conditions relating to compromise agreements under section 147 of the Equality Act 2010, section 77(4A) of the Sex Discrimination Act 1975 (in relation to claims under that Act and the Equal Pay Act 1970), section 72(4A) of the Race Relations Act 1976, paragraph 2 of Schedule 3A to the Disability Discrimination Act 1995, paragraph 2(2) of Schedule 4 to the Employment Equality (Sexual Orientation) Regulations 2003, paragraph 2(2) of Schedule 4 to the Employment Equality (Religion or Belief) Regulations 2003, paragraph 2(2) of Schedule 5 to the Employment Equality (Age) Regulations 2006, section 288(2B) of the Trade Union and Labour Relations (Consolidation) Act 1992, section 203(3) of the Employment Rights Act 1996, regulation 35(3) of the Working Time Regulations 1998, section 49(4) of the National Minimum Wage Act 1998, regulation 41(4) of the Transnational Information and Consultation etc. Regulations 1999, regulation 9 of the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000, regulation 10 of the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, regulation 40(4) of the Information and Consultation of Employees Regulations 2004 and paragraph 12 of the Schedule to the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 and have been satisfied.	
 	 	
7.5	The waiver in clause 7.1 shall have effect irrespective of whether or not, at the date of this agreement, the Employee is or could be aware of such claims or have such claims in his express contemplation (including such claims of which the Employee becomes aware after the date of this agreement in whole or in part as a result of new legislation or the development of common law or equity).	
 	 	
7.6	The Employee agrees that, except for the payments and benefits provided for in this agreement, and subject to the waiver in clause 7.1, he shall not be eligible for any further payment from any Group Company relating to his employment or its termination and without limitation to the generality of the foregoing, he expressly waives any right or claim that he has or may have to payment of bonuses, any benefit or award programme or grant of equity interest, or to any other benefit, payment or award he may have received had his employment not terminated.	
 	 	
7.7	The Company warrants (insofar as permitted by law or applicable regulations) that Messrs Martin (CEO), Monaghan (CFO), Torsonne (Chief HR Officer) and Goldstein (Chief Legal Counsel) have	
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 	confirmed (having undertaken no specific due diligence or enquiries) that as at the date of this Agreement they are not aware of any claims that the Company or any Group Company may have against the Employee arising out of his employment, his directorships or otherwise	
 	 	
8.	Employee Indemnity and Director’s Liability Insurance	
 	 	
8.1	The Employee shall indemnify the Company on a continuing basis in respect of any income tax or national insurance contributions (save for employers’ national insurance contributions) due in respect of the payments and benefits in clauses 3.1, 4, 5 and 6 (and any related interest, penalties, costs and expenses) over and above that deducted by the Company in accordance with clause 3.2 ( Excess Tax ). Before making any payment to HM Revenue and Customs or other competent body, the Company shall give the Employee reasonable notice of any demand which may lead to liabilities on the Employee under this indemnity and shall provide him with reasonable access to any documentation he may reasonably require to dispute such a claim (provided that nothing in this clause shall prevent the Company from complying with its legal obligations with regard to HM Revenue and Customs or other competent body, and provided that the Employee shall not be liable under this indemnity for any interest, penalties costs and expenses caused by the Company’s default in respect of payments of income tax or national insurance contributions deducted by the Company in accordance with clause 3.2).	
 	 	
8.2	If the Employee breaches any material provision of this agreement or pursues a claim against any Group Company arising out of his employment or its termination other than those excluded under clause 7.2 and save in connection with the enforcement of this Agreement, he agrees to indemnify the Company for any losses suffered as a result thereof, including all reasonable legal and professional fees incurred.	
 	 	
8.3	The Employee shall remain covered (in the same way as all similarly situated offices of the Group) under the Company’s or any Group Company’s Directors and Officers Liability Insurance in place from time to time in respect of past, present and future officers of the Company or any Group Company subject to the terms of the insurance scheme and the rules of the relevant policy.	
 	 	
9.	Return of Company Property	
 	 	
9.1	Subject to clause 9.4, the Employee shall, before the 31 December 2010 return:	

9.1.1	all Confidential Information and Copies;	
 	 	
9.1.2	all property belonging to the Company in satisfactory condition including (but not limited to) any car (together with the keys and all documentation relating to the car), fuel card, company credit card, keys, security pass, identity badge, mobile telephone, pager, lap-top computer or fax machine; and	
 	 	
9.1.3	all documents and copies (whether written, printed, electronic, recorded or otherwise and wherever located) made, compiled or acquired by him during his employment with the Company or relating to the business or affairs of any Group Company their business contacts,	

 	in the Employee’s possession or under his control to David Denney.	
 	 	
9.2	The Employee shall, before 31 December 2010, delete irretrievably any information relating to the business of any Group Company that he has stored on any magnetic or optical disk or memory and all	
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 	matter derived from such sources which is in his possession or under his control outside the premises of the Company.	
 	 	
9.3	The Employee shall, if requested to do so by the Company, provide a signed statement that he has complied fully with his obligations under clause 9.1 and clause 9.2 and shall provide it with such reasonable evidence of compliance as may be requested.	
 	 	
9.4	The Company and the Employee agree that:	
 	 	 	
 	9.4.1	subject to the Employee making his company mobile/blackberry, laptop and any removable storage media available to David Denny to enable all data to be removed, ownership of the Employee’s Company laptop, printer and mobile phone/blackberry shall transfer from the Company to the Employee on 31 December 2010 and that the true market value of those goods for this purpose at the date of this agreement is £100;	
 	 	 	
 	9.4.2	the Company shall request within 14 days of 31 December 2010 a PAC code in respect of the Employee’s two company mobile telephone numbers in order that the Employee may retain those numbers for his personal use; and	
 	 	
10.	Employee Warranties and Acknowledgments	
 	 	
10.1	As at the date of this agreement, the Employee warrants and represents to the Company that there are no circumstances of which the Employee is aware or of which the Employee ought reasonably to be aware which would amount to a repudiatory breach by the Employee of any express or implied term of the Employee’s contract of employment which would entitle (or would have entitled) the Company to terminate the Employee’s employment without notice or payment in lieu of notice and any payment to the Employee pursuant to clause 3.1.1 is conditional on this being so.	
 	 	
10.2	As at the date of this agreement, the Employee warrants that he has not received or accepted any offer which will provide him with any form of income or benefits at any time after the Termination Date.	
 	 	
10.3	The Employee agrees to make himself available to, and to cooperate with, the Company or its advisers in any internal investigation or administrative, regulatory, judicial or quasi-judicial proceedings. The Employee acknowledges that this could involve, but is not limited to, responding to or defending any regulatory or legal process, providing information in relation to any such process, preparing witness statements and giving evidence in person on behalf of the Company. The Company shall reimburse any reasonable expenses incurred by the Employee as a consequence of complying with his obligations under this clause, provided that such expenses are approved in advance by the Company. For the avoidance of doubt, this clause shall not require the Employee to devote an amount of time that would interfere with his performance of any paid employment or engagement undertaken after 31 December 2011.	
 	 	
10.4	The Employee acknowledges that he is not entitled to any compensation for the loss of any rights or benefits under any share option, bonus, long-term incentive plan or other profit sharing scheme operated by any Group Company in which he may participate other than the payments in clause 2.	
 	 	
11.	Resignation From Offices	
 	 	
11.1	The Employee shall, together with a signed copy of this Agreement, provide the Company with a letter of resignation from any office, trusteeship or position he holds in or on behalf of the Company or any Group Company in the form attached at Schedule 3.	
 	 	 	 	
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12.	Garden Leave	
 	 	
12.1	During the period from 1 January 2011 to the Termination Date (Garden Leave), the Employee shall not perform any services for any Group Company.	
 	 	
12.2	During Garden Leave the Company shall be under no obligation to provide any work to, or vest any powers in, the Employee, who shall have no right to perform any services for the Company or any Group Company save in relation to assisting with ad hoc queries.	
 	 	
12.3	During the period of Garden Leave the Employee shall:	
 	 	 	
 	12.3.1	continue to receive his salary and the contractual benefits as set out in clause 2 of this agreement in the usual way (subject to the rules of the relevant benefit schemes in force from time to time). The Company will declare these benefits to HM Revenue and Customs at the appropriate time and the Employee will be liable for any further tax or national insurance contributions due in relation to them;	
 	 	 	
 	12.3.2	remain an employee of the Company and bound by the terms of his employment contract, save as modified by this clause 12;	
 	 	 	
 	12.3.3	not, without the prior written consent of David Denney, attend his place of work or any other premises of any Group Company or access the information technology systems of any Group Company save as necessary for the Employee to comply with his obligations under clause 10;	
 	 	 	
 	12.3.4	not, without the prior written consent of David Denney, have business contact or business dealings with (or attempt to have business contact or business dealings with) any officer, employee, consultant, client, customer, supplier, agent, distributor, shareholder, adviser or other business contact of any Group Company; and	
 	 	 	
 	12.3.5	be deemed to take any accrued but unused holiday entitlement.	
 	 	 	
 	12.3.6	(except during any periods taken as holiday in accordance with the Company’s usual procedures) be ready and available on reasonable notice to perform such duties (consistent with his status and experience) as the Company may reasonably require under clause 12.3, ensuring that David Denney knows where and how he can be contacted during each working day and complying with any written requests to contact a specified employee of the Company at specified intervals	
 	 	
13.	Confidentiality and Announcements	
 	 	
13.1	The Employee acknowledges that, as a result of his employment, he has had access to Confidential Information. Without prejudice to his common law duties, the Employee shall not (except as authorised or required by law or as authorised by the Company) at any time after the Termination Date:	
 	 	 	
 	13.1.1	use any Confidential Information; or	
 	 	 	
 	13.1.2	make or use any Copies; or	
 	 	 	 	
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 	13.1.3	disclose any Confidential Information to any person, company or other organisation whatsoever.	
 	 	
13.2	The restrictions in clause 13.1 do not apply to any Confidential Information which is in or comes into the public domain other than through the Employee’s unauthorised disclosure.	
 	 	
13.3	The Employee and the Company confirm that they have kept and agree to keep the existence and terms of this agreement and the circumstances concerning the termination of the Employee’s employment confidential, save where such disclosure is to HM Revenue & Customs, required by law or (where necessary or appropriate) to the Employee’s spouse, civil partner or partner, immediate family or legal or professional advisers, provided that they agree to keep the information confidential.	
 	 	
13.4	The Company may also disclose the existence and terms of this Agreement to those of its officers, employees or legal or professional advisers who need to be aware of its terms in the performance of their duties, provided that they agree to keep the information confidential.	
 	 	
13.5	The Employee shall not make any adverse or derogatory comment about the Company, its directors or employees and the Company shall instruct its executive officers not to make or authorise any adverse or derogatory comment about the Employee. The Employee shall not do anything which shall, or may, bring the Company, its directors or employees into disrepute and the Company shall instruct its executive officers not to do anything which shall, or may, bring the Employee into disrepute.	
 	 	
13.6	Nothing in this clause 13 shall prevent the Employee from making a protected disclosure under section 43B of the Employment Rights Act 1996 and nothing in this clause 13 shall prevent the Company from making such disclosure as it is required by law to make.	
 	 	
13.7	The Company shall pay £100 to the Employee as consideration for his entering into the restrictions in this Clause 13, such sum to be paid within 14 days of the Termination Date or receipt by the Company of a copy of this agreement signed by the Employee and receipt by the Company of a letter from the adviser as set out in Schedule 2, whichever is later. The Company shall deduct income tax and national insurance contributions from this sum.	
 	 	
13.8	Notwithstanding clause 14 the Employee acknowledges that the post-termination restrictions in clauses 16 and 20 of the Contract will continue to apply after the Termination Date save that the period of each will be reduced by the period that he spends on Garden Leave.	
 	 	
14.	Entire Agreement and Previous Contracts	
 	 	
14.1	Each party on behalf of itself and, in the case of the Company, as agent for any Group Companies acknowledges and agrees with the other party (the Company acting on behalf of itself and as agent for each Group Company) that:	
 	 	 	
 	14.1.1	this agreement and any document attached hereto constitutes the entire agreement and understanding between the Employee and any Group Company and supersedes any previous arrangement, understanding or agreement (whether in writing or not) between them relating to his employment by the Company (which shall be deemed to have been terminated by mutual consent);	
 	 	 	
 	14.1.2	in entering into this agreement neither party has relied on any statement, representation, assurance or warranty of any person (whether party to this agreement or not and whether in writing or not) other than as expressly set out in this agreement; and	
 	 	 	 	
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 	14.1.3	the only rights or remedies available to the parties arising out of any statement, representation, assurance or warranty shall be for breach of contract under the terms of this agreement.	
 	 	 	
14.2	Nothing in this agreement shall, however, operate to limit or exclude any liability for fraud.	
 	 	 	
15.	Variation	
 	 	 	
 	No variation of this agreement shall be valid unless it is in writing and signed by or on behalf of each of the parties.	
 	 	 	
16.	Third Party Rights	
 	 	 	
 	The Contracts (Rights of Third Parties) Act 1999 shall only apply to this agreement in relation to any Group Company and no person other than the Employee and any Group Company shall have any rights under it. The terms of this agreement may be varied, amended or modified or this agreement may be suspended, cancelled or terminated by agreement in writing between the parties or this agreement may be rescinded (in each case), without the consent of any third party.	
 	 	 	
17.	Governing Law and Jurisdiction	
 	 	 	
17.1	This agreement shall be governed by and construed in accordance with the law of England and Wales.	
 	 	 	
17.2	Each party irrevocably agrees to submit to the exclusive jurisdiction of the courts of England and Wales over any claim or matter arising under or in connection with this agreement.	
 	 	 	
18.	Subject to Contract and Without Prejudice	
 	 	 	
 	This agreement shall be deemed to be without prejudice and subject to contract until such time as it is signed and dated by both parties, when it shall be treated as an open document evidencing a binding agreement.	
 	 	 	
19.	Counterparts	
 	 	 	
 	This agreement may be executed in any number of counterparts, each of which, when executed, shall be an original, and all the counterparts together shall constitute one and the same instrument.	
This agreement has been entered into on the date stated at the beginning of it.
 	 	 	
Signed by DAVID DENNEY for	 	 	
and on behalf of Pitney Bowes Limited	 	 	
 	/s/ David Denny	 	
 	 	 	
 	Director	 	
 	 	 	
Signed by Patrick Keddy	 	 	
 	/s/ Patrick Keddy	 	
 	 	 	
115

SCHEDULE 1

Claims

          Claims:
 	 	
1.1	for breach of contract or wrongful dismissal (including but not limited to any claim in respect of bonus under the Pitney Bowes Incentive Programme);	
 	 	
1.2	for unfair dismissal and related claims, under sections 93 and 111 of the Employment Rights Act 1996 or a leading up to the Termination Date;	
 	 	
1.3	for a statutory redundancy payment, under section 163 of the Employment Rights Act 1996;	
 	 	
1.4	in relation to an unauthorised deduction from wages or unauthorised payment, under section 23 of the Employment Rights Act 1996;	
 	 	
1.5	for an unlawful detriment under section 48 of the Employment Rights Act 1996;	
 	 	
1.6	in relation to employment particulars and itemised pay statements, under section 11 of the Employment Rights Act 1996;	
 	 	
1.7	in relation to guarantee payments, under section 34 of the Employment Rights Act 1996;	
 	 	
1.8	in relation to suspension from work, under section 70 of the Employment Rights Act 1996;	
 	 	
1.9	in relation to parental rights and flexible working, under sections 80 and 80H of the Employment Rights Act 1996;	
 	 	
1.10	in relation to time off work, under sections 51, 54, 57, 57B, 60, 63 and 63C of the Employment Rights Act 1996;	
 	 	
1.11	in relation to working time or holiday pay, under regulation 30 of the Working Time Regulations 1998;	
 	 	
1.12	in relation to the national minimum wage, under sections 11, 18, 19D and 24 of the National Minimum Wage Act 1998;	
 	 	
1.13	for equality of terms, under sections 120 and 127 of the Equality Act 2010 and section 2 of the Equal Pay Act 1970;	
 	 	
1.14	for direct or indirect discrimination, harassment or victimisation on the grounds of sex, marital or civil partnership status, gender reassignment, pregnancy or maternity, under section 120 of the Equality Act 2010 and section 63 of the Sex Discrimination Act 1975;	
 	 	
1.15	for direct or indirect discrimination, harassment or victimisation on the grounds of colour, race, nationality or ethnic or national origin, under section 120 of the Equality Act 2010 and section 54 of the Race Relations Act 1976;	
 	 	
1.16	for discrimination, harassment or victimisation related to disability, under section 120 of the Equality Act 2010 and section 17A of the Disability Discrimination Act 1995;	
 	 	
1.17	for breach of obligations under the Protection of Harassment Act 1997;	
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1.18	for less favourable treatment on the grounds of part-time status, under regulation 8 of the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000;	
 	 	
1.19	for less favourable treatment on the grounds of fixed-term status, under regulation 7 of the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002;	
 	 	
1.20	for direct or indirect discrimination, harassment or victimisation on the grounds of religion or belief, under section 120 of the Equality Act 2010 and regulation 28 of the Employment Equality (Religion or Belief) Regulations 2003;	
 	 	
1.21	for direct or indirect discrimination, harassment or victimisation on the grounds of sexual orientation, under section 120 of the Equality Act 2010 and regulation 28 of the Employment Equality (Sexual Orientation) Regulations 2003;	
 	 	
1.22	for direct or indirect discrimination, harassment or victimisation on the grounds of age, under section 120 of the Equality Act 2010 and regulation 36 of the Employment Equality (Age) Regulations 2006;	
 	 	
1.23	in relation to the duty to consider working beyond retirement, under paragraphs 11 and 12 of Schedule 6 to the Employment Equality (Age) Regulations 2006;	
 	 	
1.24	under regulations 27 and 32 of the Transnational Information and Consultation etc. Regulations 1999;	
 	 	
1.25	under regulations 29 and 33 of the Information and Consultation of Employees Regulations 2004;	
 	 	
1.26	under regulations 45 and 51 of the Companies (Cross-Border Mergers) Regulations 2007;	
 	 	
1.27	under paragraphs 4 and 8 of the Schedule to the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006;	
 	 	
1.28	under sections 68A, 87, 137, 145A, 145B, 146, 168, 168A, 169, 170, 174 and 192 of the Trade Union and Labour Relations (Consolidation) Act 1992;	
 	 	
1.29	in relation to the obligations to elect appropriate representatives or any entitlement to compensation, under the Transfer of Undertakings (Protection of Employment) Regulations 2006;	
 	 	
1.30	for failure to comply with obligations under the Human Rights Act 1998;	
 	 	
1.31	for failure to comply with obligations under the Data Protection Act 1998;	
 	 	
1.32	in relation to existing personal injury claims, whether or not the Employee is aware of such claims;	
 	 	
1.33	in relation to the right to be accompanied under section 11 of the Employment Relations Act 1999;	
 	 	
1.34	in relation to refusal of employment, refusal of employment agency services and detriment under regulations 5, 6 and 9 of the Employment Relations Act 1999 (Blacklists) Regulations 2010;	
 	 	
1.35	in relation to the right to request time off for study or training under section 631 of the Employment Rights Act 1996; and	
 	 	
1.36	arising as a consequence of the United Kingdom’s membership of the European Union.	
117

SCHEDULE 2
Adviser’s Certificate

[ON HEADED NOTEPAPER OF ADVISER]

For the attention of [DETAILS]

[DATE]

Dear Sirs,

I am writing in connection with the agreement between my client, Patrick Keddy, and Pitney Bowes Limited (Company) of today’s date (Agreement) to confirm that:

1. I, [NAME] of [FIRM], whose address is [ADDRESS], am a Solicitor of the Senior Courts of England and Wales who holds a current practising certificate.

2. I have given Patrick Keddy legal advice on the terms and effect of the Agreement and, in particular, its effect on his ability to pursue the claims specified in Schedule 1 of the Agreement.

3. I gave the advice to Patrick Keddy as a relevant independent adviser within the meaning of the above acts and regulations referred to at clause 7.4.

4. There is now in force (and was in force at the time I gave the advice referred to above) a policy of insurance or an indemnity provided for members of a profession or professional body covering the risk of claim by Patrick Keddy in respect of loss arising in consequence of the advice I have given him.

Yours faithfully,

[NAME]
Employee’s Adviser

118

SCHEDULE 3
Resignation Letter

[On headed notepaper of director]

To the Directors:

Pitney Bowes SA (Pty) Ltd, PB Australia Funding Pty Limited, Pitney Bowes Australia FAS Pty Limited, Pitney Bowes Australia Pty Limited, Pitney Bowes Credit Australia Limited, Pitney Bowes Austria Ges.m.b.H, Pitney Bowes Belgium NV, Pitney Bowes Mail and Messaging Systems (Shanghai) Co., Ltd, Pitney Bowes Danmark A/S, Pitney Bowes Holdings Denmark ApS, Pitney Bowes Oy, Pitney Bowes Asterion Direct SAS, Pitney Bowes Asterion SAS, Pitney Bowes SAS, Pitney Bowes Software SAS, Pitney Bowes Deutschland GmbH, Pitney Bowes Management Services Deutschland GmbH, Pitney Bowes Hong Kong Limited, Pitney Bowes Italia S.r.l, Pitney Bowes Management Services Italia, S.r.l., Pitney Bowes Japan K.K., Pitney Bowes Luxembourg SARL, Pitney Bowes (Malaysia) Sdn Bhd, Pitney Bowes Holdings B.V., Pitney Bowes Management Services Netherlands B.V., Pitney Bowes Netherlands B.V., Pitney Bowes New Zealand Limited, Pitney Bowes Norge AS, Pitney Bowes Polska Sp. z.o.o., Pitney Bowes Portugal Sociedade Unipessoal, Lda, PBDorm Ireland Limited, Pitney Bowes Ireland Limited, Pitney Bowes (Asia Pacific) Pte Ltd, Pitney Bowes (Dormant) Pte Ltd, Pitney Bowes (Singapore) Pte Ltd, Pitney Bowes Espana, S.A., Pitney Bowes Management Services Sweden AB, Pitney Bowes Svenska Aktiebolag, Horizon Management AB, Horizon Scandinavia Aktiebolag, Pitney Bowes (Switzerland) AG, Addressing Systems International Holdings Limited, Alternative Mail & Parcels Investments Limited, Archiver Limited, International Imaging Limited, P. Technical Services Limited , Pitney Bowes Document Messaging Technologies Limited, Pitney Bowes Europe Limited, Pitney Bowes Finance plc, Pitney Bowes Global Limited, Pitney Bowes Holdings Limited, Pitney Bowes International Mail Services Limited, Pitney Bowes Limited, Secap Technologies Limited, Universal Postal Frankers Ltd (together “the Companies”)

Dear Sirs

I hereby resign from my office as a director and, in the case of Pitney Bowes Asterion Direct SAS and Pitney Bowes Asterion SAS my role as Chairman/President, of the Companies, as well as any subsidiary and subsidiary undertaking of any of the Companies of which I am a director or officer or employee (where subsidiary and subsidiary undertaking for these purposes shall have the meanings as set out in Sections 1159 and 1162 of the Companies Act 2006 in relation to any subsidiaries or subsidiary undertakings in England, and which references shall, in respect of any jurisdiction other than England, be deemed to include a reference to what most nearly approximates to the English legal term in that jurisdiction (each a Subsidiary)) with effect immediately upon the acceptance of such resignation by the various companies and entities noted above but in no event later than December 31, 2010, and acknowledge and confirm that, save in relation to the enforcement of an agreement between me and the Company dated [ date ], I have no claim or right of action of any kind outstanding for compensation or otherwise against any of the Companies or any subsidiary or any of its, or their officers or employees in respect of the termination of my office or otherwise. To the extent that any such claim exists or may exist, I irrevocably waive such claim and release the Companies and any subsidiary, its or their officers and employees from any liability in respect thereof.

I agree to sign, execute or complete any further documentation required to give effect to my resignations.
 	 	 	
Yours faithfully	 	 	
 	 	 	
Signed and Delivered as a Deed	 	 	
by Patrick Keddy	 	 	

In the presence of:	 	 	
119

SCHEDULE 4
Additional  Compromise  Agreement
 	 	 	 	
 	  DATED	2011  	 	

 	PITNEY BOWES LIMITED	 	
 	(1)	 	

 	PATRICK KEDDY	 	
 	(2)	 	

 	 	 	

 	Additional Compromise Agreement	 	

Brierly Place New London Road
Chelmsford Essex CM2 0AP
dx 89703 Chelmsford 2
t: 01245 211211   f: 01245 354764
www.birketts.co.uk

120

THIS AGREEMENT is dated [DATE]

PARTIES
 	 	
(1)	Pitney Bowes Limited incorporated and registered in England and Wales with company number 182037 whose registered office is at Elizabeth Way, The Pinnacles, Harlow, Essex CM19 5BD ( Company )	
 	 	
(2)	Patrick Keddy of [ADDRESS] (Employee)	
 	 	
BACKGROUND	
 	 	
(A)	The Employee has been employed by the Company from 2 May 1989, most recently as President of Pitney Bowes International under a service agreement dated 29 January 2003 ( Contract ).	
 	 	
(B)	The Employee entered into a Compromise Agreement with the Company on [date] (Compromise) following which he has served his notice on Garden Leave in accordance with clause 2.2 of the Compromise.	
 	 	
(C)	The Employee’s employment with the Company terminated on [date] 2011.	
 	 	
(D)	The parties have entered into this agreement to record and implement the terms on which they have agreed to settle any claims which the Employee has or may have in connection with his employment or its termination or otherwise against any Group Company (as defined below) or their officers or employees whether or not those claims are, or could be, in the contemplation of the parties at the time of signing this agreement, and including, in particular, the statutory complaints which the Employee raises in this agreement.	
 	 	
(E)	The parties intend this agreement to be an effective waiver of any such claims and to satisfy the conditions relating to compromise agreements in the relevant legislation.	
 	 	
(F)	The Company enters into this agreement for itself and as agent and trustee for all Group Companies and it is authorised to do so. It is the parties’ intention that each Group Company should be able to enforce any rights it has under this agreement, subject to and in accordance with the Contracts (Rights of Third Parties) Act 1999.	
 	 	
AGREED TERMS	
 	 	
1.	Interpretation	
 	 	
1.1	The definitions in this clause apply in this agreement.	

 	Adviser	[NAME] of [FIRM];	 	
 	Board	the board of directors of the Company (including any committee of the board duly appointed by it);	 	
 	Group Company	the Company, its Subsidiaries or Holding Companies from time to time and any Subsidiary of any Holding Company from time to time;	 	
 	Subsidiary and Holding
Company	in relation to a company mean “subsidiary” and “holding company” as defined in section 1159 of the Companies Act 2006 and a company shall be treated, for the purposes only of the membership requirement contained in subsections 1159(b) and (c), as a member of another company even if its shares in that other company are registered in the name of (a) another person (or its nominee), whether by way of security or in connection with the taking of security, or (b) a nominee.	 	
121

 	 	 	
2.	Waiver of Claims	
 	 	 	
2.1	The Employee agrees that the terms of this agreement and the Compensation Payment and Termination Payment under clause 3.1 of the Compromise are offered by the Company without any admission of liability on the part of the Company and are in full and final settlement of all and any claims or rights of action that the Employee has or may have against any Group Company or their officers or employees whether arising out of his employment with the Company or its termination including events occurring after this agreement has been entered into, whether under common law, contract, statute or otherwise, whether such claims are, or could be, known to the parties or in their contemplation at the date of this agreement in any jurisdiction and including, but not limited to, the claims specified in Schedule 1 (each of which is hereby intimated and waived).	
 	 	 	
2.2	The waiver in clause 2.1 shall not apply to the following:	
 	 	 	
 	2.2.1	any claims by the Employee to enforce this agreement or the Compromise;	
 	 	 	
 	2.2.2	any personal injury claims which have not arisen at the date of this agreement and any personal injury claims of which the Employee is not aware at the date of this agreement; and	
 	 	 	
 	2.2.3	any claims in relation to accrued entitlements under the Pension Scheme.	
 	 	 	
2.3	The Employee warrants that:	
 	 	 	
 	2.3.1	before entering into this agreement he received independent advice from the Adviser as to the terms and effect of this agreement and, in particular, on its effect on his ability to pursue any complaint before an employment tribunal or other court;	
 	 	 	
 	2.3.2	the Adviser has confirmed to the Employee that they are a solicitor of the Senior Courts of England and Wales holding a current practising certificate and that there is in force a policy of insurance covering the risk of a claim by the Employee in respect of any loss arising in consequence of their advice;	
 	 	 	
 	2.3.3	the Adviser shall sign and deliver to the Company a letter in the form attached as Schedule 2 to this agreement;	
 	 	 	
 	2.3.4	before receiving the advice he disclosed to the Adviser all facts or circumstances that may give rise to a claim against any Group Company or their officers or employees and that he is not aware of any other facts or circumstances that may give rise to any claim against any Group Company or their officers or employees other than those claims specified in clause 2.1; and	
 	 	 	
 	2.3.5	the only claims that he has or may have against any Group Company or their officers or employees (whether at the time of entering into this agreement or in the future) relating to his employment with the Company or its termination are specified in clause 2.1.	
122

 	 	 	
 	The Employee acknowledges that the Company acted in reliance on these warranties when entering into this agreement.	
 	 	 	
2.4	The Employee acknowledges that the conditions relating to compromise agreements under section 147 of the Equality Act 2010, section 77(4A) of the Sex Discrimination Act 1975 (in relation to claims under that Act and the Equal Pay Act 1970), section 72(4A) of the Race Relations Act 1976, paragraph 2 of Schedule 3A to the Disability Discrimination Act 1995, paragraph 2(2) of Schedule 4 to the Employment Equality (Sexual Orientation) Regulations 2003, paragraph 2(2) of Schedule 4 to the Employment Equality (Religion or Belief) Regulations 2003, paragraph 2(2) of Schedule 5 to the Employment Equality (Age) Regulations 2006, section 288(2B) of the Trade Union and Labour Relations (Consolidation) Act 1992, section 203(3) of the Employment Rights Act 1996, regulation 35(3) of the Working Time Regulations 1998, section 49(4) of the National Minimum Wage Act 1998, regulation 41(4) of the Transnational Information and Consultation etc. Regulations 1999, regulation 9 of the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000, regulation 10 of the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, regulation 40(4) of the Information and Consultation of Employees Regulations 2004 and paragraph 12 of the Schedule to the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 and have been satisfied.	
 	 	 	
2.5	The waiver in clause 2.1 shall have effect irrespective of whether or not, at the date of this agreement, the Employee is or could be aware of such claims or have such claims in his express contemplation (including such claims of which the Employee becomes aware after the date of this agreement in whole or in part as a result of new legislation or the development of common law or equity).	
 	 	 	
2.6	The Employee agrees that, except for the payments and benefits provided for in this agreement, and subject to the waiver in clause 2.1, he shall not be eligible for any further payment from any Group Company relating to his employment or its termination and without limitation to the generality of the foregoing, he expressly waives any right or claim that he has or may have to payment of bonuses, any benefit or award programme or grant of equity interest, or to any other benefit, payment or award he may have received had his employment not terminated.	
 	 	 	
2.7	If the Employee breaches any material provision of this agreement or pursues a claim against any Group Company arising out of his employment or its termination other than those excluded under clause 2.2 and save in connection with the enforcement of this Agreement and the Compromise, he agrees to indemnify the Company for any losses suffered as a result thereof, including all reasonable legal and professional fees incurred.	
 	 	 	
3.	Entire Agreement and Previous Contracts	
 	 	 	
3.1	Each party on behalf of itself and, in the case of the Company, as agent for any Group Companies acknowledges and agrees with the other party (the Company acting on behalf of itself and as agent for each Group Company) that:	

 	3.1.1	this agreement and the Compromise constitutes the entire agreement and understanding between the Employee and any Group Company and supersedes any previous arrangement, understanding or agreement (whether in writing or not) between them relating to his employment by the Company (which shall be deemed to have been terminated by mutual consent);	
123

 	 	 	 	
 	3.1.2	in entering into this agreement neither party has relied on any statement, representation, assurance or warranty of any person (whether party to this agreement or not and whether in writing or not) other than as expressly set out in this agreement or the Compromise; and	
 	 	 	 	
 	3.1.3	the only rights or remedies available to the parties arising out of any statement, representation, assurance or warranty shall be for breach of contract under the terms of this agreement or the Compromise.	
 	 	
3.2	Nothing in this agreement shall, however, operate to limit or exclude any liability for fraud.	
 	 	
4.	Variation	
 	 	
 	No variation of this agreement shall be valid unless it is in writing and signed by or on behalf of each of the parties.	
 	 	
5.	Third Party Rights	
 	 	
 	The Contracts (Rights of Third Parties) Act 1999 shall only apply to this agreement in relation to any Group Company and no person other than the Employee and any Group Company shall have any rights under it. The terms of this agreement may be varied, amended or modified or this agreement may be suspended, cancelled or terminated by agreement in writing between the parties or this agreement may be rescinded (in each case), without the consent of any third party.	
 	 	
6.	Governing Law and Jurisdiction	
 	 	
6.1	This agreement shall be governed by and construed in accordance with the law of England and Wales.	
 	 	
6.2	Each party irrevocably agrees to submit to the exclusive jurisdiction of the courts of England and Wales over any claim or matter arising under or in connection with this agreement.	
 	 	
7.	Subject to Contract and Without Prejudice	
 	 	
 	This agreement shall be deemed to be without prejudice and subject to contract until such time as it is signed and dated by both parties, when it shall be treated as an open document evidencing a binding agreement.	
 	 	
8.	Counterparts	
 	 	
 	This agreement may be executed in any number of counterparts, each of which, when executed, shall be an original, and all the counterparts together shall constitute one and the same instrument.	
 	 	
This agreement has been entered into on the date stated at the beginning of it.	
Executed as a deed by Pitney Bowes Limited
acting by  DAVID DENNEY
a director

Signature of Director	 	
 	 	
In the presence of:	 	

124

 	 	
Signature of witness:	 	
 	 	
Name, Address and occupation:	 	

 	 	

 	 	

 	 	
Signed as a Deed by Patrick Keddy
in the presence of:	 	

Signature of witness:	 	
 	 	
Name, Address and occupation:	 	

 	 	

 	 	

 	 	
125

SCHEDULE 1
Claims
 	 	
 	Claims:	
 	 	
1.37	for breach of contract or wrongful dismissal (including but not limited to any claim in respect of bonus under the Pitney Bowes Incentive Programme);	
 	 	
1.38	for unfair dismissal and related claims, under sections 93 and 111 of the Employment Rights Act 1996 or a leading up to the Termination Date;	
 	 	
1.39	for a statutory redundancy payment, under section 163 of the Employment Rights Act 1996;	
 	 	
1.40	in relation to an unauthorised deduction from wages or unauthorised payment, under section 23 of the Employment Rights Act 1996;	
 	 	
1.41	for an unlawful detriment under section 48 of the Employment Rights Act 1996;	
 	 	
1.42	in relation to employment particulars and itemised pay statements, under section 11 of the Employment Rights Act 1996;	
 	 	
1.43	in relation to guarantee payments, under section 34 of the Employment Rights Act 1996;	
 	 	
1.44	in relation to suspension from work, under section 70 of the Employment Rights Act 1996;	
 	 	
1.45	in relation to parental rights and flexible working, under sections 80 and 80H of the Employment Rights Act 1996;	
 	 	
1.46	in relation to time off work, under sections 51, 54, 57, 57B, 60, 63 and 63C of the Employment Rights Act 1996;	
 	 	
1.47	in relation to working time or holiday pay, under regulation 30 of the Working Time Regulations 1998;	
 	 	
1.48	in relation to the national minimum wage, under sections 11, 18, 19D and 24 of the National Minimum Wage Act 1998;	
 	 	
1.49	for equality of terms, under sections 120 and 127 of the Equality Act 2010 and section 2 of the Equal Pay Act 1970;	
 	 	
1.50	for direct or indirect discrimination, harassment or victimisation on the grounds of sex, marital or civil partnership status, gender reassignment, pregnancy or maternity, under section 120 of the Equality Act 2010 and section 63 of the Sex Discrimination Act 1975;	
 	 	
1.51	for direct or indirect discrimination, harassment or victimisation on the grounds of colour, race, nationality or ethnic or national origin, under section 120 of the Equality Act 2010 and section 54 of the Race Relations Act 1976;	
 	 	
1.52	for discrimination, harassment or victimisation related to disability, under section 120 of the Equality Act 2010 and section 17A of the Disability Discrimination Act 1995;	
 	 	
1.53	for breach of obligations under the Protection of Harassment Act 1997;	
126

 	 	
1.54	for less favourable treatment on the grounds of part-time status, under regulation 8 of the Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000;	
 	 	
1.55	for less favourable treatment on the grounds of fixed-term status, under regulation 7 of the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002;	
 	 	
1.56	for direct or indirect discrimination, harassment or victimisation on the grounds of religion or belief, under section 120 of the Equality Act 2010 and regulation 28 of the Employment Equality (Religion or Belief) Regulations 2003;	
 	 	
1.57	for direct or indirect discrimination, harassment or victimisation on the grounds of sexual orientation, under section 120 of the Equality Act 2010 and regulation 28 of the Employment Equality (Sexual Orientation) Regulations 2003;	
 	 	
1.58	for direct or indirect discrimination, harassment or victimisation on the grounds of age, under section 120 of the Equality Act 2010 and regulation 36 of the Employment Equality (Age) Regulations 2006;	
 	 	
1.59	in relation to the duty to consider working beyond retirement, under paragraphs 11 and 12 of Schedule 6 to the Employment Equality (Age) Regulations 2006;	
 	 	
1.60	under regulations 27 and 32 of the Transnational Information and Consultation etc. Regulations 1999;	
 	 	
1.61	under regulations 29 and 33 of the Information and Consultation of Employees Regulations 2004;	
 	 	
1.62	under regulations 45 and 51 of the Companies (Cross-Border Mergers) Regulations 2007;	
 	 	
1.63	under paragraphs 4 and 8 of the Schedule to the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006;	
 	 	
1.64	under sections 68A, 87, 137, 145A, 145B, 146, 168, 168A, 169, 170, 174 and 192 of the Trade Union and Labour Relations (Consolidation) Act 1992;	
 	 	
1.65	in relation to the obligations to elect appropriate representatives or any entitlement to compensation, under the Transfer of Undertakings (Protection of Employment) Regulations 2006;	
 	 	
1.66	for failure to comply with obligations under the Human Rights Act 1998;	
 	 	
1.67	for failure to comply with obligations under the Data Protection Act 1998;	
 	 	
1.68	in relation to existing personal injury claims, whether or not the Employee is aware of such claims;	
 	 	
1.69	in relation to the right to be accompanied under section 11 of the Employment Relations Act 1999;	
 	 	
1.70	in relation to refusal of employment, refusal of employment agency services and detriment under regulations 5, 6 and 9 of the Employment Relations Act 1999 (Blacklists) Regulations 2010;	
 	 	
1.71	in relation to the right to request time off for study or training under section 631 of the Employment Rights Act 1996; and	
 	 	
1.72	arising as a consequence of the United Kingdom’s membership of the European Union.	
127

SCHEDULE 2

Adviser’s Certificate

[ON HEADED NOTEPAPER OF ADVISER]

For the attention of [DETAILS]

[DATE]

Dear Sirs,

I am writing in connection with the agreement between my client, Patrick Keddy, and Pitney Bowes Limited (Company) of today’s date (Agreement) to confirm that:

1. I, [NAME] of [FIRM], whose address is [ADDRESS], am a Solicitor of the Senior Courts of England and Wales who holds a current practising certificate.

2. I have given Patrick Keddy legal advice on the terms and effect of the Agreement and, in particular, its effect on his ability to pursue the claims specified in Schedule 1 of the Agreement.

3. I gave the advice to Patrick Keddy as a relevant independent adviser within the meaning of the above acts and regulations referred to at clause 2.4.

4. There is now in force (and was in force at the time I gave the advice referred to above) a policy of insurance or an indemnity provided for members of a profession or professional body covering the risk of claim by Patrick Keddy in respect of loss arising in consequence of the advice I have given him.

Yours faithfully,

[NAME]
Employee’s Adviser

128

Schedule 5

Share Options, Awards and Long Term Incentives
 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
 	Grants Issued All Grant Dates
As of Dec 14, 2010	 	
 	Exercises to Include: Completed Exercises Only	 	

	
PATRICK JOHN KEDDY ID: 00279021	
 	
TREVONEN	
THE CLUMP	
CHORLEYWOOD, HT WD3 4BD	
United Kingdom	

	
Stock Class: PBI | Currency: USD ($)	
 	
Plan: 1991 ISO, NQ, & RES-Pre 1/1/99	

	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Jun 14, 1993	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000001223	 	Jun 13, 2003	 	NQSO	 	1,100	 	21.19	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Mar 05, 1997	 	Currency	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.144745	 	translation	 	 	 	1,100	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Jun 14, 2003	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.99967	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Jun 14, 1993	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000002712	 	Jun 14, 2003	 	NQSO	 	1,100	 	21.19	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Jun 15, 2003	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.100478	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Mar 09, 1997	 	currency	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.144744	 	translation	 	 	 	1,100	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Jun 14, 1993	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000002713	 	Jun 14, 2003	 	NQSO	 	1,100	 	22.38	 	0	 	0	 	0	 	Not Exercisable	 	 	

	
 	Page 1 of 11	TOPTIONS\gbrereton	

129

 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
 	Grants Issued All Grant Dates	 	
 	As of Dec 14, 2010	 	
 	Exercises to Include: Completed Exercises Only	 	

 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Jun 15, 2003	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.100482	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Mar 05, 1997
01205	 	Cashless Exercise	 	 	 	1,100	 	0	 	31.38	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Jun 13, 1994	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000017451	 	Jun 12, 2004	 	NQSO	 	1,600	 	20.57	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Jun 13, 2004	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.105810	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Mar 08, 2000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000000001532	 	Cash Exercise	 	 	 	1,600	 	0	 	49.09	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 13, 1995	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000017452	 	Feb 12, 2005	 	NQSO	 	2,000	 	16.91	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 13, 2005	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.105814	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Mar 08, 2000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000000001531	 	Cash Exercise	 	 	 	2,000	 	0	 	49.09	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 12, 1996	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000001226	 	Feb 11, 2006	 	NQSO	 	2,000	 	24.59	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 	 	 	

	
 	Page 2 of 11	TOPTIONS\gbrereton	

130

 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
 	Grants Issued All Grant Dates	 	
 	As of Dec 14, 2010	 	
 	Exercises to Include: Completed Exercises Only	 	

 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Dec 03, 2001	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.144886	 	Spin-Off	 	 	 	2,000	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 12, 2006	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.99969	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 12, 1996	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000017124	 	Feb 11, 2006	 	NQSO	 	2,050	 	24.00	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 12, 2006	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.113195	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Nov 03, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	No00000006394	 	Cashless Exercise	 	 	 	2,050	 	0	 	43.98	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 10, 1997	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000003054	 	Feb 09, 2007	 	NQSO	 	5,400	 	29.31	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 10, 2007	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.100578	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Dec 03, 2001	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.145119	 	Spin-Off	 	 	 	5,400	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 10, 1997	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000017611	 	Feb 09, 2007	 	NQSO	 	5,534	 	28.61	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	

 	 	 	

	
 	Page 3 of 11	TOPTIONS\gbrereton	

131

 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
 	Grants Issued All Grant Dates	 	
 	As of Dec 14, 2010	 	
 	Exercises to Include: Completed Exercises Only	 	

 	 	Feb 10, 2007	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.113506	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Nov 03, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	No00000006395	 	Cashless Exercise	 	 	 	5,534	 	0	 	43.98	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 09, 1998	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000003201	 	Feb 08, 2008	 	NQSO	 	6,000	 	45.31	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 09, 2008	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.100624	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Dec 03, 2001	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.145157	 	Spin-Off	 	 	 	6,000	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 09, 1998	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000017690	 	Feb 08, 2008	 	NQSO	 	6,149	 	44.22	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 09, 2008	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.113550	 	EXPIRATION	 	 	 	6,149	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sep 14, 1998	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000004848	 	Sep 13, 2008	 	NQSO	 	6,000	 	53.13	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Sep 14, 2008	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.101165	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Dec 03, 2001	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.145685	 	Spin-Off	 	 	 	6,000	 	0	 	 	 	 	 	 	 	 	

	
 	Page 4 of 11	TOPTIONS\gbrereton	

132

 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
 	Grants Issued All Grant Dates	 	
 	As of Dec 14, 2010	 	
 	Exercises to Include: Completed Exercises Only	 	

Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sep 14, 1998	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000018915	 	Sep 13, 2008	 	NQSO	 	6,149	 	51.84	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Sep 14, 2008	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.114175	 	EXPIRATION	 	 	 	6,149	 	0	 	 	 	 	 	 	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	
Total for 1991 ISO, NQ, & RES-Pre 1/1/99	 	46,182	 	 	 	0	 	0	 	0	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Plan: 1991 ISO, NQ, & RES-Post 1/1/99	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 14, 2005	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000062176	 	Feb 13, 2015	 	NQSO	 	22,000	 	46.93	 	22,000	 	22,000	 	22,000	 	Fully Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
Feb 13, 2006	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000064318	 	Feb 12, 2016	 	NQSO	 	31,557	 	42.62	 	31,557	 	31,557	 	31,557	 	Fully Exercisable	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	
Total for 1991 ISO, NQ, & RES-Post 1/1/99	 	53,557	 	 	 	53,557	 	53,557	 	53,557	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Plan: 2007 RSU Plan	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 09, 2009	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No.8525	 	Feb 08, 2019	 	RSU	 	4,545	 	.00	 	3,409	 	0	 	0	 	1,136 Feb 01, 2011	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,136 Feb 07, 2012	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,137 Feb 05, 2013	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	

	
 	Page 5 of 11	TOPTIONS\gbrereton	

133

 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
 	Grants Issued All Grant Dates	 	
 	As of Dec 14, 2010	 	
 	Exercises to Include: Completed Exercises Only	 	

 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 02, 2010	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	No.192046	 	Cash Exercise	 	 	 	1,136	 	0	 	21.33	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 08, 2010	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No.11381	 	Feb 07, 2020	 	RSU	 	5,093	 	.00	 	5,093	 	0	 	0	 	1,273 Feb 01, 2011	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,274 Feb 07, 2012	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,273 Feb 05, 2013	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	1,273 Feb 04, 2014	 	N/A	

	

	

	

	

	

	

	

	

	

	

	

	

	

	
Total for 2007 RSU Plan	 	9,638	 	 	 	8,502	 	0	 	0	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Plan: 2007 Stock Options	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 12, 2007	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000070925	 	Feb 11, 2017	 	NQSO	 	32,374	 	48.03	 	32,374	 	24,280	 	24,280	 	8,094 Feb 12, 2011	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 11, 2008	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000072281	 	Feb 10, 2018	 	NQSO	 	69,231	 	36.96	 	69,231	 	34,615	 	34,615	 	17,308 Feb 11, 2011	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	17,308 Feb 11, 2012	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 09, 2009	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No.5709	 	Feb 08, 2019	 	NQSO	 	37,007	 	24.75	 	37,007	 	12,336	 	12,336	 	12,335 Feb 09, 2011	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	12,336 Feb 09, 2012	 	N/A	

	

	

	
 	Page 6 of 11	TOPTIONS\gbrereton	

134

 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
 	Grants Issued All Grant Dates	 	
 	As of Dec 14, 2010	 	
 	Exercises to Include: Completed Exercises Only	 	

Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 08, 2010	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No.11369	 	Feb 07, 2020	 	NQSO	 	39,894	 	22.09	 	39,894	 	0	 	0	 	13,298 Feb 08, 2011	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	13,298 Feb 08, 2012	 	N/A	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	13,298 Feb 08, 2013	 	N/A	

	

	

	

	

	

	

	

	

	

	

	

	

	
Total for 2007 Stock Options	 	 	 	178,506	 	 	 	178,506	 	71,231	 	71,231	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Plan: Pitney Bowes Stock Plan (RES)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oct 07, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000061815	 	Oct 07, 2014	 	RSA	 	6,500	 	.00	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Oct 07, 2008	 	Restricted Stock	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	No.87504	 	Exercise	 	 	 	6,500	 	0	 	29.64	 	 	 	 	 	 	

 	 	 	 	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	
Total for Pitney Bowes Stock Plan (RES)	 	 	 	6,500	 	 	 	0	 	0	 	0	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Plan: UK Plan - 10/20/2000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oct 20, 2000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000013093	 	Oct 19, 2010	 	NQSO	 	24,000	 	27.66	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Oct 20, 2010	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.111288	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Dec 03, 2001	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.155768	 	Spin-Off	 	 	 	24,000	 	0	 	 	 	 	 	 	 	 	

	

	

	
 	Page 7 of 11	TOPTIONS\gbrereton	

135

 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
 	Grants Issued All Grant Dates	 	
 	As of Dec 14, 2010	 	
 	Exercises to Include: Completed Exercises Only	 	

Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Oct 20, 2000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000041385	 	Oct 19, 2010	 	NQSO	 	24,593	 	26.99	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Oct 20, 2010	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.124863	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 03, 2005	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	No00000007505	 	Cashless Exercise	 	 	 	24,593	 	0	 	45.95	 	 	 	 	 	 	

 	 	 	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	

	
Total for UK Plan - 10/20/2000	 	 	 	48,593	 	 	 	0	 	0	 	0	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Plan: UK Plan - Post 1/1/99	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	

	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 08, 1999	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000009658	 	Feb 07, 2009	 	NQSO	 	12,000	 	65.72	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 08, 2009	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.102812	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Dec 03, 2001	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.147320	 	Spin-Off	 	 	 	12,000	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Grant Date /
ID	 	Expiration
Date	 	Grant
Type	 	Shares
Granted	 	Exercise
Price	 	Shares
Outstanding	 	Shares
Vested	 	Shares
Exercisable	 	Future
Exercisability
Increments	 	Future
ISO
Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 08, 1999	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000022762	 	Feb 07, 2009	 	NQSO	 	12,297	 	64.13	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 08, 2009	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.116048	 	EXPIRATION	 	 	 	12,297	 	0	 	 	 	 	 	 	 	 	

	

	

	
 	Page 8 of 11	TOPTIONS\gbrereton	

136

 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
Grants Issued All Grant Dates	
As of Dec 14, 2010	
Exercises to Include: Completed Exercises Only	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Future	 	Future	
Grant Date /	 	Expiration	 	Grant	 	Shares	 	Exercise	 	Shares	 	Shares	 	Shares	 	Exercisability	 	ISO	
ID	 	Date	 	Type	 	Granted	 	Price	 	Outstanding	 	Vested	 	Exercisable	 	Increments	 	Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 14, 2000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
0000000017457	 	Feb 13, 2010	 	NQSO	 	12,000	 	47.53	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 14, 2010	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.105813	 	EXPIRATION	 	 	 	0	 	0	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Dec 03, 2001	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.150321	 	Spin-Off	 	 	 	12,000	 	0	 	 	 	 	 	 	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Future	 	Future	
Grant Date /	 	Expiration	 	Grant	 	Shares	 	Exercise	 	Shares	 	Shares	 	Shares	 	Exercisability	 	ISO	
ID	 	Date	 	Type	 	Granted	 	Price	 	Outstanding	 	Vested	 	Exercisable	 	Increments	 	Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 14, 2000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000029355	 	Feb 13, 2010	 	NQSO	 	12,297	 	46.38	 	0	 	0	 	0	 	Not Exercisable	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Transactions	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Date/ID	 	Type	 	 	 	Shares	 	Rights	 	Price	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Feb 14, 2010	 	Cancellation:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	0000.119308	 	EXPIRATION	 	 	 	12,297	 	0	 	 	 	 	 	 	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Future	 	Future	
Grant Date /	 	Expiration	 	Grant	 	Shares	 	Exercise	 	Shares	 	Shares	 	Shares	 	Exercisability	 	ISO	
ID	 	Date	 	Type	 	Granted	 	Price	 	Outstanding	 	Vested	 	Exercisable	 	Increments	 	Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 11, 2002	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000050117	 	Feb 10, 2012	 	NQSO	 	3,000	 	40.68	 	3,000	 	3,000	 	3,000	 	Fully Exercisable	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Future	 	Future	
Grant Date /	 	Expiration	 	Grant	 	Shares	 	Exercise	 	Shares	 	Shares	 	Shares	 	Exercisability	 	ISO	
ID	 	Date	 	Type	 	Granted	 	Price	 	Outstanding	 	Vested	 	Exercisable	 	Increments	 	Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sep 05, 2002	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000052737	 	Sep 04, 2012	 	NQSO	 	10,000	 	34.73	 	10,000	 	10,000	 	10,000	 	Fully Exercisable	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Future	 	Future	
Grant Date /	 	Expiration	 	Grant	 	Shares	 	Exercise	 	Shares	 	Shares	 	Shares	 	Exercisability	 	ISO	
ID	 	Date	 	Type	 	Granted	 	Price	 	Outstanding	 	Vested	 	Exercisable	 	Increments	 	Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 10, 2003	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000056292	 	Feb 09, 2013	 	NQSO	 	15,000	 	32.10	 	15,000	 	15,000	 	15,000	 	Fully Exercisable	 	 	

	

	

	
 	Page 9 of 11	TOPTIONS\gbrereton	

137

 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
Grants Issued All Grant Dates	
As of Dec 14, 2010	
Exercises to Include: Completed Exercises Only	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Future	 	Future	
Grant Date /	 	Expiration	 	Grant	 	Shares	 	Exercise	 	Shares	 	Shares	 	Shares	 	Exercisability	 	ISO	
ID	 	Date	 	Type	 	Granted	 	Price	 	Outstanding	 	Vested	 	Exercisable	 	Increments	 	Split	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Feb 09, 2004	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
No00000061413	 	Feb 08, 2014	 	NQSO	 	20,000	 	40.08	 	20,000	 	20,000	 	20,000	 	Fully Exercisable	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	

	
Total for UK Plan - Post 1/1/99	 	96,594	 	 	 	48,000	 	48,000	 	48,000	 	 	 	 	

	

	

	

	

	

	

	

	

	

	

	

	

	

	
Total for PBI	 	 	 	439,570	 	 	 	288,565	 	172,788	 	172,788	 	 	 	 	

	

	

	
 	Page 10 of 11	TOPTIONS\gbrereton	

138

 	 	 	
Pitney Bowes Stock Options	Grant Detail	 	
Grants Issued All Grant Dates	
As of Dec 14, 2010	
Exercises to Include: Completed Exercises Only	

	

	

	
 	Page 11 of 11	TOPTIONS\gbrereton	

139

Schedule 6

Rule 65.3 of Trust Deed & Rules of Pitney Bowes Pension Fund
 	 	 	 	
65	Incapacity Pension and Redundancy	
 	 	 	 	
65.1	If an Active Member who has completed at least five years’ Pensionable Service leaves Service before Normal Retirement Date on account of either:	
 	 	 	 	
 	(a)	Incapacity; or	
 	 	 	 	
 	(b)	in the opinion of the Principal Employer, redundancy where he is aged at or over his Normal Minimum Pension Age;	
 	 	 	 	
 	he may elect, subject to rule 65.6, to receive the aggregate of:	
 	 	 	 	
 	(i)	an immediate annual pension equal to his Scale Pension calculated using:	
 	 	 	 	
 	 	(A)	his Final Pensionable Salary at the date of he leaves Pensionable Service; and	
 	 	 	 	
 	 	(B)	his Pensionable Service up to the date he left Pensionable Service; and	
 	 	 	 	
 	 	(C)	adjusted to take account of its early payment in accordance with the terms of this Rule 65; and	
 	 	 	 	
 	(ii)	in respect of a Member entitled to a Top-Up Account, a benefit derived from the application of the Member’s Top-Up Account under Rule 59.	
 	 	 	 	
65.2	Subject to Rule 65.5, where Rule 65.1(a) applies:	
 	 	 	 	
 	(a)	the Scale Pension will be calculated on the basis of the Pensionable Service which the Member would have completed had he remained in Pensionable Service to Normal Retirement Date (“the notional period”); and	
 	 	 	 	
 	(b)	no actuarial reduction will be applied to a Scale Pension.	
 	 	 	 	
65.3	Subject to Rule 65.5, where Rule 65.1(b) applies the Scale Pension will be calculated on the basis that the Trustees will:	
 	 	 	 	
 	(a)	not actuarially reduce that part of the Scale Pension payable under Rule 65.1(b) which is attributable to Pensionable Service completed before 1 July 1998; and	
 	 	 	 	
 	(b)	actuarially reduce that part of the Scale Pension payable under Rule 65.1(b) which is attributable to Pensionable Service completed after 30 June 1998 to take account of the period (if any) that it is paid early between the date the Member’s pension starts to be paid and the date of his 65th birthday.	
 	 	 	 	
65.4	The amount of the actuarial reduction applied under Rule 65.3(b) will be determined by the Trustees on a basis advised by the Actuary.	
 	 	 	 	
65.5	The Trustees must be reasonably satisfied that value of the immediate pension payable under this Rule 65 (ignoring any part of the pension derived from the application of the Member’s Top-Up Account) is at least equal to the value of any benefits which have accrued to and in respect of the Member under the Defined Benefit Section of the Fund on the date it starts to be paid:	
 	 	 	 	
 	(a)	ignoring the Member’s Top-Up Account (if any); and	
 	 	 	 	
 	(b)	taking into account the Preservation Requirements.	
 	 	 	 	
65.6	Where a Member of the Defined Benefit Section has requested the early payment of his benefits due to Incapacity, the Trustees must be satisfied that the Member meets the ill-health condition as required by paragraph 1 of schedule 28 of the Finance Act 2004.	

140

 	 	 	 	
65.7	Rules 71 to 75 [exchange of pension for cash] and 76 [exchange of pension for a dependant’s pension] apply.	
 	 	 	 	
65.8	The payment of the Scale Pension is subject to compliance with the Contracting-out Requirements set out in Schedule 2.	
 	 	 	 	
65.9	The pension will commence in payment on the day after the date of the Member ceasing to be in Service.	
 	 	 	 	
65.10	In the case of the payment of a pension before Normal Retirement Date under this Rule due to Incapacity, the Trustees may review the payment as such a pension under the terms of Rule 66.	
 	 	 	 	
66	Review of Incapacity Pensions	
 	 	 	 	
66.1	A pension which is paid under either Rule 65.1(a) or Rule 70.2(b) due to the Incapacity of the Active Member or Early Leaver (as applicable) may be reviewed by the Trustees every three (3) years after the date his pension starts to be paid or such other period as the Trustees determine. No reviews will be made once the Member attains his Normal Retirement Date.	
 	 	 	 	
66.2	At each review of the payment of pension due to Incapacity, the Trustees may ask the Pensioner to:	
 	 	 	 	
 	(a)	attend a medical with the registered medical practitioner of the Trustees selection; and / or	
 	 	 	 	
 	(b)	provide any information and other co-operation to allow the Trustees to complete their review.	
 	 	 	 	
66.3	If the Trustees are satisfied that the Pensioner:	
 	 	 	 	
 	(a)	is no longer suffering from Incapacity to the same degree as gave rise to the entitlement to pension under Rule 65.1(a) or 70.2(b); or	
 	 	 	 	
 	(b)	has failed to co-operate with the review to such a degree that the Trustees are not able to determine if the Pensioner continues to suffer from Incapacity	
 	 	 	 	
 	the Trustees may either:	
 	 	 	 	
 	(i)	reduce the Scale Pension entitlement of the Pensioner:	
 	 	 	 	
 	 	(A)	so as to ignore the notional period; and	
 	 	 	 	
 	 	(B)	treat him as if he has left Service and started to receive a pension under Rule 65.1(a) or 70.2(b); or	
 	 	 	 	
 	(ii)	stop the payment of the Scale Pension to the Pensioner.	
 	 	 	 	
66.4	If the pension is reduced or stopped, the Pensioner must remain entitled to receive the Scale Pension to which he would have been entitled from his Normal Retirement Date at least equal to an amount calculated in accordance with the Preservation Requirements.	
 	 	 	 	
66.5	The payment of the Scale Pension is subject to compliance with the Contracting-out Requirements set out in Schedule 2.	
 	 	 	 	
66.6	This Rule 66 only applies to pensions payable due to Incapacity which start to be paid after	

141

EXHIBIT (31.1)

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Murray D. Martin, certify that:
 	 	 	
1.	I have reviewed this Report on Form 10-K of Pitney Bowes Inc.;	
 	 	 	
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;	
 	 	 	
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;	
 	 	 	
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 	 	 	
 	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;	
 	 	 	
 	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	 	
 	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and	
 	 	 	
 	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 	 	 	
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):	
 	 	 	
 	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	 	
 	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
Date: February 25, 2011
 	 	 	
/s/ Murray D. Martin	 	 	
 	 	 	
Murray D. Martin	 	
Chairman, President and Chief Executive Officer	 	
142

EXHIBIT (31.2)

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Michael Monahan, certify that:
 	 	 	
1.	I have reviewed this Report on Form 10-K of Pitney Bowes Inc.;	
 	 	 	
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;	
 	 	 	
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;	
 	 	 	
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 	 	 	
 	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;	
 	 	 	
 	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 	 	 	
 	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and	
 	 	 	
 	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 	 	 	
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):	
 	 	 	
 	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 	 	 	
 	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
Date: February 25, 2011
 	 	 	
/s/ Michael Monahan	 	 	
 	 	 	
Michael Monahan	 	
Executive Vice President and Chief Financial Officer	 	
143

EXHIBIT (32.1)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

The certification set forth below is being submitted in connection with the Annual Report of Pitney Bowes Inc. (the “Company”) on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

I, Murray D. Martin, Chairman, President and Chief Executive Officer of the Company, certify that, to the best of my knowledge:
 	 	 	
 	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and	
 	 	 	
 	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

/s/ Murray D. Martin	 	 	
 	 	 	
Murray D. Martin	 	
Chairman, President and Chief Executive Officer	 	
February 25, 2011	 	 	
144

EXHIBIT (32.2)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

The certification set forth below is being submitted in connection with the Annual Report of Pitney Bowes Inc. (the “Company”) on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

I, Michael Monahan, Executive Vice President and Chief Financial Officer of the Company, certify that, to the best of my knowledge:
 	 	 	
 	(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and	
 	 	 	
 	(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

/s/ Michael Monahan	 	 	
 	 	 	
Michael Monahan	 	
Executive Vice President and Chief Financial Officer	 	
February 25, 2011	 	 	
145