UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012 
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number: 1-3579
PITNEY BOWES INC.
(Exact name of registrant as specified in its charter)

 	 	 	
Delaware	 	06-0495050	
(State or other jurisdiction of incorporation or organization)	 	(I.R.S. Employer Identification No.)	
 	 	 	
1 Elmcroft Road, Stamford, Connecticut	 	06926-0700	
(Address of principal executive offices)	 	(Zip Code)	

 	
(203) 356-5000	
(Registrant’s telephone number, including area code)	
 	
(Former name, former address and former fiscal year, if changed since last report)	
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 þ	No o          	
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ	No 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ	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 Exchange Act).

Yes o	No þ          	
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of July 31, 2012.

Class	 	Outstanding	
Common Stock, $1 par value per share	 	200,638,510 shares	

1

PITNEY BOWES INC.
INDEX

 	 	 	
 	 	Page Number	
 	 	 	
Part I - Financial Information:	 	
 	 	 	
Item 1:	Financial Statements (Unaudited)	 	
 	 	 	
 	Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2012 and 2011	3

 	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2012 and 2011	3	
 	 	 	
 	Condensed Consolidated Balance Sheets at June 30, 2012 and December 31, 2011	3	
 	 	 	
 	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011	3	
 	 	 	
 	Notes to Condensed Consolidated Financial Statements	4	
 	 	 	
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19	
 	 	 	
Item 3:	Quantitative and Qualitative Disclosures about Market Risk	27	
 	 	 	
Item 4:	Controls and Procedures	27	
 	 	 	
Part II - Other Information:	 	
 	 	 	
Item 1:	Legal Proceedings	28	
 	 	 	
Item 1A:	Risk Factors	28	
 	 	 	
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	28	
 	 	 	
Item 6:	Exhibits	28	
 	 	 	
Signatures	29	

2

PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
PITNEY BOWES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share data)

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2012	 	2011	 	2012	 	2011	
Revenue:	 	

 	 	 	
 	
Equipment sales	$	224,235	
 	 	$	242,921	
 	 	$	444,414	
 	 	$	484,552	
 	
Supplies	70,522	
 	 	78,587	
 	 	146,887	
 	 	161,457	
 	
Software	104,551	
 	 	105,516	
 	 	208,901	
 	 	205,081	
 	
Rentals	145,497	
 	 	156,162	
 	 	285,886	
 	 	312,854	
 	
Financing	122,948	
 	 	136,369	
 	 	249,696	
 	 	276,958	
 	
Support services	171,254	
 	 	176,807	
 	 	344,772	
 	 	355,421	
 	
Business services	406,811	
 	 	418,112	
 	 	820,918	
 	 	841,220	
 	
Total revenue	1,245,818	
 	 	1,314,474	
 	 	2,501,474	
 	 	2,637,543	
 	
Costs and expenses:	 	

 	 	 	
 	
Cost of equipment sales	106,718	
 	 	104,385	
 	 	203,634	
 	 	219,138	
 	
Cost of supplies	20,863	
 	 	25,562	
 	 	44,734	
 	 	51,754	
 	
Cost of software	24,404	
 	 	24,898	
 	 	45,497	
 	 	50,110	
 	
Cost of rentals	31,850	
 	 	36,109	
 	 	62,075	
 	 	72,016	
 	
Financing interest expense	20,642	
 	 	22,192	
 	 	41,781	
 	 	45,485	
 	
Cost of support services	112,122	
 	 	115,417	
 	 	227,209	
 	 	230,693	
 	
Cost of business services	313,553	
 	 	325,250	
 	 	632,529	
 	 	658,817	
 	
Selling, general and administrative	391,606	
 	 	432,715	
 	 	802,791	
 	 	859,326	
 	
Research and development	33,776	
 	 	37,441	
 	 	67,849	
 	 	72,199	
 	
Restructuring charges and asset impairments	1,074	
 	 	4,994	
 	 	1,074	
 	 	31,018	
 	
Other interest expense	30,353	
 	 	28,550	
 	 	59,720	
 	 	57,074	
 	
Interest income	(2,003	)	 	(2,215	)	 	(3,736	)	 	(3,437	)	
Other expense, net	4,372	
 	 	—	
 	 	1,138	
 	 	—	
 	
Total costs and expenses	1,089,330	
 	 	1,155,298	
 	 	2,186,295	
 	 	2,344,193	
 	
Income from continuing operations before income taxes	156,488	
 	 	159,176	
 	 	315,179	
 	 	293,350	
 	
Provision for income taxes	52,271	
 	 	53,012	
 	 	67,030	
 	 	94,406	
 	
Income from continuing operations	104,217	
 	 	106,164	
 	 	248,149	
 	 	198,944	
 	
(Loss) income from discontinued operations, net of tax	—	
 	 	(635	)	 	19,332	
 	 	(2,517	)	
Net income before attribution of noncontrolling interests	104,217	
 	 	105,529	
 	 	267,481	
 	 	196,427	
 	
Less: Preferred stock dividends of subsidiaries attributable to noncontrolling interests	4,594	
 	 	4,594	
 	 	9,188	
 	 	9,188	
 	
Net income - Pitney Bowes Inc.	$	99,623	
 	 	$	100,935	
 	 	$	258,293	
 	 	$	187,239	
 	
Amounts attributable to common stockholders:	 	

 	 	 	
 	
Income from continuing operations	$	99,623	
 	 	$	101,570	
 	 	$	238,961	
 	 	$	189,756	
 	
(Loss) income from discontinued operations	—	
 	 	(635	)	 	19,332	
 	 	(2,517	)	
Net income - Pitney Bowes Inc.	$	99,623	
 	 	$	100,935	
 	 	$	258,293	
 	 	$	187,239	
 	
Basic earnings per share attributable to common stockholders (1):	 	

 	 	 	
 	
Continuing operations	$	0.50	
 	 	$	0.50	
 	 	$	1.19	
 	 	$	0.93	
 	
Discontinued operations	—	
 	 	—	
 	 	0.10	
 	 	(0.01	)	
Net income - Pitney Bowes Inc.	$	0.50	
 	 	$	0.50	
 	 	$	1.29	
 	 	$	0.92	
 	
Diluted earnings per share attributable to common stockholders (1):	 	

 	 	 	
 	
Continuing operations	$	0.50	
 	 	$	0.50	
 	 	$	1.19	
 	 	$	0.93	
 	
Discontinued operations	—	
 	 	—	
 	 	0.10	
 	 	(0.01	)	
Net income - Pitney Bowes Inc.	$	0.50	
 	 	$	0.49	
 	 	$	1.29	
 	 	$	0.92	

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

See Notes to Condensed Consolidated Financial Statements
PITNEY BOWES INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited; in thousands, except per share data)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	 	2012	 	2011	 	2012	 	2011	
 	 	 	 	 	 	 	 	 	
Net income - Pitney Bowes Inc.	 	$	99,623	
 	 	$	100,935	
 	 	$	258,293	
 	 	$	187,239	
 	
Other comprehensive income, net of tax:	 	 	 	 	 	 	 	 	
Foreign currency translations	 	(53,267	)	 	25,164	
 	 	(19,908	)	 	75,981	
 	
Net unrealized gain on cash flow hedges, net of tax of $321, $273, $353 and $245, respectively	 	504	
 	 	438	
 	 	553	
 	 	387	
 	
Net unrealized gain on investment securities, net of tax of $790, $790, $242 and $710, respectively	 	1,235	
 	 	1,236	
 	 	378	
 	 	1,111	
 	
Amortization of pension and postretirement costs, net of tax of $6,580, $4,856, $13,466 and $9,833, respectively	 	10,976	
 	 	8,496	
 	 	22,964	
 	 	17,165	
 	
Other comprehensive income	 	(40,552	)	 	35,334	
 	 	3,987	
 	 	94,644	
 	
Comprehensive income - Pitney Bowes Inc.	 	59,071	
 	 	136,269	
 	 	262,280	
 	 	281,883	
 	
Preferred stock dividends of subsidiaries attributable to noncontrolling interests	 	4,594	
 	 	4,594	
 	 	9,188	
 	 	9,188	
 	
Total comprehensive income	 	$	63,665	
 	 	$	140,863	
 	 	$	271,468	
 	 	$	291,071	

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands, except share and per share data)

 	June 30, 2012	 	December 31, 2011	
ASSETS	 	

Current assets:	 	

Cash and cash equivalents	$	499,772	
 	 	$	856,238	
 	
Short-term investments	38,549	
 	 	12,971	
 	
Accounts receivable, gross	691,332	
 	 	755,485	
 	
Allowance for doubtful accounts receivables	(30,233	)	 	(31,855	)	
Accounts receivable, net	661,099	
 	 	723,630	
 	
Finance receivables	1,221,086	
 	 	1,296,673	
 	
Allowance for credit losses	(31,781	)	 	(45,583	)	
Finance receivables, net	1,189,305	
 	 	1,251,090	
 	
Inventories	187,562	
 	 	178,599	
 	
Current income taxes	20,107	
 	 	102,556	
 	
Other current assets and prepayments	124,922	
 	 	134,774	
 	
Total current assets	2,721,316	
 	 	3,259,858	
 	
Property, plant and equipment, net	391,651	
 	 	404,146	
 	
Rental property and equipment, net	251,495	
 	 	258,711	
 	
Finance receivables	1,072,641	
 	 	1,123,638	
 	
Allowance for credit losses	(19,960	)	 	(17,847	)	
Finance receivables, net	1,052,681	
 	 	1,105,791	
 	
Investment in leveraged leases	32,725	
 	 	138,271	
 	
Goodwill	2,133,559	
 	 	2,147,088	
 	
Intangible assets, net	188,657	
 	 	212,603	
 	
Non-current income taxes	44,299	
 	 	89,992	
 	
Other assets	528,614	
 	 	530,644	
 	
Total assets	$	7,344,997	
 	 	$	8,147,104	
 	
LIABILITIES, NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY (DEFICIT)	 	 	
 	
Current liabilities:	 	

Accounts payable and accrued liabilities	$	1,701,135	
 	 	$	1,840,465	
 	
Current income taxes	230,242	
 	 	242,972	
 	
Notes payable and current portion of long-term obligations	375,000	
 	 	550,000	
 	
Advance billings	466,926	
 	 	458,425	
 	
Total current liabilities	2,773,303	
 	 	3,091,862	
 	
Deferred taxes on income	30,472	
 	 	175,944	
 	
Tax uncertainties and other income tax liabilities	223,603	
 	 	194,840	
 	
Long-term debt	3,306,473	
 	 	3,683,909	
 	
Other non-current liabilities	633,510	
 	 	743,165	
 	
Total liabilities	6,967,361	
 	 	7,889,720	
 	
Noncontrolling interests (Preferred stockholders’ equity in subsidiaries)	296,370	
 	 	296,370	
 	
Commitments and contingencies (See Note 11)	

 	
 	
Stockholders’ equity (deficit):	 	 	 	
Cumulative preferred stock, $50 par value, 4% convertible	4	
 	 	4	
 	
Cumulative preference stock, no par value, $2.12 convertible	653	
 	 	659	
 	
Common stock, $1 par value (480,000,000 shares authorized; 323,337,912 shares issued)	323,338	
 	 	323,338	
 	
Additional paid-in capital	227,136	
 	 	240,584	
 	
Retained earnings	4,708,485	
 	 	4,600,217	
 	
Accumulated other comprehensive loss	(657,658	)	 	(661,645	)	
Treasury stock, at cost (122,995,133 and 123,586,842 shares, respectively)	(4,520,692	)	 	(4,542,143	)	
Total Pitney Bowes Inc. stockholders’ equity (deficit)	81,266	
 	 	(38,986	)	
Total liabilities, noncontrolling interests and stockholders’ equity (deficit)	$	7,344,997	
 	 	$	8,147,104	
 	
See Notes to Condensed Consolidated Financial Statements
PITNEY BOWES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)

 	Six Months Ended June 30,	
 	2012	 	2011	
Cash flows from operating activities:	 	

Net income before attribution of noncontrolling interests	$	267,481	
 	 	$	196,427	
 	
Restructuring payments	(47,875	)	 	(51,968	)	
Special pension plan contributions	(95,000	)	 	(123,000	)	
Tax payments related to sale of leveraged lease assets	(84,904	)	 	—	
 	
Adjustments to reconcile net income to net cash provided by operating activities:	 	

Gain on sale of leveraged lease assets, net of tax	(12,886	)	 	—	
 	
Depreciation and amortization	131,607	
 	 	137,635	
 	
Stock-based compensation	8,852	
 	 	8,656	
 	
Restructuring charges and asset impairments	1,074	
 	 	31,018	
 	
Changes in operating assets and liabilities:	 	

(Increase) decrease in accounts receivable	60,176	
 	 	82,030	
 	
(Increase) decrease in finance receivables	113,034	
 	 	139,793	
 	
(Increase) decrease in inventories	(9,428	)	 	(7,435	)	
(Increase) decrease in other current assets and prepayments	3,161	
 	 	4,466	
 	
Increase (decrease) in accounts payable and accrued liabilities	(87,468	)	 	(85,361	)	
Increase (decrease) in current and non-current income taxes	86,555	
 	 	105,235	
 	
Increase (decrease) in advance billings	17,178	
 	 	885	
 	
Increase (decrease) in other operating capital, net	18,610	
 	 	11,020	
 	
Net cash provided by operating activities	370,167	
 	 	449,401	
 	
Cash flows from investing activities:	 	

Short-term and other investments	(30,966	)	 	(36,236	)	
Capital expenditures	(88,751	)	 	(88,017	)	
Proceeds from sale of leveraged lease assets	105,506	
 	 	—	
 	
Net investment in external financing	(3,464	)	 	(3,132	)	
Reserve account deposits	2,334	
 	 	18,088	
 	
Net cash used in investing activities	(15,341	)	 	(109,297	)	
Cash flows from financing activities:	 	

Decrease in notes payable, net	—	
 	 	(50,000	)	
Principal payments of long-term obligations	(550,000	)	 	—	
 	
Proceeds from issuance of common stock	4,274	
 	 	7,170	
 	
Stock repurchases	—	
 	 	(49,998	)	
Dividends paid to stockholders	(150,025	)	 	(150,863	)	
Dividends paid to noncontrolling interests	(9,188	)	 	(9,188	)	
Net cash used in financing activities	(704,939	)	 	(252,879	)	
Effect of exchange rate changes on cash and cash equivalents	(6,353	)	 	6,860	
 	
(Decrease) increase in cash and cash equivalents	(356,466	)	 	94,085	
 	
Cash and cash equivalents at beginning of period	856,238	
 	 	484,363	
 	
Cash and cash equivalents at end of period	$	499,772	
 	 	$	578,448	
 	
Cash interest paid	$	99,477	
 	 	$	100,131	
 	
Cash income tax payments (refund), net	$	63,998	
 	 	$	(7,859	)	

See Notes to Condensed Consolidated Financial Statements

3

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

1. Description of Business and Basis of Presentation
Pitney Bowes Inc. and its subsidiaries (PBI, the company, we, us, and our) is a global provider of software, hardware and services that enables both physical and digital communications and that integrates those physical and digital communications channels. 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 12 for information regarding our reportable segments.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In addition, the December 31, 2011 Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In management's opinion, all adjustments, consisting of normal recurring adjustments, considered necessary to present fairly our financial position, results of operations and cash flows for the periods presented have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any other interim period or the year ending December 31, 2012.
These statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report to Stockholders on Form 10-K for the year ended December 31, 2011 (the 2011 Annual Report). Certain prior year amounts have been reclassified to conform to the current period presentation.
2. Inventories
Inventories at June 30, 2012 and December 31, 2011 consisted of the following:

 	June 30,
2012	 	December 31,
2011	
Raw materials and work in process	$	68,456	
 	 	$	63,216	
 	
Supplies and service parts	72,552	
 	 	68,600	
 	
Finished products	72,535	
 	 	71,958	
 	
Inventory at FIFO cost	213,543	
 	 	203,774	
 	
Excess of FIFO cost over LIFO cost	(25,981	)	 	(25,175	)	
Total inventory, net	$	187,562	
 	 	$	178,599	

4

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

3. 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.
Finance receivables at June 30, 2012 and December 31, 2011 consisted of the following:

 	June 30, 2012	
 	North America	 	International	 	Total	
Sales-type lease receivables	 	

 	
Gross finance receivables	$	1,638,414	
 	 	$	447,317	
 	 	$	2,085,731	
 	
Unguaranteed residual values	163,736	
 	 	20,336	
 	 	184,072	
 	
Unearned income	(325,882	)	 	(103,142	)	 	(429,024	)	
Allowance for credit losses	(23,881	)	 	(9,041	)	 	(32,922	)	
Net investment in sales-type lease receivables	1,452,387	
 	 	355,470	
 	 	1,807,857	
 	
Loan receivables	 	

 	
Loan receivables	407,327	
 	 	45,621	
 	 	452,948	
 	
Allowance for credit losses	(16,530	)	 	(2,289	)	 	(18,819	)	
Net investment in loan receivables	390,797	
 	 	43,332	
 	 	434,129	
 	
Net investment in finance receivables	$	1,843,184	
 	 	$	398,802	
 	 	$	2,241,986	

 	December 31, 2011	
 	North America	 	International	 	Total	
Sales-type lease receivables	 	

 	
Gross finance receivables	$	1,727,653	
 	 	$	460,101	
 	 	$	2,187,754	
 	
Unguaranteed residual values	185,450	
 	 	20,443	
 	 	205,893	
 	
Unearned income	(348,286	)	 	(102,618	)	 	(450,904	)	
Allowance for credit losses	(28,661	)	 	(12,039	)	 	(40,700	)	
Net investment in sales-type lease receivables	1,536,156	
 	 	365,887	
 	 	1,902,043	
 	
Loan receivables	 	

 	
Loan receivables	436,631	
 	 	40,937	
 	 	477,568	
 	
Allowance for credit losses	(20,272	)	 	(2,458	)	 	(22,730	)	
Net investment in loan receivables	416,359	
 	 	38,479	
 	 	454,838	
 	
Net investment in finance receivables	$	1,952,515	
 	 	$	404,366	
 	 	$	2,356,881	
 	
Allowance for Credit Losses and Aging of Receivables
We estimate our finance receivable 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. We believe that our concentration of credit risk is limited because of our large number of customers, small account balances for most of our customers, and customer geographic and industry diversification.

Our policy is to discontinue revenue recognition for lease receivables that are more than 120 days past due and for unsecured loan receivables that are more than 90 days past due. 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 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 the reserves as necessary. This evaluation is inherently subjective and actual results may differ significantly from estimated reserves.

5

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

We maintain a program for U.S. borrowers in our North America loan portfolio who are experiencing financial difficulties, but are able to make reduced payments over an extended period of time. Upon acceptance into the program, the borrower’s credit line is closed, interest accrual is suspended, the borrower’s minimum required payment is reduced and the account is re-aged and classified as current. There is generally no forgiveness of debt or reduction of balances owed. The loans in the program are considered to be troubled debt restructurings because of the concessions granted to the borrower. At June 30, 2012 and December 31, 2011, loans in this program had a balance of $5 million and $7 million, respectively.

The allowance for credit losses for these modified loans is determined by the difference between cash flows expected to be received from the borrower discounted at the original effective rate and the carrying value of the loan. The allowance for credit losses related to such loans was $1 million at June 30, 2012 and $2 million at December 31, 2011 and is included in the allowance for credit losses of North America loans in the table below. Management believes that the allowance for credit losses is adequate for these loans and all other loans in the portfolio. Write-offs of loans in the program for the past twelve months were less than $1 million.

Activity in the allowance for credit losses for finance receivables for the six months ended June 30, June 30, 2012 was as follows:

 	Sales-type Lease Receivables	 	Loan Receivables	 	 	
 	North
America	 	International	 	North
America	 	International	 	Total	
Balance at January 1, 2012	$	28,661	
 	 	$	12,039	
 	 	$	20,272	
 	 	$	2,458	
 	 	$	63,430	
 	
Amounts charged to expense	288	
 	 	53	
 	 	2,284	
 	 	422	
 	 	3,047	
 	
Accounts written off	(5,068	)	 	(3,051	)	 	(6,026	)	 	(591	)	 	(14,736	)	
Balance at June 30, 2012	$	23,881	
 	 	$	9,041	
 	 	$	16,530	
 	 	$	2,289	
 	 	$	51,741	

The aging of finance receivables at June 30, 2012 and December 31, 2011 was as follows:

 	Sales-type Lease Receivables	 	Loan Receivables	 	 	
 	North
America	 	International	 	North
America	 	International	 	Total	
June 30, 2012	 	

 	 	 	

< 31 days	$	1,556,971	
 	 	$	419,905	
 	 	$	387,285	
 	 	$	43,646	
 	 	$	2,407,807	
 	
> 30 days and < 61 days	32,991	
 	 	11,043	
 	 	11,372	
 	 	1,291	
 	 	56,697	
 	
> 60 days and < 91 days	22,348	
 	 	4,893	
 	 	3,660	
 	 	327	
 	 	31,228	
 	
> 90 days and < 121 days	8,044	
 	 	3,809	
 	 	2,404	
 	 	147	
 	 	14,404	
 	
> 120 days	18,060	
 	 	7,667	
 	 	2,606	
 	 	210	
 	 	28,543	
 	
Total	$	1,638,414	
 	 	$	447,317	
 	 	$	407,327	
 	 	$	45,621	
 	 	$	2,538,679	
 	
Past due amounts > 90 days	 	

 	 	 	

Still accruing interest	$	8,044	
 	 	$	3,809	
 	 	$	—	
 	 	$	—	
 	 	$	11,853	
 	
Not accruing interest	18,060	
 	 	7,667	
 	 	5,010	
 	 	357	
 	 	31,094	
 	
Total	$	26,104	
 	 	$	11,476	
 	 	$	5,010	
 	 	$	357	
 	 	$	42,947	

6

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Sales-type Lease Receivables	 	Loan Receivables	 	 	
 	North
America	 	International	 	North
America	 	International	 	Total	
December 31, 2011	 	

 	 	 	

< 31 days	$	1,641,706	
 	 	$	434,811	
 	 	$	414,434	
 	 	$	38,841	
 	 	$	2,529,792	
 	
> 30 days and < 61 days	41,018	
 	 	10,152	
 	 	12,399	
 	 	1,066	
 	 	64,635	
 	
> 60 days and < 91 days	24,309	
 	 	5,666	
 	 	4,362	
 	 	425	
 	 	34,762	
 	
> 90 days and < 121 days	4,912	
 	 	3,207	
 	 	2,328	
 	 	186	
 	 	10,633	
 	
> 120 days	15,708	
 	 	6,265	
 	 	3,108	
 	 	419	
 	 	25,500	
 	
Total	$	1,727,653	
 	 	$	460,101	
 	 	$	436,631	
 	 	$	40,937	
 	 	$	2,665,322	
 	
Past due amounts > 90 days	 	

 	 	 	

Still accruing interest	$	4,912	
 	 	$	3,207	
 	 	$	—	
 	 	$	—	
 	 	$	8,119	
 	
Not accruing interest	15,708	
 	 	6,265	
 	 	5,436	
 	 	605	
 	 	28,014	
 	
Total	$	20,620	
 	 	$	9,472	
 	 	$	5,436	
 	 	$	605	
 	 	$	36,133	
 	
Credit Quality
The extension of credit and management of credit lines to new and existing customers uses a combination of an automated credit score, where available, and a detailed manual review of the customer’s financial condition and, when applicable, the customer’s payment history. Once credit is granted, the payment performance of the customer is managed through automated collections processes and is supplemented with direct follow up should an account become delinquent. We have robust automated collections and extensive portfolio management processes. The portfolio management processes ensure that our global strategy is executed, collection resources are allocated appropriately and enhanced tools and processes are implemented as needed.
We use a third party to score the majority of the North American portfolio on a quarterly basis using a commercial credit score. We do not use a third party to score our International portfolios because the cost to do so is prohibitive, it is a localized process and there is no single credit score model that covers all countries.
The table below shows the North American portfolio at June 30, 2012 and December 31, 2011 by relative risk class (low, medium, high) based on the relative scores of the accounts within each class. The relative scores are determined based on a number of factors, including the company type, ownership structure, payment history and financial information. A fourth class is shown for accounts that are not scored. Absence of a score is not indicative of the credit quality of the account. The degree of risk, as defined by the third party, refers to the relative risk that an account in the next 12 month period may become delinquent.
 	 	
•	Low risk accounts are companies with very good credit scores and are considered to approximate the top 30% of all commercial borrowers.	
 	 	
•	Medium risk accounts are companies with average to good credit scores and are considered to approximate the middle 40% of all commercial borrowers.	
 	 	
•	High risk accounts are companies with poor credit scores, are delinquent or are at risk of becoming delinquent and are considered to approximate the bottom 30% of all commercial borrowers.	

7

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

 	 	 	 	 	 	 	 	
 	June 30,
2012	 	December 31,
2011	
Sales-type lease receivables	 	

Risk Level	 	

Low	$	1,041,255	
 	 	$	1,096,676	
 	
Medium	470,064	
 	 	473,394	
 	
High	49,313	
 	 	58,177	
 	
Not Scored	77,782	
 	 	99,406	
 	
Total	$	1,638,414	
 	 	$	1,727,653	
 	
Loan receivables	 	

Risk Level	 	

Low	$	243,419	
 	 	$	269,547	
 	
Medium	145,053	
 	 	115,490	
 	
High	13,720	
 	 	21,081	
 	
Not Scored	5,135	
 	 	30,513	
 	
Total	$	407,327	
 	 	$	436,631	

 	

Although the relative score of accounts within each class is used as a factor in determining 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 1.7% of the portfolio as greater than 90 days past due, and the roll-forward schedule of the allowance for credit losses, showing the actual losses for the six months ended June 30, 2012 are more representative of the potential loss performance of our portfolio than relative risk based on scores, as defined by the third party.

Leveraged Leases
Our investment in leveraged lease assets consisted of the following:

 	June 30,
2012	 	December 31,
2011	
Rental receivables	$	88,942	
 	 	$	810,306	
 	
Unguaranteed residual values	13,816	
 	 	13,784	
 	
Principal and interest on non-recourse loans	(61,497	)	 	(606,708	)	
Unearned income	(8,536	)	 	(79,111	)	
Investment in leveraged leases	32,725	
 	 	138,271	
 	
Less: deferred taxes related to leveraged leases	(20,117	)	 	(101,255	)	
Net investment in leveraged leases	$	12,608	
 	 	$	37,016	
 	
The following is a summary of the components of income from leveraged leases:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2012	 	2011	 	2012	 	2011	
Pre-tax leveraged lease income	$	432	
 	 	$	1,558	
 	 	$	1,225	
 	 	$	3,094	
 	
Income tax effect	7	
 	 	(81	)	 	26	
 	 	(163	)	
Income from leveraged leases	$	439	
 	 	$	1,477	
 	 	$	1,251	
 	 	$	2,931	
 	
During 2012, we sold certain non-U.S. leveraged lease assets for cash. The investment in the leveraged lease assets at the date of sale was $109 million and an after-tax gain of $13 million was recognized. The effects of the sale are not included in the table above.
4. Intangible Assets and Goodwill
Intangible assets
Intangible assets at June 30, 2012 and December 31, 2011 consisted of the following:

 	June 30, 2012	 	December 31, 2011	
 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net
Carrying
Amount	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net
Carrying
Amount	
Customer relationships	$	408,401	
 	 	$	(253,404	)	 	$	154,997	
 	 	$	409,489	
 	 	$	(237,536	)	 	$	171,953	
 	
Supplier relationships	29,000	
 	 	(20,662	)	 	8,338	
 	 	29,000	
 	 	(19,213	)	 	9,787	
 	
Software & technology	169,998	
 	 	(147,759	)	 	22,239	
 	 	170,286	
 	 	(143,456	)	 	26,830	
 	
Trademarks & trade names	34,560	
 	 	(31,575	)	 	2,985	
 	 	33,908	
 	 	(30,076	)	 	3,832	
 	
Non-compete agreements	7,381	
 	 	(7,283	)	 	98	
 	 	7,564	
 	 	(7,363	)	 	201	
 	
Total intangible assets	$	649,340	
 	 	$	(460,683	)	 	$	188,657	
 	 	$	650,247	
 	 	$	(437,644	)	 	$	212,603	

Amortization expense for intangible assets was $11 million and $14 million for the three months ended June 30, 2012 and 2011, respectively, and $23 million and $29 million for the six months ended June 30,  2012 and 2011, respectively. The future amortization expense for intangible assets as of June 30, 2012 was as follows:

Remaining for year ended December 31, 2012	$	21,622	
 	
Year ended December 31, 2013	41,849	
 	
Year ended December 31, 2014	36,496	
 	
Year ended December 31, 2015	32,541	
 	
Year ended December 31, 2016	23,997	
 	
Thereafter	32,152	
 	
Total	$	188,657	
 	
Actual amortization expense may differ from the amounts above due to, among other things, fluctuations in foreign currency exchange rates, impairments, future acquisitions and accelerated amortization.
Goodwill
The changes in the carrying amount of goodwill, by reporting segment, for the six months ended June 30, 2012 were as follows:

 	 	December 31, 2011	 	Other (1)	 	June 30, 2012	
North America Mailing	 	$	352,897	
 	 	$	(2,787	)	 	$	350,110	
 	
International Mailing	 	189,067	
 	 	(11,698	)	 	177,369	
 	
Small & Medium Business Solutions	 	541,964	
 	 	(14,485	)	 	527,479	
 	
Production Mail	 	127,589	
 	 	640	
 	 	128,229	
 	
Software	 	667,124	
 	 	650	
 	 	667,774	
 	
Management Services	 	402,723	
 	 	(333	)	 	402,390	
 	
Mail Services	 	213,455	
 	 	(1	)	 	213,454	
 	
Marketing Services	 	194,233	
 	 	—	
 	 	194,233	
 	
Enterprise Business Solutions	 	1,605,124	
 	 	956	
 	 	1,606,080	
 	
Total	 	$	2,147,088	
 	 	$	(13,529	)	 	$	2,133,559	

(1)	Primarily foreign currency translation adjustments.	

8

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

5. Debt
On June 30, 2012, we redeemed our $400 million, 4.625% notes (the 2012 Notes) that were due in October 2012. As a result of the early redemption of the 2012 Notes, we recorded a net charge of $2 million in other expense, net as a loss on the extinguishment of debt. The charge is comprised of a make-whole payment and a gain recognized upon the termination of interest rate swap contracts related to the 2012 Notes.
In April 2012, we entered into forward starting swap agreements with an aggregate notional value of $150 million to hedge interest rate risk associated with the planned issuance of long-term debt before the end of the second quarter. We chose not to issue debt within the planned time period, and on June 29, 2012, the swap agreements expired and we recorded a loss of $6 million in other expense, net during the quarter ended June 30, 2012.
In March 2012, we redeemed, at par plus accrued interest, a $150 million term loan that was scheduled to mature in the fourth quarter of 2012.
During the quarter, commercial paper borrowings averaged $142 million at a weighted-average interest rate of 0.38% and the maximum amount outstanding at any time was $343 million. At June 30, 2012, there was no outstanding commercial paper borrowings.
6. Noncontrolling Interests (Preferred Stockholders’ Equity in Subsidiaries)
Pitney Bowes International Holdings, Inc. (PBIH), a subsidiary, has 300,000 shares, or $300 million, of outstanding perpetual voting preferred stock (the Preferred Stock) held by certain 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% through 2016 after which it becomes callable and, if it remains outstanding, will yield a dividend that increases by 50% every six months thereafter. No dividends were in arrears at June 30, 2012 or December 31, 2011. There was no change in the carrying value of noncontrolling interests during the period ended June 30, 2012 or the year ended December 31, 2011.
7. Income Taxes
The effective tax rate for the three months ended June 30, 2012 and 2011 was 33.4% and 33.3%, respectively. The effective tax rate for the six months ended June 30, 2012 and 2011 was 21.3% and 32.2%, respectively. The effective tax rate for the six months ended June 30, 2012 includes a $17 million tax benefit from the sale of non-U.S. leveraged lease assets and tax benefits of $22 million arising from the conclusion of tax examinations. The effective tax rate for the six months ended June 30, 2011 includes a $9 million tax benefit arising from a favorable conclusion of a foreign tax examination.
As is the case with other large corporations, our tax returns are examined each year by tax authorities in the United States, other countries and local jurisdictions in which we have operations. Except for issues arising out of certain partnership investments, the IRS examination of tax years 2001-2004 is closed to audit and the examination of years 2005-2008 is expected to be closed to audit by the end of 2012. Other significant tax filings subject to examination include various post-2000 U.S. state and local, post 2007 Canadian and German, and post-2008 French and U.K. tax filings. We have other less significant tax filings currently under examination or subject to examination. 
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.  We believe we have established tax reserves that are appropriate given the possibility of tax adjustments.  However, determining the appropriate level of tax reserves requires judgment regarding the uncertain application of tax law and the possibility of tax adjustments. Future changes in tax reserve requirements could have a material impact, positive or negative, on our results of operations, financial position and cash flows.

9

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

8. Stockholders’ Equity

Changes in stockholders’ equity for the six months ended June 30, 2012 and 2011 were as follows:

 	Preferred
stock	 	Preference
stock	 	Common Stock	 	Additional Paid-in Capital	 	Retained earnings	 	Accumulated other comprehensive loss	 	Treasury stock	 	Total equity	
Balances at December 31, 2011	$	4	
 	 	$	659	
 	 	$	323,338	
 	 	$	240,584	
 	 	$	4,600,217	
 	 	$	(661,645	)	 	$	(4,542,143	)	 	$	(38,986	)	
Net income	—	
 	 	—	
 	 	—	
 	 	—	
 	 	258,293	
 	 	—	
 	 	—	
 	 	258,293	
 	
Other comprehensive income	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	3,987	
 	 	—	
 	 	3,987	
 	
Cash dividends	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common ($0.75 per share)	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(149,999	)	 	—	
 	 	—	
 	 	(149,999	)	
Preference	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(26	)	 	—	
 	 	—	
 	 	(26	)	
Issuances of common stock	—	
 	 	—	
 	 	—	
 	 	(22,176	)	 	—	
 	 	—	
 	 	21,321	
 	 	(855	)	
Conversions to common stock	—	
 	 	(6	)	 	—	
 	 	(124	)	 	—	
 	 	—	
 	 	130	
 	 	—	
 	
Stock-based compensation expense	—	
 	 	—	
 	 	—	
 	 	8,852	
 	 	—	
 	 	—	
 	 	—	
 	 	8,852	
 	
Balance at June 30, 2012	$	4	
 	 	$	653	
 	 	$	323,338	
 	 	$	227,136	
 	 	$	4,708,485	
 	 	$	(657,658	)	 	$	(4,520,692	)	 	$	81,266	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Preferred
stock	 	Preference
stock	 	Common Stock	 	Additional Paid-in Capital	 	Retained earnings	 	Accumulated other comprehensive loss	 	Treasury stock	 	Total equity	
Balances at December 31, 2010	$	4	
 	 	$	752	
 	 	$	323,338	
 	 	$	250,928	
 	 	$	4,282,316	
 	 	$	(473,806	)	 	$	(4,480,113	)	 	$	(96,581	)	
Net income	—	
 	 	—	
 	 	—	
 	 	—	
 	 	187,239	
 	 	—	
 	 	—	
 	 	187,239	
 	
Other comprehensive income	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	94,644	
 	 	—	
 	 	94,644	
 	
Cash dividends	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common ($0.74 per share)	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(150,834	)	 	—	
 	 	—	
 	 	(150,834	)	
Preference	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(29	)	 	—	
 	 	—	
 	 	(29	)	
Issuances of common stock	—	
 	 	—	
 	 	—	
 	 	(23,836	)	 	—	
 	 	—	
 	 	29,570	
 	 	5,734	
 	
Conversions to common stock	—	
 	 	(11	)	 	—	
 	 	(244	)	 	—	
 	 	—	
 	 	255	
 	 	—	
 	
Stock-based compensation expense	—	
 	 	—	
 	 	—	
 	 	8,656	
 	 	—	
 	 	—	
 	 	—	
 	 	8,656	
 	
Repurchase of common stock	—	
 	 	—	
 	 	—	
 	 	 	 	—	
 	 	—	
 	 	(49,998	)	 	(49,998	)	
Balance at June 30, 2011	$	4	
 	 	$	741	
 	 	$	323,338	
 	 	$	235,504	
 	 	$	4,318,692	
 	 	$	(379,162	)	 	$	(4,500,286	)	 	$	(1,169	)	

The components of accumulated other comprehensive loss at June 30, 2012 and 2011 were as follows:

 	January 1, 2012	 	Other comprehensive income	 	June 30, 2012	 	January 1, 2011	 	Other comprehensive income	 	June 30, 2011	
Foreign currency translation adjustments	$	83,952	
 	 	$	(19,908	)	 	$	64,044	
 	 	$	137,521	
 	 	$	75,981	
 	 	$	213,502	
 	
Net unrealized (loss) gain on derivatives	(8,438	)	 	553	
 	 	(7,885	)	 	(10,445	)	 	387	
 	 	(10,058	)	
Net unrealized gain on investment securities	4,387	
 	 	378	
 	 	4,765	
 	 	1,439	
 	 	1,111	
 	 	2,550	
 	
Net unamortized (loss) gain on pension and postretirement plans	(741,546	)	 	22,964	
 	 	(718,582	)	 	(602,321	)	 	17,165	
 	 	(585,156	)	
Accumulated other comprehensive loss	$	(661,645	)	 	$	3,987	
 	 	$	(657,658	)	 	$	(473,806	)	 	$	94,644	
 	 	$	(379,162	)	

9. 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 June 30, 2012 and December 31, 2011. 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.

 	June 30, 2012	
 	Level 1	 	Level 2	 	Level 3	 	Total	
Assets:	 	

 	 	 	
 	
Investment securities	 	

 	 	 	
 	
Money market funds / commercial paper	$	244,403	
 	 	$	25,345	
 	 	$	—	
 	 	$	269,748	
 	
Equity securities	—	
 	 	23,605	
 	 	—	
 	 	23,605	
 	
Commingled fixed income securities	—	
 	 	28,660	
 	 	—	
 	 	28,660	
 	
Debt securities - U.S. and foreign governments, agencies and municipalities	115,387	
 	 	20,890	
 	 	—	
 	 	136,277	
 	
Debt securities - corporate	—	
 	 	34,834	
 	 	—	
 	 	34,834	
 	
Mortgage-backed / asset-backed securities	—	
 	 	139,808	
 	 	—	
 	 	139,808	
 	
Derivatives	 	 	 	 	 	

 	
Interest rate swaps	—	
 	 	11,036	
 	 	—	
 	 	11,036	
 	
Foreign exchange contracts	—	
 	 	5,810	
 	 	—	
 	 	5,810	
 	
Total assets	$	359,790	
 	 	$	289,988	
 	 	$	—	
 	 	$	649,778	
 	
Liabilities:	 	

 	 	 	
 	
Derivatives	 	

 	 	 	
 	
Foreign exchange contracts	$	—	
 	 	$	(4,950	)	 	$	—	
 	 	$	(4,950	)	
Total liabilities	$	—	
 	 	$	(4,950	)	 	$	—	
 	 	$	(4,950	)	

10

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	December 31, 2011	
 	Level 1	 	Level 2	 	Level 3	 	Total	
Assets:	 	

 	 	 	
 	
Investment securities	 	

 	 	 	
 	
Money market funds / commercial paper	$	239,157	
 	 	$	300,702	
 	 	$	—	
 	 	$	539,859	
 	
Equity securities	—	
 	 	22,097	
 	 	—	
 	 	22,097	
 	
Commingled fixed income securities	—	
 	 	27,747	
 	 	—	
 	 	27,747	
 	
Debt securities - U.S. and foreign governments, agencies and municipalities	93,175	
 	 	19,042	
 	 	—	
 	 	112,217	
 	
Debt securities - corporate	—	
 	 	31,467	
 	 	—	
 	 	31,467	
 	
Mortgage-backed / asset-backed securities	—	
 	 	134,262	
 	 	—	
 	 	134,262	
 	
Derivatives	 	

 	 	

Interest rate swaps	—	
 	 	15,465	
 	 	—	
 	 	15,465	
 	
Foreign exchange contracts	—	
 	 	4,230	
 	 	—	
 	 	4,230	
 	
Total assets	$	332,332	
 	 	$	555,012	
 	 	$	—	
 	 	$	887,344	
 	
Liabilities:	 	

 	 	 	
 	
Derivatives	 	

 	 	 	
 	
Foreign exchange contracts	$	—	
 	 	$	(1,439	)	 	$	—	
 	 	$	(1,439	)	
Total liabilities	$	—	
 	 	$	(1,439	)	 	$	—	
 	 	$	(1,439	)	
Investment Securities
The valuation of investment securities is based on the market approach using 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 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 classified as Level 2 as they are not separately listed on an exchange.	
 	 	
•	Commingled Fixed Income Securities:  Mutual funds that invest in a variety of fixed income securities including securities of the U.S. government and its agencies, corporate debt, mortgage-backed securities and asset-backed securities. The value of the funds is based on the market value of the underlying investments owned by each fund, minus its liabilities, divided by the number of shares outstanding, as reported by the fund manager. These commingled funds are not listed on an exchange in an active market and 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.	
 	 	
•	Mortgage-Backed Securities (MBS) / Asset-Backed Securities (ABS): These securities are valued based on external pricing indices. When external index pricing is not observable, MBS and ABS are valued based on external price/spread data. These securities are classified as Level 2.	
The carrying value of our investment securities at June 30, 2012 and December 31, 2011 was $625 million and $861 million, respectively.
Investment securities include investments held by The Pitney Bowes Bank, a wholly-owned subsidiary and a Utah-chartered

11

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

Industrial Loan Company. The bank’s investments at June 30, 2012 and December 31, 2011 were $343 million and $282 million, respectively. These investments are reported on the Condensed Consolidated Balance Sheets as cash and cash equivalents, short-term investments and other assets depending on the type of investment and maturity.
We have not experienced any write-offs in our investment portfolio. The majority of our MBS are either guaranteed or supported 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 incur imposed limits on redemptions. We have no investments in inactive markets that 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
In the normal course of business, we are exposed to the impact of interest rate changes and foreign currency fluctuations. We limit these risks by following established risk management policies and procedures, including the use of derivatives. We use derivatives to manage the related cost of debt and to limit the effects of foreign exchange rate fluctuations on financial results. 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.
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 is based on the market approach using observable market inputs, such as forward rates.

The fair value of our derivative instruments at June 30, 2012 and December 31, 2011 was as follows:

Designation of Derivatives	 	Balance Sheet Location	 	June 30,
2012	 	December 31,
2011	
Derivatives designated as
hedging instruments	 	Other current assets and prepayments:	 	 	

 	 	Foreign exchange contracts	 	$	597	
 	 	$	780	
 	
 	 	Other assets:	 	 	

 	 	Interest rate swaps	 	11,036	
 	 	15,465	
 	
 	 	Accounts payable and accrued liabilities:	 	 	

 	 	Foreign exchange contracts	 	(5	)	 	(79	)	
Derivatives not designated as
hedging instruments	 	Other current assets and prepayments:	 	 	

 	 	Foreign exchange contracts	 	5,213	
 	 	3,450	
 	
 	 	Accounts payable and accrued liabilities:	 	 	

 	 	Foreign exchange contracts	 	(4,945	)	 	(1,360	)	
 	 	 	 	 	 	 	
 	 	Total Derivative Assets	 	$	16,846	
 	 	$	19,695	
 	
 	 	Total Derivative Liabilities	 	(4,950	)	 	(1,439	)	
 	 	Total Net Derivative Assets	 	$	11,896	
 	 	$	18,256	

12

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

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. The following represents the results of fair value hedging relationships for the three and six months ended June 30, 2012 and 2011:

 	 	 	 	Three Months Ended June 30,	
 	 	 	 	Derivative Gain
Recognized in Earnings	 	Hedged Item Expense
Recognized in Earnings	
Derivative Instrument	 	Location of Gain (Loss)	 	2012	 	2011	 	2012	 	2011	
Interest rate swaps	 	Interest expense	 	$	3,446	
 	 	$	3,133	
 	 	$	(10,059	)	 	$	(8,281	)	
 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	Six Months Ended June 30,	
 	 	 	 	Derivative Gain
Recognized in Earnings	 	Hedged Item Expense
Recognized in Earnings	
Derivative Instrument	 	Location of Gain (Loss)	 	2012	 	2011	 	2012	 	2011	
Interest rate swaps	 	Interest expense	 	$	6,773	
 	 	$	4,866	
 	 	$	(20,168	)	 	$	(12,906	)	

Foreign Exchange Contracts
We enter into foreign currency exchange contracts to mitigate the currency risk associated with 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 cash flow hedges is included in accumulated other comprehensive income (AOCI) 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 June 30, 2012 and December 31, 2011, we had outstanding contracts associated with these anticipated transactions with a notional amount of $21 million and $19 million, respectively. These contracts had a net asset value of approximately $1 million at June 30, 2012 and December 31, 2011.
The amounts included in AOCI at June 30, 2012 will be recognized in earnings within the next 12 months. No amount of ineffectiveness was recorded in earnings for these designated cash flow hedges.
The following represents the results of cash flow hedging relationships for the three and six months ended June 30,  2012 and 2011:

 	 	Three Months Ended June 30,	 	
 	 	Derivative Gain (Loss)
Recognized in AOCI
(Effective Portion)	 	Location of Gain (Loss)
(Effective Portion)	 	Gain (Loss) Reclassified
from AOCI to Earnings
(Effective Portion)	 	
Derivative Instrument	 	2012	 	2011	 	 	 	2012	 	2011	 	 	
Foreign exchange contracts	 	$	(150	)	 	$	618	
 	 	Revenue	 	$	473	
 	 	$	(122	)	 	 	

 	 	Cost of sales	 	(7	)	 	(292	)	 	 	

 	 	 	 	$	466	
 	 	$	(414	)	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended June 30,	 	 	
 	 	Derivative Gain (Loss)
Recognized in AOCI
(Effective Portion)	 	Location of Gain (Loss)
(Effective Portion)	 	Gain (Loss) Reclassified
from AOCI to Earnings
(Effective Portion)	 	 	
Derivative Instrument	 	2012	 	2011	 	 	 	2012	 	2011	 	 	
Foreign exchange contracts	 	$	(809	)	 	$	303	
 	 	Revenue	 	$	774	
 	 	$	(131	)	 	 	

 	 	Cost of sales	 	(73	)	 	(554	)	 	 	

 	 	 	 	$	701	
 	 	$	(685	)	 	 	
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 adjustment on the derivatives are both recorded in earnings. At June 30, 2012, outstanding foreign exchange contracts to buy or sell various currencies had a net asset value of less than $1 million. These contracts mature in 2012. At December 31, 2011, outstanding foreign exchange contracts to buy or sell various currencies had a net asset value of $2 million.

13

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

The following represents the results of our non-designated derivative instruments for the three and six months ended June 30, June 30, 2012 and 2011:

 	 	 	 	Three Months Ended June 30,	
 	 	 	 	Derivative Gain (Loss)
Recognized in Earnings	
Derivatives Instrument	 	Location of Derivative Gain (Loss)	 	2012	 	2011	
Foreign exchange contracts	 	Selling, general and administrative expense	 	$	1,157	
 	 	$	(13,619	)	
 	 	 	 	 	 	 	
 	 	 	 	Six Months Ended June 30,	
 	 	 	 	Derivative Gain (Loss)
Recognized in Earnings	
Derivatives Instrument	 	Location of Derivative Gain (Loss)	 	2012	 	2011	
Foreign exchange contracts	 	Selling, general and administrative expense	 	(3,067	)	 	(20,861	)	

Credit-Risk-Related Contingent Features
Certain derivative instruments contain credit-risk-related contingent features that would require us to post collateral based on a combination of our long-term senior unsecured debt ratings and the net fair value of our derivatives. At June 30, 2012, we were not required to post any collateral. The maximum amount of collateral that we would have been required to post at June 30, 2012, had the credit-risk-related contingent features been triggered, was $2 million.

Fair Value of Financial Instruments
Our financial instruments include cash and cash equivalents, investment securities, accounts receivable, loan receivables, derivative instruments, account payables and debt. The carrying value for cash and cash equivalents, accounts receivable, loans receivable, and accounts payable approximate fair value because of the short maturity of these instruments.
The fair value of our debt is estimated based on recently executed transactions and market price quotations.  We classify our debt as Level 2 in the fair value hierarchy. The carrying value and estimated fair value of our debt at June 30, 2012 and December 31, 2011 was as follows:

 	June 30, 2012	 	December 31, 2011	 	
Carrying value	$	3,681,473	
 	 	$	4,233,909	
 	 	
Fair value	$	3,783,459	
 	 	$	4,364,176	

10. Restructuring Charges and Asset Impairments
2009 Program
In 2009, we implemented a series of strategic transformation initiatives designed to transform and enhance the way we operate as a global company (the 2009 Program). The initiatives were designed to enhance our responsiveness to changing market conditions and 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 substantially completed and we do not anticipate any further significant charges under this program. Most of the costs were cash-related charges. The majority of the remaining restructuring payments are expected to be paid through 2014; however, due to certain international labor laws and long-term lease agreements, some payments will extend beyond 2014. We expect that cash flows from operations will be sufficient to fund these payments.

Activity in restructuring reserves for the 2009 Program for the six months ended June 30, 2012 was as follows:

 	Severance and benefits costs	 	Other exit
costs	 	Total	
Balance at January 1, 2012	$	96,036	
 	 	$	11,358	
 	 	$	107,394	
 	
Expenses, net	3,072	
 	 	(1,462	)	 	1,610	
 	
Cash payments	(42,958	)	 	(3,354	)	 	(46,312	)	
Balance at June 30, 2012	$	56,150	
 	 	$	6,542	
 	 	$	62,692	
 	
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 2007 Program). 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. We are not recording additional restructuring charges under the 2007 Program; however, due to international labor laws and long-term lease agreements, we are still making cash payments under this program. We expect that cash flows from operations will be sufficient to fund these payments.

Activity in the restructuring reserves for the 2007 Program for the six months ended June 30, 2012 was as follows:

 	Severance and
benefits costs	 	Other exit costs	 	Total	
Balance at January 1, 2012	$	9,000	
 	 	$	2,717	
 	 	$	11,717	
 	
Reserve adjustments	(464	)	 	(72	)	 	(536	)	
Cash payments	(1,055	)	 	(508	)	 	(1,563	)	
Balance at June 30, 2012	$	7,481	
 	 	$	2,137	
 	 	$	9,618	

11. 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.

In October 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 in September 2010. After briefing on the motion to dismiss was completed, the plaintiffs filed a new amended complaint on February 17, 2012. We have moved to dismiss this new amended complaint. Based upon our current understanding of the facts and applicable laws, we do not believe there is a reasonable possibility that any loss has been incurred. We expect to prevail in this legal action; 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, results of operations or cash flows.
w12. 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:
North America Mailing: Includes the U.S. and Canadian 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 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 outside North America.
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 and related software.
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.
Segment earnings before interest and taxes (EBIT), a non-GAAP measure, is determined by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses not allocated to a particular business segment, restructuring charges, asset impairments and goodwill charges which are recognized on a consolidated basis. Management uses segment EBIT to measure profitability and performance at the segment level. Segment EBIT may not be indicative of our overall consolidated performance and therefore, should be read in conjunction with our consolidated results of operations.

14

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

Revenue and EBIT by business segment for the three and six months ended June 30, 2012 and 2011 is as follows:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2012	 	2011	 	2012	 	2011	
Revenue:	 	

 	 	 	
 	
North America Mailing	$	453,484	
 	 	$	493,653	
 	 	$	914,789	
 	 	$	1,002,692	
 	
International Mailing	165,480	
 	 	176,158	
 	 	333,494	
 	 	346,691	
 	
Small & Medium Business Solutions	618,964	
 	 	669,811	
 	 	1,248,283	
 	 	1,349,383	
 	
Production Mail	123,067	
 	 	133,769	
 	 	238,083	
 	 	265,375	
 	
Software	99,874	
 	 	99,783	
 	 	200,201	
 	 	195,768	
 	
Management Services	227,561	
 	 	240,461	
 	 	458,191	
 	 	482,085	
 	
Mail Services	140,507	
 	 	134,273	
 	 	290,663	
 	 	278,556	
 	
Marketing Services	35,845	
 	 	36,377	
 	 	66,053	
 	 	66,376	
 	
Enterprise Business Solutions	626,854	
 	 	644,663	
 	 	1,253,191	
 	 	1,288,160	
 	
Total revenue	$	1,245,818	
 	 	$	1,314,474	
 	 	$	2,501,474	
 	 	$	2,637,543	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2012	 	2011	 	2012	 	2011	
EBIT:	 	

 	 	 	
 	
North America Mailing	$	167,870	
 	 	$	175,786	
 	 	$	346,041	
 	 	$	355,447	
 	
International Mailing	21,758	
 	 	26,735	
 	 	41,755	
 	 	49,928	
 	
Small & Medium Business Solutions	189,628	
 	 	202,521	
 	 	387,796	
 	 	405,375	
 	
Production Mail	5,594	
 	 	9,223	
 	 	8,373	
 	 	16,397	
 	
Software	8,487	
 	 	9,542	
 	 	19,179	
 	 	15,054	
 	
Management Services	12,606	
 	 	19,979	
 	 	25,921	
 	 	41,008	
 	
Mail Services	27,085	
 	 	9,819	
 	 	58,990	
 	 	20,084	
 	
Marketing Services	7,503	
 	 	6,792	
 	 	12,320	
 	 	10,952	
 	
Enterprise Business Solutions	61,275	
 	 	55,355	
 	 	124,783	
 	 	103,495	
 	
Total EBIT	250,903	
 	 	257,876	
 	 	512,579	
 	 	508,870	
 	
Reconciling items:	 	

 	 	 	
 	
Interest, net (1)	(48,992	)	 	(48,527	)	 	(97,765	)	 	(99,122	)	
Corporate and other expenses	(44,349	)	 	(45,179	)	 	(98,561	)	 	(85,380	)	
Restructuring charges and asset impairments	(1,074	)	 	(4,994	)	 	(1,074	)	 	(31,018	)	
Income from continuing operations before income taxes	$	156,488	
 	 	$	159,176	
 	 	$	315,179	
 	 	$	293,350	
 	
(1) Includes financing interest expense, other interest expense and interest income.

15

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

13. Pensions and Other Benefit Programs
Defined Benefit Pension Plans
The components of net periodic benefit cost for defined benefit pension plans for the three and six months ended June 30, 2012 and 2011 were as follows:

 	Three Months Ended June 30,	
 	United States	 	Foreign	
 	2012	 	2011	 	2012	 	2011	
Service cost	$	4,515	
 	 	$	4,702	
 	 	$	2,013	
 	 	$	1,929	
 	
Interest cost	19,917	
 	 	21,931	
 	 	6,934	
 	 	7,198	
 	
Expected return on plan assets	(30,194	)	 	(31,711	)	 	(8,041	)	 	(8,088	)	
Amortization of transition credit	—	
 	 	—	
 	 	(2	)	 	(2	)	
Amortization of prior service cost	197	
 	 	37	
 	 	27	
 	 	44	
 	
Recognized net actuarial loss	13,165	
 	 	9,347	
 	 	3,492	
 	 	2,787	
 	
Settlement	—	
 	 	—	
 	 	250	
 	 	—	
 	
Special termination benefits	—	
 	 	368	
 	 	—	
 	 	10	
 	
Curtailment	—	
 	 	394	
 	 	—	
 	 	224	
 	
Net periodic benefit cost	$	7,600	
 	 	$	5,068	
 	 	$	4,673	
 	 	$	4,102	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	Six Months Ended June 30,	
 	United States	 	Foreign	
 	2012	 	2011	 	2012	 	2011	
Service cost	$	9,469	
 	 	$	9,725	
 	 	$	4,031	
 	 	$	3,814	
 	
Interest cost	40,520	
 	 	43,870	
 	 	13,857	
 	 	14,255	
 	
Expected return on plan assets	(60,812	)	 	(61,529	)	 	(16,064	)	 	(16,033	)	
Amortization of transition credit	—	
 	 	—	
 	 	(4	)	 	(4	)	
Amortization of prior service cost	402	
 	 	73	
 	 	55	
 	 	88	
 	
Recognized net actuarial loss	26,479	
 	 	18,761	
 	 	6,988	
 	 	5,525	
 	
Settlement	—	
 	 	—	
 	 	250	
 	 	—	
 	
Special termination benefits	—	
 	 	760	
 	 	—	
 	 	10	
 	
Curtailment	—	
 	 	2,096	
 	 	—	
 	 	224	
 	
Net periodic benefit cost	$	16,058	
 	 	$	13,756	
 	 	$	9,113	
 	 	$	7,879	

Through June 30, 2012, we contributed $90 million to our U.S. pension plan and $23 million to our foreign pension plans. This includes special contributions of $85 million to our U.S. pension plan and $10 million to our foreign pension plans.

16

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

Nonpension Postretirement Benefit Plans
The components of net periodic benefit cost for nonpension postretirement benefit plans for the three and six months ended June 30, 2012 and 2011 were as follows:

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2012	 	2011	 	2012	 	2011	
Service cost	$	868	
 	 	$	796	
 	 	$	1,759	
 	 	$	1,667	
 	
Interest cost	2,714	
 	 	3,300	
 	 	5,789	
 	 	6,771	
 	
Amortization of prior service credit	(523	)	 	(687	)	 	(1,046	)	 	(1,252	)	
Amortization of net loss	1,690	
 	 	1,839	
 	 	4,057	
 	 	3,833	
 	
Special termination benefits	—	
 	 	46	
 	 	—	
 	 	113	
 	
Curtailment	—	
 	 	386	
 	 	—	
 	 	1,236	
 	
Net periodic benefit cost	$	4,749	
 	 	$	5,680	
 	 	$	10,559	
 	 	$	12,368	
 	
Contributions for benefit payments were $8 million for each of the three months ended June 30, 2012 and 2011 and $14 million and $15 million for the six months ended June 30, 2012 and 2011, respectively.

17

PITNEY BOWES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited; table amounts in thousands of dollars, unless otherwise noted)

14. Earnings per Share
The calculation of basic and diluted earnings per share for the three and six months ended June 30, 2012 and 2011 is presented below. The sum of earnings per share amounts may not equal the totals due to rounding.

 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2012	 	2011	 	2012	 	2011	
Numerator:	 	

 	 	 	
 	
Amounts attributable to common stockholders:	 	

 	 	 	
 	
Income from continuing operations	$	99,623	
 	 	$	101,570	
 	 	$	238,961	
 	 	$	189,756	
 	
(Loss) income from discontinued operations	—	
 	 	(635	)	 	19,332	
 	 	(2,517	)	
Net income (numerator for diluted EPS)	99,623	
 	 	100,935	
 	 	258,293	
 	 	187,239	
 	
Less: Preference stock dividend	(13	)	 	(14	)	 	(26	)	 	(29	)	
Income attributable to common stockholders (numerator for basic EPS)	$	99,610	
 	 	$	100,921	
 	 	$	258,267	
 	 	$	187,210	
 	
Denominator (in thousands):	 	

 	 	 	
 	
Weighted-average shares used in basic EPS	200,252	
 	 	203,171	
 	 	200,091	
 	 	203,372	
 	
Effect of dilutive shares:	 	

 	 	 	
 	
Preferred stock	2	
 	 	2	
 	 	2	
 	 	2	
 	
Preference stock	398	
 	 	453	
 	 	399	
 	 	454	
 	
Stock plans	459	
 	 	459	
 	 	407	
 	 	399	
 	
Weighted-average shares used in diluted EPS	201,111	
 	 	204,085	
 	 	200,899	
 	 	204,227	
 	
Basic earnings per share:	 	

 	 	 	
 	
Income from continuing operations	$	0.50	
 	 	$	0.50	
 	 	$	1.19	
 	 	$	0.93	
 	
Income (loss) from discontinued operations	—	
 	 	—	
 	 	0.10	
 	 	(0.01	)	
Net income	$	0.50	
 	 	$	0.50	
 	 	$	1.29	
 	 	$	0.92	
 	
Diluted earnings per share:	 	

 	 	 	
 	
Income from continuing operations	$	0.50	
 	 	$	0.50	
 	 	$	1.19	
 	 	$	0.93	
 	
Income (loss) from discontinued operations	—	
 	 	—	
 	 	0.10	
 	 	(0.01	)	
Net income	$	0.50	
 	 	$	0.49	
 	 	$	1.29	
 	 	$	0.92	
 	
Anti-dilutive shares (in thousands):	 	

 	 	 	
 	
Anti-dilutive shares not used in calculating diluted weighted-average shares	13,737	
 	 	14,224	
 	 	14,517	
 	 	14,023	

15. Discontinued Operations
During the six months ended June 30, 2012, we recognized $19 million of tax benefits in discontinued operations arising from the conclusion of tax examinations. Discontinued operations relate to our Capital Services business that was sold in 2006.

18

Item 2: Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
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-Q 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:
 	 	
•	declining physical mail volumes	
 	 	
•	mailers’ utilization of alternative means of communication or competitors’ products	
 	 	
•	timely development and acceptance of new products and services	
 	 	
•	successful entry into new markets	
 	 	
•	success in gaining product approval in new markets where regulatory approval is required	
 	 	
•	changes in postal or banking regulations	
 	 	
•	interrupted use of key information systems	
 	 	
•	third-party suppliers’ ability to provide product components, assemblies or inventories	
 	 	
•	our success at managing the relationships with our outsource providers, including the costs of outsourcing functions and operations not central to our business	
 	 	
•	changes in privacy laws	
 	 	
•	intellectual property infringement claims	
 	 	
•	regulatory approvals and satisfaction of other conditions to consummate and integrate any acquisitions	
 	 	
•	negative developments in economic conditions, including adverse impacts on customer demand	
 	 	
•	our success at managing customer credit risk	
 	 	
•	significant changes in pension, health care and retiree medical costs	
 	 	
•	changes in interest rates, foreign currency fluctuations or credit ratings	
 	 	
•	income tax adjustments or other regulatory levies for prior audit years and changes in tax laws or regulations	
 	 	
•	impact on mail volume resulting from concerns over the use of the mail for transmitting harmful biological agents	
 	 	
•	changes in international or national political conditions, including any terrorist attacks	
 	 	
•	acts of nature	
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements contained in this report and our Annual Report to Stockholders on Form 10-K for the year ended December 31, 2011 (2011 Annual Report). All table amounts are presented in millions of dollars, unless otherwise stated. Table amounts may not sum to the total due to rounding.
Overview
For the second quarter of 2012, revenue decreased 5% to $1,246 million compared to $1,314 million in the prior year quarter driven by an 8% decline in equipment sales as some customers continue to prolong finalizing investment decisions, a 10% decline in financing revenue due to lower equipment sales in prior periods, a 7% decline in rentals revenue and 10% decline in supplies revenue due to a decrease in mail volumes and our installed meter base. Foreign currency translation had an unfavorable impact of 2% on revenue in the quarter.

Net income from continuing operations attributable to common stockholders was $100 million, or $0.50 per diluted share for the quarter compared to $102 million or $0.50 per diluted share for the prior year quarter.

For the six months ended June 30, 2012, we generated $370 million of cash flow from operations and received $106 million from the sale of leveraged lease assets. We used cash to redeem $550 million of long-term debt, pay dividends of $159 million to our stockholders and fund capital investments of $89 million.

For the six months ended June 30, 2012, revenue decreased 5% to $2,501 million compared to $2,638 million for the six months ended June 30, 2011. Net income from continuing operations attributable to common stockholders was $239 million, or $1.19 per diluted share for the six months ended June 30, 2012 compared to $190 million, or $0.93 per diluted share for the six months ended June 30, 2011.

19

Outlook
The worldwide economy and business environment, including the economic situation in Europe, continue to cause many of our customers to remain cautious about spending; however, we continue to make progress in delivering new customer communications solutions that meet the needs of our broad range of customers. Small and Medium Business Solutions (SMB) revenues are expected to continue to be challenged by the decline in physical mail volumes as alternative means of communications evolve and gain further acceptance. We anticipate that the rate of decline in mailing equipment sales will lessen, due in part to global sales of our Connect+ communications systems. A slowing of the rate of decline for overall SMB revenue will lag that of equipment sales because of the recurring revenue streams that follow after each equipment sale. We anticipate revenue growth in certain of our Enterprise Business Solutions segments from demand for multi-year software licensing agreements, continued expansion in Mail Services operations and market acceptance for our new solutions that help customers grow their business by more effectively managing their physical and digital communications with their customers.

We will continue to focus on streamlining our business operations and creating more flexibility in our cost structure. Our growth strategies will focus on leveraging our expertise in physical communications with our expanding capabilities in digital and hybrid communications. We will continue to develop and invest in products, software, services and solutions that help customers grow their business by more effectively communicating with their customers across physical, digital and hybrid channels.

We expect our mix of revenue to continue to change, with a greater percentage of revenue coming from enterprise-related products and solutions. We also expect to continue to roll out digitally-based products and services but do not expect them to have a significant impact on our revenues for 2012.

RESULTS OF OPERATIONS
Revenue by source and the related cost of revenue are shown in the following tables:

Revenue	 	 	 	 	 	 	 	 	 	 	 	
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2012	 	2011	 	% change	 	2012	 	2011	 	% change	
Equipment sales	$	224	
 	 	$	243	
 	 	(8	)%	 	$	444	
 	 	$	485	
 	 	(8	)%	
Supplies	71	
 	 	79	
 	 	(10	)%	 	147	
 	 	161	
 	 	(9	)%	
Software	105	
 	 	106	
 	 	(1	)%	 	209	
 	 	205	
 	 	2	 %	
Rentals	145	
 	 	156	
 	 	(7	)%	 	286	
 	 	313	
 	 	(9	)%	
Financing	123	
 	 	136	
 	 	(10	)%	 	250	
 	 	277	
 	 	(10	)%	
Support services	171	
 	 	177	
 	 	(3	)%	 	345	
 	 	355	
 	 	(3	)%	
Business services	407	
 	 	418	
 	 	(3	)%	 	821	
 	 	841	
 	 	(2	)%	
Total revenue	$	1,246	
 	 	$	1,314	
 	 	(5	)%	 	$	2,501	
 	 	$	2,638	
 	 	(5	)%	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of revenue	 	

 	 	 	
 	 	 	 	 	 	 	 	 	
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	 	 	 	 	Percentage of Revenue	 	 	 	 	 	Percentage of Revenue	
 	2012	 	2011	 	2012	 	2011	 	2012	 	2011	 	2012	 	2011	
Cost of equipment sales	$	107	
 	 	$	104	
 	 	47.6	%	 	43.0	%	 	$	204	
 	 	$	219	
 	 	45.8	%	 	45.2	%	
Cost of supplies	21	
 	 	26	
 	 	29.6	%	 	32.5	%	 	45	
 	 	52	
 	 	30.5	%	 	32.1	%	
Cost of software	24	
 	 	25	
 	 	23.3	%	 	23.6	%	 	45	
 	 	50	
 	 	21.8	%	 	24.4	%	
Cost of rentals	32	
 	 	36	
 	 	21.9	%	 	23.1	%	 	62	
 	 	72	
 	 	21.7	%	 	23.0	%	
Financing interest expense	21	
 	 	22	
 	 	16.8	%	 	16.3	%	 	42	
 	 	45	
 	 	16.7	%	 	16.4	%	
Cost of support services	112	
 	 	115	
 	 	65.5	%	 	65.3	%	 	227	
 	 	231	
 	 	65.9	%	 	64.9	%	
Cost of business services	314	
 	 	325	
 	 	77.1	%	 	77.8	%	 	633	
 	 	659	
 	 	77.1	%	 	78.3	%	
Total cost of revenue	$	630	
 	 	$	654	
 	 	50.6	%	 	49.7	%	 	$	1,257	
 	 	$	1,328	
 	 	50.3	%	 	50.4	%	

20

Equipment sales
Equipment sales revenue decreased 8% in both the quarter and year-to-date periods to $224 million and $444 million, respectively, compared with the same periods in 2011 as customers continue to postpone purchases of new equipment. Foreign currency translation had an unfavorable impact on revenue of 3% and 2% on the quarter and year-to-date periods, respectively. Cost of equipment sales as a percentage of revenue increased to 47.6%  in the quarter compared to 43.0% in the prior year quarter due to a higher mix of lower margin product sales together with pricing pressure on competitive placements. Cost of equipment sales as a percentage of revenue for the year-to-date period was 45.8% compared to 45.2% in the prior year period.
Supplies
Supplies revenue decreased 10% to $71 million and 9% to $147 million in the quarter and year-to-date periods, respectively, compared with the same periods in 2011 primarily due to reduced mail volumes, fewer installed meters worldwide and lower ink and toner sales. Foreign currency translation had an unfavorable impact on revenue of 3% and 2% on the quarter and year-to-date periods, respectively. Cost of supplies as a percentage of revenue improved to 29.6% in the quarter compared with 32.5% in the prior year quarter and to 30.5% in the year-to-date period compared to 32.1% in the comparable prior year period primarily due to a favorable mix of higher margin core supplies sales and price increases.

Software
Software revenue decreased 1% to $105 million in the quarter and increased 2% to $209 million in the year-to-date period compared with the same periods in 2011. Foreign currency had an unfavorable impact on revenue of 3% in the quarter and 2% in the year-to-date period. The underlying increase in revenue in the quarter and year-to-date periods was primarily due to growth in licensing revenue in North America and Latin America, which was partially offset by a decline in Europe. Cost of software as a percentage of revenue improved slightly in the quarter to 23.3% compared with 23.6% in the prior year quarter. On a year-to-date basis, cost of software as a percentage of revenue improved to 21.8% compared with 24.4% in the prior year-to-date period due to higher revenue and lower intangible asset amortization expense.

Rentals
Rentals revenue decreased 7% to $145 million and 9% to $286 million in the quarter and year-to-date period, respectively, compared with the same periods in 2011 due to lower mail volumes and fewer meters in service worldwide. The year-to-date decrease also includes a one-time adjustment to deferred revenue which reduced rental revenue in the mailing businesses by 2%. Foreign currency translation had an unfavorable impact of 2% and 1% on the quarter and year-to-date revenue, respectively. Cost of rentals as a percentage of revenue improved in the quarter to 21.9% compared to 23.1% in the prior year quarter and to 21.7% for the year-to-date period compared with 23.0% in the prior year-to-date period due to lower depreciation expense.

Financing
Financing revenue decreased 10% in both the quarter and year-to-date periods to $123 million and $250 million, respectively, compared with the same periods in 2011 due to lower equipment sales in prior periods. Financing interest expense as a percentage of revenue in the quarter was 16.8% compared to 16.3% in the prior year quarter and 16.7% for the year-to-date period compared to 16.4% in the prior year-to-date period. In computing our financing interest expense, which represents our cost of borrowing associated with the generation of financing revenue, 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 decreased 3% in both the quarter and year-to-date periods to $171 million and $345 million, respectively, compared with the same periods in 2011. The overall decrease was driven primarily by the unfavorable impacts of foreign currency translation, which reduced revenue by 3% and 2% in the quarter and year-to-date periods, respectively. Cost of support services as a percentage of revenue was 65.5% in the quarter compared with 65.3% in the prior year quarter. Cost of support services as a percentage of revenue in the year-to-date period increased to 65.9% compared to 64.9% in the prior year-to-date period primarily due to pricing pressure on new placements and renewal contracts.

Business Services
Business services revenue decreased 3% to $407 million and 2% to $821 million in the quarter and year-to-date period, respectively, compared with the same periods in 2011. The decrease is primarily due to account contractions and terminations in prior periods and pricing pressures on new business and contract renewals in our Management Services business. Foreign currency translation had an unfavorable impact of 1% on both the quarter and year-to-date revenue. Cost of business services as a percentage of revenue in the quarter and year-to-date periods was 77.1% compared with 77.8% in the prior year quarter and 78.3%  in the prior year year-to-date period. The improvement was primarily due to an increase in higher margin standard mail volumes in our Presort business and improved margins in our International Mail Services business.

21

Selling, general and administrative (SG&A)
SG&A expense decreased 10% to $392 million in the quarter and 7% to $803 million in the year-to-date period compared to the same periods in the prior year. These decreases are primarily due to a 5% decrease in employee-related costs in the quarter and year-to-date periods due to prior restructuring actions and productivity initiatives and a 2% decrease in depreciation and amortization expense in the quarter and year-to-date periods as a result of lower capital expenditures in prior periods.
Restructuring charges and asset impairments
Restructuring charges and asset impairments were $1 million, net for the three and six months ended June 30, 2012 compared to $5 million and $31 million for the three and six months ended June 30, 2011, respectively. By the end of 2011, our major restructuring programs were substantially completed and we do not expect significant charges in 2012. See Note 10 to the unaudited Condensed Consolidated Financial Statements.
Other expense, net
Other expense, net for the quarter and year-to-date periods of 2012 is comprised of the following:

 	(Income) / Expense	
 	Quarter	 	Year-to-date	
Insurance proceeds	$	(4	)	 	$	(11	)	
Loss on forward starting swap agreement	6	
 	 	6	
 	
Make-whole payment on early termination of debt	4	
 	 	4	
 	
Gain on termination of interest rate swap contracts	(2	)	 	(2	)	
Pretax loss on sale of certain leverage lease assets	—	
 	 	4	
 	
Other expense, net	$	4	
 	 	$	1	

For the quarter and six months ended June 30, 2012, we received insurance proceeds of $4 million and $11 million, respectively, in connection with the 2011 fire at our Dallas presort facility.
In April 2012, we entered into forward starting swap agreements with an aggregate notional value of $150 million to hedge interest rate risk associated with a forecasted issuance of long-term debt. Our anticipated debt issuance did not occur and these swap agreements expired June 29, 2012, resulting in a loss of $6 million.
On June 30, 2012, we redeemed our $400 million, 4.625% notes (the 2012 Notes) that were due in October 2012. As a result of the early redemption of the 2012 Notes, we incurred a loss of $4 million for a make-whole payment offset by a gain of $2 million associated with the termination of interest rate swap contracts related to the 2012 Notes.
In the first quarter of 2012, we completed a sale of certain non-U.S. leveraged lease assets to the lessee for cash and incurred a pretax loss of $4 million. We also recognized a tax benefit of $17 million associated with this sale, which is included in the provision for income taxes.
Income taxes
See Note 7 to the unaudited Condensed Consolidated Financial Statements.
Discontinued operations
See Note 15 to the unaudited Condensed Consolidated Financial Statements.
Preferred stock dividends of subsidiaries attributable to noncontrolling interests
See Note 6 to the unaudited Condensed Consolidated Financial Statements.

22

Business segment results
We conduct our business activities in seven reporting segments within two business groups, Small & Medium Business Solutions and Enterprise Business Solutions. The following tables show revenue and EBIT by business segment for the three and six months ended June 30, 2012 and 2011. Segment EBIT, a non-GAAP measure, is determined by deducting from segment revenue the related costs and expenses attributable to the segment. Segment EBIT excludes interest, taxes, general corporate expenses not allocated to a particular business segment, restructuring charges, asset impairments and goodwill charges, which are recognized on a consolidated basis. Management uses segment EBIT to measure profitability and performance at the segment level. Segment EBIT may not be indicative of our overall consolidated performance and therefore, should be read in conjunction with our consolidated results of operations. Refer to Note 12 to the Condensed Consolidated Financial Statements for a reconciliation of segment EBIT to income from continuing operations before income taxes.

Revenue	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2012	 	2011	 	%
change	 	2012	 	2011	 	%
change	
North America Mailing	$	453	
 	 	$	494	
 	 	(8	)%	 	$	915	
 	 	$	1,003	
 	 	(9	)%	
International Mailing	165	
 	 	176	
 	 	(6	)%	 	333	
 	 	347	
 	 	(4	)%	
Small & Medium Business Solutions	619	
 	 	670	
 	 	(8	)%	 	1,248	
 	 	1,349	
 	 	(7	)%	
Production Mail	123	
 	 	134	
 	 	(8	)%	 	238	
 	 	265	
 	 	(10	)%	
Software	100	
 	 	100	
 	 	—	 %	 	200	
 	 	196	
 	 	2	 %	
Management Services	228	
 	 	240	
 	 	(5	)%	 	458	
 	 	482	
 	 	(5	)%	
Mail Services	141	
 	 	134	
 	 	5	 %	 	291	
 	 	279	
 	 	4	 %	
Marketing Services	36	
 	 	36	
 	 	(1	)%	 	66	
 	 	66	
 	 	—	 %	
Enterprise Business Solutions	627	
 	 	645	
 	 	(3	)%	 	1,253	
 	 	1,288	
 	 	(3	)%	
Total	$	1,246	
 	 	$	1,314	
 	 	(5	)%	 	$	2,501	
 	 	$	2,638	
 	 	(5	)%	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBIT	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2012	 	2011	 	%
change	 	2012	 	2011	 	%
change	
North America Mailing	$	168	
 	 	$	176	
 	 	(5	)%	 	$	346	
 	 	$	355	
 	 	(3	)%	
International Mailing	22	
 	 	27	
 	 	(19	)%	 	42	
 	 	50	
 	 	(16	)%	
Small & Medium Business Solutions	190	
 	 	203	
 	 	(6	)%	 	388	
 	 	405	
 	 	(4	)%	
Production Mail	6	
 	 	9	
 	 	(39	)%	 	8	
 	 	16	
 	 	(49	)%	
Software	8	
 	 	10	
 	 	(11	)%	 	19	
 	 	15	
 	 	27	 %	
Management Services	13	
 	 	20	
 	 	(37	)%	 	26	
 	 	41	
 	 	(37	)%	
Mail Services	27	
 	 	10	
 	 	176	 %	 	59	
 	 	20	
 	 	194	 %	
Marketing Services	8	
 	 	7	
 	 	10	 %	 	12	
 	 	11	
 	 	12	 %	
Enterprise Business Solutions	61	
 	 	55	
 	 	11	 %	 	125	
 	 	103	
 	 	21	 %	
Total	$	251	
 	 	$	258	
 	 	(3	)%	 	$	513	
 	 	$	509	
 	 	1	 %	
Small & Medium Business Solutions
Small & Medium Business Solutions revenue for the quarter and year-to-date periods decreased 8% to $619 million and 7% to $1,248 million, respectively, compared the same periods in 2011.  EBIT decreased 6% to $190 million and 4% to $388 million the quarter and year-to-date periods, respectively, compared to the same periods in 2011. Within the Small & Medium Business Solutions group:
North America Mailing
Revenue for the North America Mailing segment decreased 8% to $453 million and 9% to $915 million in the quarter and year-to-date periods, respectively, compared with the same periods in 2011. Equipment sales declined 8% in the quarter and year-to-date periods due to the continued decline in mail volumes and continued concerns about economic conditions which is impacting customers purchasing decisions. Financing revenue declined 9% in the quarter and 10% in the year-to-date periods due to declining equipment sales in prior periods. Rentals revenue declined 7% and 9% in the quarter and year-to-date periods, respectively, primarily due to fewer meters in service. Supplies revenue declined 13% in both the quarter and year-to-date periods due to lower mail volumes, a declining installed meter base and lower ink and toner sales.
EBIT decreased 5% to $168 million and 3% to $346 million in the quarter and year-to-date periods, respectively, compared with the same periods in 2011 primarily due to the decline in revenue; however, EBIT margins improved as a result of ongoing productivity improvements, the decline in low-margin ink and toner sales and lower credit losses.

23

International Mailing
Revenue for the International Mailing segment decreased 6% to $165 million and 4% to $333 million in the quarter and year-to-date periods, respectively, compared with the same periods in 2011; however, foreign currency translation had an unfavorable impact on revenue of 7% and 5% in the quarter and year-to-date periods, respectively. Excluding the effects of foreign currency, the underlying revenue increase in the quarter and year-to-date periods was driven by higher equipment and supplies sales. Partially offsetting the underlying year-to-date revenue increase was lower rentals revenue, primarily due to a change in mix from rentals to equipment sales in France.

EBIT decreased 19% to $22 million and 16% to $42 million in the quarter and year-to-date periods, respectively, compared with the same periods in 2011 primarily due to the mix of lower margin product sales and foreign currency translation which had an unfavorable impact on EBIT of 7% and 5% in the quarter and year-to-date periods, respectively.
Enterprise Business Solutions
Enterprise Business Solutions revenue for the quarter and year-to-date periods decreased 3% to $627 million and $1,253 million, respectively, compared to the same periods in 2011. EBIT increased 11% to $61 million in the quarter and 21% to $125 million for the year-to-date period compared with the same periods in 2011; however, these results were impacted by the fire in 2011 that destroyed a presort facility located in Dallas, and are discussed in the Mail Services section below. Within the Enterprise Business Solutions group:
Production Mail
Revenue for the Production Mail segment decreased 8% to $123 million and 10% to $238 million in the quarter and year-to-date periods, respectively, compared with the same periods in 2011, primarily due to a decline in equipment sales as customers continue to prolong finalizing capital investment decisions and opting to retain their existing equipment longer than usual, particularly in the United States. Foreign currency translation had an unfavorable impact on revenue of 3% and 2% in the quarter and year-to-date periods, respectively.

EBIT decreased 39% to $6 million and 49% to $8 million in the quarter and year-to-date periods respectively, compared with the same periods in 2011 due to the decline in revenue, the sale of lower margin products and continued investment in Volly.

Software
Revenue for the Software segment for the quarter was flat compared to last year at $100 million. We continue to see growth in licensing revenue in North America and Latin America; however, revenue growth in North America and Latin America in the second quarter was offset by a decline in revenue in Europe. For the year-to-date period, revenue increased 2% to $200 million compared to last year as year-to-date growth in licensing revenue in North America and Latin America more than offset the decline in Europe. Foreign currency translation had an unfavorable impact on revenue of 3% and 2% in the quarter and year-to-date periods, respectively.

EBIT decreased 11% to $8 million in the quarter as lower revenue in our international operations and channel investments to expand our product line globally more than offset the benefit of lower intangible asset amortization expense. For the year-to-date period, EBIT increased 27% to $19 million compared with the same period in 2011 due to higher revenue in North America and Latin America and lower intangible asset amortization expense partially offset by the EBIT decline in our international operations.

Management Services
Revenue for the Management Services segment decreased 5% in both the quarter and year-to-date periods to $228 million and $458 million, respectively and EBIT decreased 37% in both the quarter and year-to-date periods to $13 million and $26 million, respectively, compared with the same periods in 2011. The decline in revenue and EBIT was primarily due to account contractions and terminations in prior periods and pricing pressure on new business and contract renewals. Foreign currency translation had an unfavorable impact on revenue of 2% and 1% in the quarter and year-to-date periods, respectively.

Mail Services
Revenue for the Mail Services segment increased 5% to $141 million and 4% to $291 million in the quarter and year-to-date periods, respectively, compared with the same periods in 2011. However, revenue in the prior quarter and year-to-date periods was adversely impacted by $9 million and $17 million, respectively, due to the fire that destroyed our Dallas presort facility. Excluding the impact of the fire, revenue decreased 2% in both the quarter and year-to-date periods primarily due to lower volumes in our International Mail Services business partially offset by higher standard mail volumes in our Presort business.

EBIT increased 176% to $27 million and 194% to $59 million in the quarter and year-to-date periods, respectively, compared with the same periods in 2011. However, EBIT for the prior year quarter and year-to-date periods was reduced $9 million and $16 million, respectively, by the effects of the fire. Additionally, EBIT for the current year quarter and year-to-date periods includes a benefit of $4 million and $11 million, respectively, from fire-related insurance recoveries. Excluding these items, EBIT for the quarter and year-to-date periods increased 19% and 30%, respectively, from higher standard mail volumes in our Presort business and improved margins in our International Mail Services business.

24

Marketing Services
Revenue for the Marketing Services segment was basically flat for the quarter and year-to-date periods at $36 million and $66 million, respectively, when compared to the same periods in 2011. EBIT was up slightly for the quarter and year-to-date periods at $8 million and $12 million, respectively, compared with the same periods in 2011 due to reduced print production costs and ongoing productivity initiatives.

LIQUIDITY AND CAPITAL RESOURCES
We believe that cash flow from operations, existing cash and investments, as well as borrowing capacity under our commercial paper program should be sufficient to support our business operations, interest and dividend payments, share repurchases, capital expenditures, and to cover customer deposits. We have the ability to supplement this short-term liquidity, if necessary, and fund the long-term needs of our business through broad access to capital markets, a credit line facility, and our effective shelf registration statement. At June 30, 2012 and December 31, 2011, cash and cash equivalents and short-term investments on hand were $538 million and $869 million, respectively.

Cash and cash equivalents held by our foreign subsidiaries are generally used to support the liquidity needs of these subsidiaries. Cash and cash equivalents held by our foreign subsidiaries at June 30, 2012 and December 31, 2011 were $160 million and $538 million, respectively. Most of these amounts could be repatriated to the United States but would be subject to additional taxes. Repatriation of some foreign balances is restricted by local laws. With the exception of net cash received from our recent sales of leveraged leases, it is our intention to permanently reinvest substantially all of our foreign cash in our foreign operations.

We continuously review our liquidity profile through published credit ratings and the credit default swap market. We monitor the creditworthiness of those banks acting as derivative counterparties, depository banks or credit providers. There has not been a material variation in the underlying sources of cash flows currently used to finance our operations, and we have had consistent access to the commercial paper market. During the second quarter, one of the rating agencies reduced our credit ratings. There can be no assurances that one or more of the rating agencies will not take additional adverse actions in the future.
Cash Flow Summary
The change in cash and cash equivalents is as follows:

 	Six Months Ended June 30,	
 	2012	 	2011	 	Change	
Net cash provided by operating activities	$	370	
 	 	$	449	
 	 	$	(79	)	
Net cash used in investing activities	(15	)	 	(109	)	 	94	
 	
Net cash used in financing activities	(705	)	 	(253	)	 	(452	)	
Effect of exchange rate changes on cash and cash equivalents	(6	)	 	7	
 	 	(13	)	
(Decrease) increase in cash and cash equivalents	$	(356	)	 	$	94	
 	 	$	(450	)	
Net cash provided by operating activities was $370 million for the six months ended June 30, 2012 compared to $449 million for the six months ended June 30, 2011. The decrease of $79 million was primarily due to higher tax payments in 2012 due to tax payments related to the sale of leveraged lease assets and income tax refunds received in 2011 and lower collections of finance and accounts receivables.

Net cash used in investing activities was $15 million for the six months ended June 30, 2012 compared to $109 million for the six months ended June 30, 2011. The decrease in cash used in investing activities was primarily due to cash proceeds of $106 million received from the sale of leveraged lease assets in 2012.

Net cash used in financing activities was $705 million for the six months ended June 30, 2012 compared to $253 million for the six months ended June 30, 2011. The increase in cash used in financing activities was due to the repayment of $550 million of long-term debt during the six months ended June 30, 2012 compared to the repayment of $50 million of commercial paper borrowings during the six months ended June 30, 2011. There were no share repurchases in the six months ended June 30, 2012  compared to $50 million of share repurchases in the six months ended June 30, 2011.

Financings and Capitalization
We are a Well-Known Seasoned Issuer with the Securities and Exchange Commission, 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 an important source of liquidity for us and a committed credit facility of $1.0 billion to support our commercial paper issuances. The new credit agreement, entered into April 2012, has a four-year term and contains affirmative and negative covenants that we believe are usual and customary for senior unsecured credit agreements, including a financial covenant requiring a maximum of a 3.5 to 1.0 adjusted leverage ratio, which is the ratio of total adjusted debt to adjusted consolidated EBITDA, each as defined in the credit agreement. We have not drawn upon the credit agreement.
During the quarter, commercial paper borrowings averaged $142 million at a weighted-average interest rate of 0.38% and the maximum amount outstanding at any time was $343 million. At June 30, 2012, there was no outstanding commercial paper borrowings.

25

On June 30, 2012, we redeemed the 2012 Notes that were scheduled to mature in October 2012. The redemption of the 2012 Notes included the payment of all accrued interest through the redemption date, a make-whole payment of $4 million and the receipt of $2 million from the termination of interest rate swap contracts related to the 2012 Notes. We also prepaid a $150 million term loan at par value plus accrued interest in March 2012.
During the quarter, we entered into forward starting swap agreements to hedge interest rate risk associated with the planned issuance of long-term debt before the end of the second quarter. We chose not to issue debt within the planned time period, and on June 29, 2012, the swap agreements expired and we made a $6 million cash payment.
Cash contribution to our pension plans were $10 million in the quarter and $113 million through June 30, 2012, and includes special contributions of $95 million. We anticipate making additional contributions of approximately $10 million to each of our U.S. and foreign pension plans during the year. We will reassess our funding alternatives as the year progresses.
On July 9, 2012, our Board of Directors declared a cash dividend of $0.375 per share, payable September 12, 2012 to stockholders of record on August 10, 2012.

Regulatory Matters
There have been no significant changes to the regulatory matters disclosed in our 2011 Annual Report.

26

Item 3: Quantitative and Qualitative Disclosures about Market Risk
There were no material changes to the disclosures made in the 2011 Annual Report regarding this matter.
Item 4: Controls and Procedures
Disclosure controls and procedures are designed to reasonably assure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate to allow timely decisions regarding required disclosure.
Under the direction of our CEO and CFO, we evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) and internal control over financial reporting. Our CEO and CFO concluded that, as of the end of the period covered by this report, such disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Exchange Act. In addition, no changes in internal control over financial reporting occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, such internal control over financial reporting. 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 disclosure controls and procedures are designed to provide reasonable assurance of achieving their stated objectives, and the CEO and CFO have concluded that the disclosure controls and procedures are effective at that reasonable assurance level.

27

PART II. OTHER INFORMATION
Item 1: Legal Proceedings
See Note 11 to the unaudited Condensed Consolidated Financial Statements.
Item 1A: Risk Factors
There were no material changes to the risk factors identified in the 2011 Annual Report.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Repurchases of Equity Securities
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. At June 30, 2012, we have remaining authorization to repurchase up to $50 million of our common stock. There were no share repurchases during the quarter ended June 30, 2012.

 	 	 	 	 	 	 	 	
Item 6: Exhibits
See Index of Exhibits.

28

Signatures  
Pursuant to the requirements 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.

 	 	PITNEY BOWES INC.	
 	 	 	
Date:	August 3, 2012	 	
 	 	 	
 	 	/s/ Michael Monahan	
 	 	 	
 	 	Michael Monahan	
 	 	Executive Vice President and Chief Financial Officer	
 	 	(Principal Financial Officer)	
 	 	 	
 	 	/s/ Steven J. Green	
 	 	 	
 	 	Steven J. Green	
 	 	Vice President – Finance and Chief Accounting Officer	
 	 	(Principal Accounting Officer)	

29

Exhibit Index

Exhibit
Number	Description	 	Status or incorporation by reference	
 	 	 	 	
(12)	Computation of ratio of earnings to fixed charges	 	Exhibit 12	
 	 	 	 	
(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	
 	 	 	 	
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	 	 	

30

Exhibit (12)

PITNEY BOWES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	
(Dollars in thousands)	 	2012	 	2011	 	2012	 	2011	
 	 	 	 	 	 	 	 	 	
Income from continuing operations before income taxes	 	$	156,488	
 	 	$	159,176	
 	 	$	315,179	
 	 	$	293,350	
 	
Add:	 	 	 	 	 	 	 	 	
Interest expense (1)	 	50,995	
 	 	50,742	
 	 	101,501	
 	 	102,559	
 	
Portion of rents representative of the interest factor	 	9,042	
 	 	9,257	
 	 	17,914	
 	 	19,063	
 	
Amortization of capitalized interest	 	243	
 	 	429	
 	 	486	
 	 	858	
 	
Income as adjusted	 	$	216,768	
 	 	$	219,604	
 	 	$	435,080	
 	 	$	415,830	

Fixed charges:	 	 	 	 	 	 	 	 	
Interest expense (1)	 	$	50,995	
 	 	$	50,742	
 	 	$	101,501	
 	 	$	102,559	
 	
Portion of rents representative of the interest factor	 	9,042	
 	 	9,257	
 	 	17,914	
 	 	19,063	
 	
Noncontrolling interests (preferred stock dividends of subsidiaries), excluding taxes	 	6,898	
 	 	6,888	
 	 	13,845	
 	 	13,548	
 	
Total fixed charges	 	$	66,935	
 	 	$	66,887	
 	 	$	133,260	
 	 	$	135,170	
 	
Ratio of earnings to fixed charges (2)	 	3.24	 	3.28	 	3.26	 	3.08	

(1)	Interest expense includes both financing interest expense and other interest expense.	

(2)	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 rent expense as the representative portion of interest.	

Exhibit (31.1)
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Murray D. Martin, certify that:
 	 	
1.	I have reviewed this quarterly report on Form 10-Q 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 report;	
 	 	
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;	
 	 	
4.	The registrant’s other certifying officer(s) 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 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 report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this 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 registrants other certifying officer(s) 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 the 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: August 3, 2012 

 	
 	 	 	 	 	
/s/ Murray D. Martin	 	 	 	 	
Murray D. Martin	 	 	 	 	
Chairman, President and Chief Executive Officer	 	 	 	 	

Exhibit (31.2)
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael Monahan, certify that:
 	 	
1.	I have reviewed this quarterly report on Form 10-Q 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 report;	
 	 	
3.	Based on my knowledge, the financial statements, and other financial information included in this 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 report;	
 	 	
4.	The registrant’s other certifying officer(s) 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 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 report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this 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(s) 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 the 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: August 3, 2012 

 	 	 	 	
/s/ Michael Monahan	 	 	 	
Michael Monahan	 	 	 	
Executive Vice President and Chief Financial Officer	 	 	 	

Exhibit (32.1)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Pitney Bowes Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Murray D. Martin, Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 	 	
(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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	 	 	 	
Date:    August 3, 2012

The foregoing certification is being furnished solely to accompany this report pursuant to 18 U.S.C. §1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the company.

Exhibit (32.2)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Pitney Bowes Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Monahan, Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 	 	
(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; 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	 	 	 	
Date:    August 3, 2012

The foregoing certification is being furnished solely to accompany this report pursuant to 18 U.S.C. §1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the company.