PITNEY BOWES INC /DE/ - Interim / Quarterly Report 2011

10-Q 1 c67402_10-q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 10-Q
þ QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended September 30, 2011
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
(Registrants 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 issuers classes of common stock as of November 1, 2011.

Class	Outstanding
Common Stock, $1 par value per share	199,637,576 shares

PITNEY BOWES INC. INDEX

		Page Number
Part I -
Financial Information:
Item 1:	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Income
for the Three and Nine Months Ended September 30, 2011 and 2010	3
	Condensed Consolidated Balance Sheets at
September 30, 2011 and December 31, 2010	4
	Condensed Consolidated Statements of Cash
Flows for the Nine Months Ended September 30, 2011 and 2010	5
	Notes to Condensed Consolidated Financial
Statements	6
Item 2:	Managements Discussion and
Analysis of Financial Condition and Results of Operations	25
Item 3:	Quantitative and Qualitative
Disclosures about Market Risk	35
Item 4:	Controls and Procedures	35
Part II - Other
Information:
Item 1:	Legal Proceedings	36
Item 1A:	Risk Factors	36
Item 2:	Unregistered Sales of Equity Securities and
Use of Proceeds	36
Item 6:	Exhibits	36
Signatures		37

P ART I. FINANCIAL INFORMATION
I tem
1: Financial Statements
PITNEY
BOWES INC.
C ONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; in thousands, except per share data)

| | Three Months Ended
September 30, — 2011 | 2010 | | 2011 | | 2010 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Revenue: | | | | | | | | |
| Equipment sales | $ 221,475 | $ | 245,634 | $ | 706,027 | $ | 713,021 | |
| Supplies | 74,271 | | 77,304 | | 235,728 | | 239,635 | |
| Software | 113,224 | | 98,444 | | 318,305 | | 270,508 | |
| Rentals | 140,172 | | 151,399 | | 425,799 | | 456,977 | |
| Financing | 150,038 | | 157,333 | | 454,223 | | 476,712 | |
| Support services | 175,286 | | 175,844 | | 530,707 | | 531,176 | |
| Business services | 425,258 | | 439,784 | | 1,266,478 | | 1,303,183 | |
| Total revenue | 1,299,724 | | 1,345,742 | | 3,937,267 | | 3,991,212 | |
| Costs and expenses: | | | | | | | | |
| Cost of equipment sales | 97,559 | | 113,282 | | 316,697 | | 320,191 | |
| Cost of supplies | 22,611 | | 23,843 | | 74,365 | | 73,381 | |
| Cost of software | 23,431 | | 23,630 | | 73,541 | | 65,993 | |
| Cost of rentals | 32,581 | | 36,277 | | 97,989 | | 107,658 | |
| Financing interest expense | 21,430 | | 22,189 | | 66,915 | | 65,948 | |
| Cost of support services | 114,074 | | 111,521 | | 344,767 | | 337,822 | |
| Cost of business services | 326,415 | | 335,588 | | 985,232 | | 1,003,712 | |
| Selling, general and
administrative | 430,650 | | 435,292 | | 1,296,584 | | 1,304,941 | |
| Research and development | 35,573 | | 38,454 | | 107,772 | | 117,487 | |
| Restructuring charges and
asset impairments | 32,956 | | 33,805 | | 63,974 | | 103,039 | |
| Goodwill impairment | 45,650 | | | | 45,650 | | | |
| Other interest expense | 28,932 | | 29,310 | | 86,006 | | 86,172 | |
| Interest income | (1,265 | ) | (393 | ) | (4,702 | ) | (1,851 | ) |
| Other income, net | (10,718 | ) | | | (10,718 | ) | | |
| Total costs and expenses | 1,199,879 | | 1,202,798 | | 3,544,072 | | 3,584,493 | |
| Income from continuing
operations before income taxes | 99,845 | | 142,944 | | 393,195 | | 406,719 | |
| (Benefit) provision for
income taxes | (17,087 | ) | 46,880 | | 77,319 | | 155,302 | |
| Income from continuing
operations | 116,932 | | 96,064 | | 315,876 | | 251,417 | |
| Gain (loss) from discontinued
operations, net of tax | 60,428 | | (2,536 | ) | 57,911 | | (8,332 | ) |
| Net income before attribution
of noncontrolling interests | 177,360 | | 93,528 | | 373,787 | | 243,085 | |
| Less: Preferred stock
dividends of subsidiaries attributable to noncontrolling interests | 4,593 | | 4,593 | | 13,781 | | 13,730 | |
| Net income - Pitney Bowes
Inc. | $ 172,767 | $ | 88,935 | $ | 360,006 | $ | 229,355 | |
| Amounts attributable to
common stockholders: | | | | | | | | |
| Income from continuing
operations | $ 112,339 | $ | 91,471 | $ | 302,095 | $ | 237,687 | |
| Gain (loss) from discontinued
operations | 60,428 | | (2,536 | ) | 57,911 | | (8,332 | ) |
| Net income - Pitney Bowes
Inc. | $ 172,767 | $ | 88,935 | $ | 360,006 | $ | 229,355 | |
| Basic earnings per share
attributable to common stockholders (1): | | | | | | | | |
| Continuing operations | $ 0.56 | $ | 0.44 | $ | 1.49 | $ | 1.15 | |
| Discontinued operations | 0.30 | | (0.01 | ) | 0.29 | | (0.04 | ) |
| Net income - Pitney Bowes
Inc. | $ 0.86 | $ | 0.43 | $ | 1.78 | $ | 1.11 | |
| Diluted earnings per share
attributable to common stockholders (1): | | | | | | | | |
| Continuing operations | $ 0.56 | $ | 0.44 | $ | 1.48 | $ | 1.15 | |
| Discontinued operations | 0.30 | | (0.01 | ) | 0.28 | | (0.04 | ) |
| Net income - Pitney Bowes
Inc. | $ 0.85 | $ | 0.43 | $ | 1.77 | $ | 1.11 | |
| Dividends declared per share
of common stock | $ 0.37 | $ | 0.365 | $ | 1.11 | $ | 1.095 | |

(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. C ONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited; in thousands, except share and per share data)

	September 30, 2011
ASSETS
Current assets:
Cash and cash equivalents	$ 715,194	$	484,363
Short-term investments	53,866		30,609
Accounts receivables, gross	707,120		824,015
Allowance for doubtful accounts receivables	(32,123	)	(31,880	)
Accounts receivables, net	674,997		792,135
Finance receivables	1,312,858		1,370,305
Allowance for credit losses	(51,247	)	(48,709	)
Finance receivables, net	1,261,611		1,321,596
Inventories	178,553		168,967
Current income taxes	67,263		103,542
Other current assets and prepayments	118,191		107,029
Total current assets	3,069,675		3,008,241
Property, plant and equipment, net	414,342		426,501
Rental property and equipment, net	267,189		300,170
Finance receivables	1,135,890		1,265,220
Allowance for credit losses	(19,554	)	(20,721	)
Finance receivables, net	1,116,336		1,244,499
Investment in leveraged leases	133,995		251,006
Goodwill	2,248,942		2,306,793
Intangible assets, net	243,349		297,443
Non-current income taxes	127,986		130,601
Other assets	541,253		478,769
Total assets	$ 8,163,067	$	8,444,023
LIABILITIES, NONCONTROLLING INTERESTS AND
STOCKHOLDERS DEFICIT
Current liabilities:
Accounts payable and accrued liabilities	$ 1,664,217	$	1,825,261
Current income taxes	341,349		192,924
Notes payable and current portion of
long-term obligations	1,941		53,494
Advance billings	450,874		481,900
Total current liabilities	2,458,381		2,553,579
Deferred taxes on income	151,539		261,118
Tax uncertainties and other income tax
liabilities	564,981		536,531
Long-term debt	4,243,547		4,239,248
Other non-current liabilities	493,532		653,758
Total liabilities	7,911,980		8,244,234
Noncontrolling interests (Preferred
stockholders equity in subsidiaries)	296,370		296,370
Commitments and contingencies (See Note 12)
Stockholders deficit:
Cumulative preferred stock, $50 par value,
4% convertible	4		4
Cumulative preference stock, no par value,
$2.12 convertible	724		752
Common stock, $1 par value (480,000,000
shares authorized; 323,337,912 shares issued)	323,338		323,338
Additional paid-in capital	238,313		250,928
Retained earnings	4,416,646		4,282,316
Accumulated other comprehensive loss	(477,431	)	(473,806	)
Treasury stock, at cost (123,707,443 and
119,906,910 shares, respectively)	(4,546,877	)	(4,480,113	)
Total Pitney Bowes Inc. stockholders
deficit	(45,283	)	(96,581	)
Total liabilities, noncontrolling interests
and stockholders deficit	$ 8,163,067	$	8,444,023

See Notes to Condensed Consolidated Financial Statements

PITNEY BOWES INC. C ONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited; in thousands)

	Nine Months Ended September 30, — 2011		2010
Cash
flows from operating activities:
Net
income before attribution of noncontrolling interests	$ 373,787		$ 243,085
Restructuring
payments	(78,379	)	(90,713	)
Special
pension plan contribution	(123,000	)
Adjustments
to reconcile net income to net cash provided by operating activities:
Restructuring
charges and asset impairments, net of tax	43,039		67,027
Goodwill
impairment, net of tax	31,334
Gain
on sale of leveraged lease assets, net of tax	(26,689	)
Proceeds
from settlement of derivative instruments			31,774
Depreciation
and amortization	205,001		231,605
Stock-based
compensation	13,393		15,866
Changes
in operating assets and liabilities:
(Increase)
decrease in accounts receivables	113,422		109,603
(Increase)
decrease in finance receivables	169,109		168,673
(Increase)
decrease in inventories	(12,731	)	(31,336	)
(Increase)
decrease in prepaid, deferred expense and other assets	(3,707	)	(792	)
Increase
(decrease) in accounts payable and accrued liabilities	(102,092	)	(68,839	)
Increase
(decrease) in current and non-current income taxes	169,144		3,017
Increase
(decrease) in advance billings	(22,392	)	(8,215	)
Increase
(decrease) in other operating capital, net	1,217		(4,684	)
Net
cash provided by operating activities	750,456		666,071
Cash
flows from investing activities:
Short-term
and other investments	(100,268	)	(112,902	)
Capital
expenditures	(123,029	)	(90,177	)
Proceeds
from sale of leveraged lease assets	101,784
Net
investment in external financing	(4,458	)	(3,117	)
Acquisitions,
net of cash acquired			(75,500	)
Reserve
account deposits	(14,528	)	5,405
Net
cash used in investing activities	(140,499	)	(276,291	)
Cash
flows from financing activities:
Decrease
in notes payable, net	(50,000	)	(89,232	)
Proceeds
from issuance of common stock	10,436		8,687
Stock
repurchases	(99,997	)	(100,000	)
Dividends
paid to common stockholders	(225,676	)	(227,199	)
Dividends
paid to noncontrolling interests	(9,188	)	(9,137	)
Net
cash used in financing activities	(374,425	)	(416,881	)
Effect
of exchange rate changes on cash and cash equivalents	(4,701	)	410
Increase
(decrease) in cash and cash equivalents	230,831		(26,691	)
Cash
and cash equivalents at beginning of period	484,363		412,737
Cash
and cash equivalents at end of period	$ 715,194		$ 386,046
Cash
interest paid	$ 177,682		$ 169,042
Cash
income tax (refund) payments, net	$ (68,659	)	$ 186,079

See Notes to Condensed Consolidated Financial Statements

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

| 1. Description of
Business and Basis of Presentation |
| --- |
| Description of Business |
| 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 14 for information regarding our reportable
segments. |
| Basis of Presentation |
| The accompanying unaudited Condensed Consolidated Financial
Statements of Pitney Bowes Inc. and its subsidiaries (PBI, the company, we, us,
and our) 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, 2010 Condensed Consolidated Balance Sheet data was derived from audited
financial statements, but does not include all disclosures required by GAAP.
In our opinion, all adjustments (consisting of only normal recurring
adjustments) considered necessary to present fairly our financial position at
September 30, 2011 and December 31, 2010, our results of operations for the
three and nine months ended September 30, 2011 and 2010 and cash flows for
the nine months ended September 30, 2011 and 2010 have been included.
Operating results for the three and nine months ended September 30, 2011 are
not necessarily indicative of the results that may be expected for any other
interim period or the year ending December 31, 2011. |
| 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, 2010, as such financial statements
have been amended by the financial information included in the Current Report
on Form 8-K dated September 22, 2011 (together, the 2010 Annual Report).
Certain prior year amounts have been reclassified to conform to the current
period presentation. |
| 2. Recent
Accounting Pronouncements |
| On January 1, 2011, new accounting guidance became effective
addressing the accounting for revenue arrangements with multiple elements and
certain revenue arrangements that include software. This guidance allows
companies to allocate consideration in a multiple element arrangement in a
way that better reflects the economics of the transaction and results in the
elimination of the residual method. In addition, tangible products that have
software components that are essential to the functionality of the tangible
product were scoped out of the software revenue guidance. The adoption of
this guidance did not have a material impact on our financial position,
results of operations or cash flows, nor did it result in any additional
disclosures beyond those already included in our 2010 Annual Report. Refer to
Note 1 to the Consolidated Financial Statements in our 2010 Annual Report for
further information. |
| In June 2011, new guidance was introduced that would eliminate the
current option to report other comprehensive income and its components in the
statement of stockholders equity, and require an entity to present items of
net income and other comprehensive income in one continuous statement,
referred to as the statement of comprehensive income, or in two separate, but
consecutive, statements. This guidance would be effective in the first
quarter of 2012, with early adoption permitted. This guidance will result in
a change in the way we present other comprehensive income and its components,
but will not have an impact on our financial position, results of operations
or cash flows. |
| 3. Discontinued
Operations |
| During the third quarter of 2011, we entered into a series of
settlements with the IRS in connection with their examination of our tax
years 2001-2004. We agreed upon both the tax treatment of a number of
disputed issues, including issues related to our Capital Services business
that was sold in 2006, and revised tax calculations. As a result, $60 million
of previously provided tax and interest reserves were released through
discontinued operations. See Note 7 for further information. |

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

4. Inventories

Inventories at September 30, 2011 and December 31, 2010 consisted of the following:

| | September 30, 2011 | December
31, 2010 |
| --- | --- | --- |
| Raw materials and work in
process | $ 58,581 | $ 46,664 |
| Supplies and service parts | 55,414 | 63,991 |
| Finished products | 64,558 | 58,312 |
| Total | $ 178,553 | $ 168,967 |

If all inventories valued at LIFO had been stated at current costs, inventories would have been $26 million higher than reported at September 30, 2011 and December 31, 2010.

5. Intangible Assets and Goodwill

Intangible assets

Intangible assets at September 30, 2011 and December 31, 2010 consisted of the following:

| | September 30, 2011 — Gross Carrying Amount | Accumulated Amortization | | Net Carrying Amount | December
31, 2010 — Gross Carrying Amount | Accumulated Amortization | | Net Carrying Amount |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Customer relationships | $ 426,136 | $ (239,486 | ) | $ 186,650 | $ 453,523 | $ (229,143 | ) | $ 224,380 |
| Supplier relationships | 29,000 | (18,367 | ) | 10,633 | 29,000 | (16,192 | ) | 12,808 |
| Software & technology | 170,910 | (129,447 | ) | 41,463 | 172,188 | (118,390 | ) | 53,798 |
| Trademarks & trade names | 36,141 | (31,766 | ) | 4,375 | 36,322 | (30,224 | ) | 6,098 |
| Non-compete agreements | 7,690 | (7,462 | ) | 228 | 7,845 | (7,486 | ) | 359 |
| Total intangible assets | $ 669,877 | $ (426,528 | ) | $ 243,349 | $ 698,878 | $ (401,435 | ) | $ 297,443 |

Amortization expense related to intangible assets was $14 million and $15 million for the three months ended September 30, 2011 and 2010, respectively, and $43 million and $48 million for the nine months ended September 30, 2011 and 2010, respectively. In the third quarter 2011, we also recorded impairment charges totaling $12 million associated with our International Mailing Services (IMS) operations within our Mail Services segment. These charges were recorded in restructuring charges and asset impairments in the Condensed Consolidated Statements of Income. See Goodwill section below and Note 14 for further details. The future amortization expense as of September 30, 2011 is as follows:

	Amount
Remaining
for year ended December 31, 2011	$ 14,045
Year ended
December 31, 2012	51,241
Year ended
December 31, 2013	46,979
Year ended
December 31, 2014	40,880
Year ended
December 31, 2015	33,926
Thereafter	56,278
Total	$ 243,349

Actual amortization expense may differ from the amounts above due to, among other things, future acquisitions, impairments, accelerated amortization or fluctuations in foreign currency exchange rates.

Goodwill

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

planning and budgeting process during the third quarter, management concluded that it was appropriate to perform a goodwill impairment review for IMS at September 30, 2011.

We determined the fair value of IMS using a combination of techniques including the present value of future cash flows, multiples of competitors and multiples from sales of like businesses. We derived the cash flow estimates from our historical experience and our long-term plans. We then allocated the implied fair value to the assets and liabilities of the reporting unit as if it had just been acquired in a business combination. Based on our analysis, it was determined that the estimated fair value of IMS was less than its carrying value, and a goodwill impairment charge of $46 million was recognized during the third quarter.

The changes in the carrying amount of goodwill, by reporting segment, for the nine months ended September 30, 2011 is as follows:

North America Mailing	Balance at December 31, 2010 — $ 357,918	Impairment — $		Other (1) — $ (1,047	)	Balance at September 30, 2011 — $ 356,871
International Mailing	181,530			(584	)	180,946
Small & Medium Business Solutions	539,448			(1,631	)	537,817
Production Mail	141,476			280		141,756
Software	678,101			(6,404	)	671,697
Management Services	494,433			(4,449	)	489,984
Mail Services	259,102	(45,650	)	3		213,455
Marketing Services	194,233					194,233
Enterprise Business Solutions	1,767,345	(45,650	)	(10,570	)	1,711,125
Total	$ 2,306,793	$ (45,650	)	$ (12,201	)	$ 2,248,942

(1) Primarily foreign currency translation adjustments.

6. Long-term Debt

There have been no significant changes to long-term debt since December 31, 2010.

In April 2011, we entered into two interest rate swap agreements with an aggregate notional value of $450 million to effectively convert the fixed rate interest payments on our $450 million 4.875% notes due in 2014 into variable rates. Under the terms of these agreements, we pay a weighted-average variable rate based on three month LIBOR plus 305 basis points and receive fixed rate payments of 4.875%.

7. Income Taxes

The effective tax rate for the three months ended September 30, 2011 and 2010 was (17.1)% and 32.8%, respectively, and the effective tax rate for the nine months ended September 30, 2011 and 2010 was 19.7% and 38.2%, respectively. The year-to-date 2011 rate includes a $34 million tax benefit from the sale of non-U.S. leveraged lease assets, $27 million of tax benefits arising from the findings of various tax examinations and a $3 million charge from the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock units previously granted to our employees. The year-to-date 2010 rate included a $9 million charge from the write-off of deferred tax assets related to the U.S. health care reform legislation that eliminated the tax deduction for retiree health care costs to the extent of federal subsidies received by companies that provide retiree prescription drug benefits equivalent to Medicare Part D coverage and a $10 million charge from the write-off of deferred tax assets associated with the expiration of out-of-the-money vested stock options and the vesting of restricted stock units previously granted to our employees.

We regularly assess the likelihood of tax adjustments in each of the tax jurisdictions in which we have operations and account for the related financial statement implications. Tax reserves have been established which we believe to be appropriate given the possibility

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

of tax adjustments. Determining the appropriate level of tax reserves requires us to exercise judgment regarding the uncertain application of tax laws. The amount of reserves is adjusted when information becomes available or when an event occurs indicating a change in the reserve is appropriate. Future changes in tax reserve requirements could have a material impact on our results of operations.

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. The IRS examination of tax years 2001-2004 is estimated to be closed to audit within the next six months and the examination of years 2005-2008 within the next 12 months. During July 2011, in connection with the 2001-2004 examination, we entered into a series of settlements with the IRS under which we agreed upon both the tax treatment of a number of disputed issues and revised tax calculations. Accordingly, in the third quarter $76 million of previously provided tax and interest reserves were released, of which $60 million related to our Capital Services business that we sold in 2006 and was released through discontinued operations. During the fourth quarter of 2011, in connection with the 2005-2008 IRS examination, we entered into a settlement with the IRS under which we agreed upon both the tax treatment of disputed issues and revised tax calculations. In the fourth quarter, we expect to release at least $30 million of 2005-2008 tax and interest reserves, about $5 million of which will be released through Discontinued Operations. Our additional liability for tax and interest arising from the 2001-2008 IRS examinations is approximately $400 million, which was previously paid through the purchase of tax bonds.

In addition, a variety of post-2000 tax years remain subject to examination by other tax authorities, including the U.S., UK, Canada, France, Germany and various U.S. states. It is reasonably possible that the amount of our unrecognized tax benefits will decrease in the next 12 months, and we expect this change could be up to two-thirds of our unrecognized tax benefits. We believe we have established tax reserves that are appropriate given the possibility of tax adjustments, including any adjustments to our unrecognized tax benefits. However, depending upon the size of the reserve as compared to the ultimate determination of such matters, the resolution could have a material impact, positive or negative, on our results of operations, financial position and cash flows.

8. Noncontrolling Interests (Preferred Stockholders Equity in Subsidiaries)

In 2009, Pitney Bowes International Holdings, Inc. (PBIH), a subsidiary of ours, issued 300,000 shares, or $300 million, of perpetual voting preferred stock (the Preferred Stock) to certain outside institutional investors. The holders of the Preferred Stock are entitled as a group to 25% of the combined voting power of all classes of capital stock of PBIH. All outstanding common stock of PBIH, representing the remaining 75% of the combined voting power of all classes of capital stock, is owned directly or indirectly by the company. The Preferred Stock is entitled to cumulative dividends at a rate of 6.125% for a period of seven years after which it becomes callable and, if it remains outstanding, will yield a dividend that increases by 50% every six months thereafter. No dividends were in arrears at September 30, 2011 or December 31, 2010.

The carrying value of the Preferred Stock is reported as Noncontrolling interests (Preferred stockholders equity in subsidiaries) on the Condensed Consolidated Balance Sheets. Preferred Stock dividends are reported in the Condensed Consolidated Statements of Income as Preferred stock dividends of subsidiaries attributable to noncontrolling interests. There was no change in the carrying value of noncontrolling interests during the period ended September 30, 2011 or the year ended December 31, 2010.

9. Comprehensive Income

Comprehensive income for the three and nine months ended September 30, 2011 and 2010 was as follows:

| | Three Months Ended
September 30, — 2011 | 2010 | | 2011 | | 2010 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net income - Pitney Bowes
Inc. | $ 172,767 | $ | 88,935 | $ | 360,006 | $ | 229,355 | |
| Other comprehensive income,
net of tax: | | | | | | | | |
| Foreign currency translation
adjustments | (111,317 | ) | 124,539 | | (35,336 | ) | (16,432 | ) |
| Net unrealized gain (loss) on
derivatives | 1,209 | | (648 | ) | 1,596 | | 853 | |
| Net
unrealized gain on investment securities | 3,147 | | 345 | | 4,258 | | 2,427 | |
| Amortization of pension and
postretirement costs | 8,692 | | 7,064 | | 25,857 | | 21,064 | |
| Comprehensive income | $ 74,498 | $ | 220,235 | $ | 356,381 | $ | 237,267 | |

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

10. Fair Value Measurements and Derivative Instruments

The fair value measurement guidance established a fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of the fair value hierarchy are as follows:

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 managements 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 September 30, 2011 and December 31, 2010, respectively. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy.

	September 30, 2011 — Level 1	Level 2	Level 3	Total
Assets:
Investment securities
Money market funds / commercial paper	$ 206,662	$ 17,349	$	$ 224,011
Equity securities		20,267		20,267
Debt securities - U.S. and foreign
governments, agencies and municipalities	115,376	29,404		144,780
Debt securities - corporate		34,885		34,885
Mortgage-back / asset-back securities		150,930		150,930
Derivatives
Interest rate swaps		18,795		18,795
Foreign exchange contracts		2,634		2,634
Total assets	$ 322,038	$ 274,264	$	$ 596,302
Liabilities:
Derivatives
Foreign exchange contracts	$	$ 3,102	$	$ 3,102
Total liabilities	$	$ 3,102	$	$ 3,102

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

	December 31, 2010 — Level 1	Level 2	Level 3	Total
Assets:
Investment securities
Money market funds / commercial paper	$ 256,074	$ 1,531	$	$ 257,605
Equity securities		23,410		23,410
Debt securities - U.S. and foreign governments,
agencies and municipalities	74,425	30,725		105,150
Debt securities - corporate		22,262		22,262
Mortgage-back / asset-back securities		106,479		106,479
Derivatives
Interest rate swaps		10,280		10,280
Foreign exchange contracts		2,887		2,887
Total assets	$ 330,499	$ 197,574	$	$ 528,073
Liabilities:
Derivatives
Foreign exchange contracts	$	$ 6,907	$	$ 6,907
Total liabilities	$	$ 6,907	$	$ 6,907

Investment Securities

For our investments, we use the market approach for recurring fair value measurements and the valuation techniques use inputs that are observable, or can be corroborated by observable data, in an active marketplace.

The following information relates to our classification into the fair value hierarchy:

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

Investment securities include investments held by The Pitney Bowes Bank (PBB). PBB, a wholly-owned subsidiary, is a Utah-chartered Industrial Loan Company (ILC). The banks investments at September 30, 2011 were $310 million. These investments were reported on the Condensed Consolidated Balance Sheets as cash and cash equivalents of $21 million, short-term investments of

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

$53 million and other assets of $236 million. The banks investments at December 31, 2010 were $246 million and were reported as cash and cash equivalents of $61 million, short-term investments of $27 million and other assets of $158 million.

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 which would warrant a possible change in our pricing methods or classification within the fair value hierarchy. Further, we have no investments in auction rate securities.

Derivative Instruments

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.

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 following is a summary of our derivative fair values at September 30, 2011 and December 31, 2010:

Designation of Derivatives	Balance Sheet Location	Fair Value — September 30, 2011	December 31, 2010
Derivatives designated as hedging instruments	Other current assets and prepayments:
	Foreign exchange contracts	$ 691	$ 160
	Other assets:
	Interest rate swaps	18,795	10,280
	Accounts payable and accrued liabilities:
	Foreign exchange contracts	158	716
Derivatives not designated as hedging instruments	Other current assets and prepayments:
	Foreign exchange contracts	1,943	2,727
	Accounts payable and accrued liabilities:
	Foreign exchange contracts	2,944	6,191
	Total Derivative Assets	$ 21,429	$ 13,167
	Total Derivative Liabilities	3,102	6,907
	Total Net Derivative Assets	$ 18,327	$ 6,260

| 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. |

At September 30, 2011, we have outstanding interest rate swaps with an aggregate notional value of $850 million that effectively convert fixed rate interest payments on the $400 million 4.625% notes due in 2012 (the 2012 Swaps) and the $450 million 4.875% notes due in 2014 (the 2014 Swaps) into variable rates.

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

Under the terms of the 2012 Swaps, we pay a weighted-average variable rate based on one month LIBOR plus 249 basis points and receive a fixed rate of 4.625%. Under the terms of the 2014 Swaps, we pay a weighted-average variable rate based on three month LIBOR plus 305 basis points and receive a fixed rate of 4.875%. At September 30, 2011 and December 31, 2010, the aggregate fair value of these interest rate swaps was an asset of $19 million and $10 million, respectively.

The following represents the results of fair value hedging relationships for the three and nine months ended September 30, 2011 and 2010:

		Three Months Ended September 30,
		Derivative Gain Recognized in Earnings		Hedged Item Expense Recognized in Earnings
Derivative Instrument	Location of Gain (Loss)	2011	2010	2011		2010
Interest rate swaps	Interest expense	$ 3,448	$ 2,699	$ (10,109	)	$ (5,792	)
		Nine Months Ended September 30,
		Derivative Gain Recognized in Earnings		Hedged Item Expense Recognized in Earnings
Derivative Instrument	Location of Gain (Loss)	2011	2010	2011		2010
Interest rate swaps	Interest expense	$ 8,406	$ 11,318	$ (23,016	)	$ (22,042	)

| Foreign Exchange Contracts |
| --- |
| We enter into foreign currency exchange contracts arising from the
anticipated purchase of inventory between affiliates and from third parties.
These contracts are designated as cash flow hedges. The effective portion of
the gain or loss on the cash flow hedges is included in 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 September 30, 2011 and December 31, 2010, we had
outstanding contracts associated with these anticipated transactions with a
notional amount of $28 million and $25 million, respectively. These contracts
had a net asset value of $1 million at September 30, 2011 and a net liability
value of $1 million at December 31, 2010. |

As of September 30, 2011, all of the net derivative gain recognized in AOCI will be recognized in earnings within the next 12 months. No amount of ineffectiveness was recorded in earnings for these designated cash flow hedges.

The following represents the results of cash flow hedging relationships for the three and nine months ended September 30, 2011 and 2010:

	Three Months Ended September 30,
	Derivative Gain (Loss) Recognized in AOCI (Effective Portion)				Gain (Loss) Reclassified from AOCI to Earnings (Effective Portion)
			Location of Gain (Loss) (Effective Portion)
Derivative Instrument	2011	2010			2011		2010
Foreign exchange contracts	$ 1,746	$ (1,945	)	Revenue	$ (129	)	$ 509
				Cost of sales	(146	)	(119	)
					$ (275	)	$ 390
	Nine Months Ended September 30,
	Derivative Gain (Loss) Recognized in AOCI (Effective Portion)				Gain (Loss) Reclassified from AOCI to Earnings (Effective Portion)
			Location of Gain (Loss) (Effective Portion)
Derivative Instrument	2011	2010			2011		2010
Foreign exchange contracts	$ 2,049	$ (808	)	Revenue	$ (260	)	$ 976
				Cost of sales	(700	)	(277	)
					$ (960	)	$ 699

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

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 September 30, 2011, outstanding foreign exchange contracts to buy or sell various currencies had a net liability value of $1 million. These contracts mature by December 2011. At December 31, 2010, outstanding foreign exchange contracts to buy or sell various currencies had a net liability value of $3 million.

The following represents the results of our non-designated derivative instruments for the three and nine months ended September 30, 2011 and 2010:

| | | Three
Months Ended September 30, | | | |
| --- | --- | --- | --- | --- | --- |
| | | Derivative Gain (Loss) Recognized in Earnings | | | |
| Derivatives Instrument | Location of Derivative Gain (Loss) | 2011 | | 2010 | |
| Foreign exchange contracts | Selling, general and administrative expense | $ 2,090 | | $ (6,364 | ) |
| | | Nine Months Ended September 30, | | | |
| | | Derivative Gain (Loss) Recognized in Earnings | | | |
| Derivatives Instrument | Location of Derivative Gain (Loss) | 2011 | | 2010 | |
| Foreign exchange contracts | Selling, general and administrative expense | $ (18,770 | ) | $ (13,835 | ) |

| Credit-Risk-Related Contingent Features |
| --- |
| Certain derivative instruments contain provisions that would require
us to post collateral upon a significant downgrade in our long-term senior
unsecured debt ratings. At September 30, 2011, our long-term senior unsecured
debt ratings were BBB+ / A2. Based on derivative values at September 30,
2011, we would have been required to post $2 million in collateral if our
long-term senior unsecured debt ratings had fallen below BB- / Ba3. |

Fair Value of Financial Instruments

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

The carrying values and estimated fair values of our remaining financial instruments at September 30, 2011 and December 31, 2010 is as follows:

	September 30, 2011 — Carrying value (1)		Fair value		December 31, 2010 — Carrying value (1)		Fair value
Investment
securities	$ 566,582		$ 574,873		$ 512,771		$ 514,906
Loans
receivable	$ 444,727		$ 444,727		$ 459,235		$ 459,235
Derivatives,
net	$ 18,327		$ 18,327		$ 6,260		$ 6,260
Long-term
debt	$ (4,276,119	)	$ (4,391,233	)	$ (4,301,337	)	$ (4,388,923	)

(1) Carrying value includes accrued interest and deferred fee income, where applicable.

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

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

11. Restructuring Charges and Asset Impairments

2009 Program

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

During the nine months ended September 30, 2011, we recorded pre-tax restructuring charges and asset impairments associated with this program of $55 million, which included $31 million for employee severance and benefit costs, a $6 million pension and retiree medical charge as workforce reductions caused the elimination of a significant amount of future service requiring us to recognize a portion of the prior service costs and actuarial losses, asset impairments of $11 and other exit costs of $8 million. Additional asset impairment charges of $12 million related to the impairment of certain intangible assets unrelated to this program were also recorded during 2011 (See Note 5). Through September 30, 2011, the cumulative charges for this program are $301 million. The majority of the liability at September 30, 2011 is expected to be paid from cash generated from operations.

Activity in the reserves for the restructuring actions taken in connection with the 2009 program for the nine months ended September 30, 2011 is as follows:

Balance at January 1, 2011	Severance and benefits costs — $ 88,169	$		$		$	6,787	$	94,956
Expenses, net of reserve
adjustments	30,730		5,563		22,867		7,705		66,865
Cash payments	(61,669	)					(13,632	)	(75,301	)
Non-cash charges			(5,563	)	(22,867	)			(28,430	)
Balance at September 30,
2011	$ 57,230	$		$		$	860	$	58,090

2007 Program

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

Activity in the reserves for the restructuring actions taken in connection with the 2007 program for the nine months ended September 30, 2011 is as follows:

| Balance at January 1, 2011 | Severance
and benefits costs — $ 13,470 | $ | 4,774 | $ | 18,244 | |
| --- | --- | --- | --- | --- | --- | --- |
| Reserve adjustments | (2,174 | ) | (717 | ) | (2,891 | ) |
| Cash payments | (1,975 | ) | (1,103 | ) | (3,078 | ) |
| Balance at September 30,
2011 | $ 9,321 | $ | 2,954 | $ | 12,275 | |

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

12. Commitments and Contingencies

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

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

On October 28, 2009, the company and certain of its current and former officers were named as defendants in NECA-IBEW Health & Welfare Fund v. Pitney Bowes Inc. et al. , a class action lawsuit filed in the U.S. District Court for the District of Connecticut. The complaint asserts claims under the Securities Exchange Act of 1934 on behalf of those who purchased the common stock of the company during the period between July 30, 2007 and October 29, 2007 alleging that the company, in essence, missed two financial projections. Plaintiffs filed an amended complaint on September 20, 2010. On December 3, 2010, we moved to dismiss the complaint. The parties have completed briefing on this motion and the motion is now pending before the court. 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 the legal actions above; however, as litigation is inherently unpredictable, there can be no assurance in this regard. If the plaintiffs do prevail, the results may have a material effect on our financial position, future results of operations or cash flows, including, for example, our ability to offer certain types of goods or services in the future.

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

13. 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 September 30, 2011 and December 31, 2010 consisted of the following:

	September 30, 2011 — North America	International		Total
Sales-type lease receivables
Gross finance receivables	$ 1,756,200	$	463,714	$	2,219,914
Unguaranteed residual values	194,516		20,663		215,179
Unearned income	(355,257	)	(103,101	)	(458,358	)
Allowance for credit losses	(29,744	)	(13,771	)	(43,515	)
Net investment in sales-type lease
receivables	1,565,715		367,505		1,933,220
Loan receivables
Loan receivables	430,394		41,619		472,013
Allowance for credit losses	(24,953	)	(2,333	)	(27,286	)
Net investment in loan receivables	405,441		39,286		444,727
Net investment in finance receivables	$ 1,971,156	$	406,791	$	2,377,947
	December 31, 2010
	North America	International		Total
Sales-type lease receivables
Gross finance receivables	$ 1,940,833	$	474,895	$	2,415,728
Unguaranteed residual values	235,392		20,333		255,725
Unearned income	(415,891	)	(107,592	)	(523,483	)
Allowance for credit losses	(27,792	)	(13,318	)	(41,110	)
Net investment in sales-type lease
receivables	1,732,542		374,318		2,106,860
Loan Receivables
Loan receivables	453,362		34,193		487,555
Allowance for credit losses	(26,208	)	(2,112	)	(28,320	)
Net investment in loan receivables	427,154		32,081		459,235
Net investment in finance receivables	$ 2,159,696	$	406,399	$	2,566,095

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

Allowance for Credit Losses

Activity in the allowance for credit losses for the nine months ended September 30, 2011 is as follows:

	Allowance for Credit Losses
	Sales-type Lease Receivables			Loan Receivables
	North America	International		North America		International		Total
Balance January 1, 2011	$ 27,792	$	13,318	$	26,208	$	2,112	$	69,430
Amounts charged to expense	12,372		10,025		9,633		2,001		34,031
Accounts written off	(10,420	)	(9,572	)	(10,888	)	(1,780	)	(32,660	)
Balance September 30, 2011	$ 29,744	$	13,771	$	24,953	$	2,333	$	70,801

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 borrowers credit line is closed, interest accrual is suspended, the borrowers minimum required payment is reduced and the account is re-aged and classified as current. There is 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 September 30, 2011 and December 31, 2010, loans in this program had a balance of approximately $7 million.

These modified loans are factored into the determination and evaluation of the adequacy of the allowance for credit losses and 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 balance. The allowance for credit losses related to such loans is approximately $3 million at September 30, 2011 and is included in the balance of the allowance for credit losses of North American loans in the table above. 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 totaled approximately $1 million for the previous twelve months.

Aging

The aging of finance receivables at September 30, 2011 and December 31, 2010 is as follows:

	Sales-type Lease Receivables — North America	International	Loan Receivables — North America	International	Total
September 30, 2011
< 31 days
past due	$ 1,673,884	$ 432,794	$ 408,826	$ 39,595	$ 2,555,099
> 30 days
and < 61 days	33,485	8,641	11,949	1,016	55,091
> 60 days
and < 91 days	23,287	7,138	4,219	405	35,049
> 90 days
and < 121 days	7,345	5,070	2,412	137	14,964
> 120
days	18,199	10,071	2,988	466	31,724
Total	$ 1,756,200	$ 463,714	$ 430,394	$ 41,619	$ 2,691,927
Past due
amounts > 90 days
Still accruing interest	$ 7,345	$ 5,070	$	$	$ 12,415
Not accruing interest	18,199	10,071	5,400	603	34,273
Total	$ 25,544	$ 15,141	$ 5,400	$ 603	$ 46,688

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

	Sales-type Lease Receivables — North America	International	Loan Receivables — North America	International	Total
December 31, 2010
< 31 days
past due	$ 1,831,655	$ 447,459	$ 430,042	$ 32,389	$ 2,741,545
> 30 days
and < 61 days	45,234	10,018	12,081	1,149	68,482
> 60 days
and < 91 days	29,380	4,743	4,711	325	39,159
> 90 days
and < 121 days	8,654	3,985	2,712	192	15,543
> 120
days	25,910	8,690	3,816	138	38,554
Total	$ 1,940,833	$ 474,895	$ 453,362	$ 34,193	$ 2,903,283
Past due
amounts > 90 days
Still accruing interest	$ 8,654	$ 3,985	$	$	$ 12,639
Not accruing interest	25,910	8,690	6,528	330	41,458
Total	$ 34,564	$ 12,675	$ 6,528	$ 330	$ 54,097

Credit Quality

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

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

The table below shows the North American portfolio at September 30, 2011 and December 31, 2010 by relative risk class (low, medium and high) based on the relative scores of the accounts within each class. A fourth class is shown for accounts that are not scored. The degree of risk, as defined by the third party, refers to the relative risk that an account in the next 12 month period may become delinquent. Absence of a score is not indicative of the credit quality of the account.

| - | Low
risk accounts are companies with very good credit risk |
| --- | --- |
| - | Medium
risk accounts are companies with average to good credit risk |
| - | High
risk accounts are companies with poor credit risk, are delinquent or are at
risk of becoming delinquent |

Although the relative score of accounts within each class is used as a factor for determining the establishment of a customer credit limit, it is not indicative of our actual history of losses due to the business essential nature of our products and services.

The aging schedule included above, showing approximately 1.7% 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 nine months ended September 30, 2011 are more representative of the potential loss performance of our portfolio than relative risk based on scores, as defined by the third party.

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

| | September 30, 2011 | December
31, 2010 |
| --- | --- | --- |
| Sales-type lease
receivables | | |
| Risk Level | | |
| Low | $ 1,118,776 | $ 1,191,682 |
| Medium | 491,033 | 512,419 |
| High | 55,972 | 60,755 |
| Not Scored | 90,419 | 175,977 |
| Total | $ 1,756,200 | $ 1,940,833 |
| Loan receivables | | |
| Risk Level | | |
| Low | $ 263,060 | $ 274,156 |
| Medium | 119,413 | 155,615 |
| High | 17,605 | 21,768 |
| Not Scored | 30,316 | 1,823 |
| Total | $ 430,394 | $ 453,362 |

Leveraged Leases

Our investment in leveraged lease assets consists of the following:

| Rental
receivables | September 30, 2011 — $ 794,724 | $ | 1,802,107 | |
| --- | --- | --- | --- | --- |
| Unguaranteed
residual values | 13,443 | | 14,141 | |
| Principal
and interest on non-recourse loans | (596,155 | ) | (1,373,651 | ) |
| Unearned
income | (78,017 | ) | (191,591 | ) |
| Investment
in leveraged leases | 133,995 | | 251,006 | |
| Less:
deferred taxes related to leveraged leases | (98,912 | ) | (192,128 | ) |
| Net
investment in leveraged leases | $ 35,083 | $ | 58,878 | |

The components of income from leveraged leases for the three and nine months ended September 30, 2011 and 2010 is as follows:

	Three Months Ended September 30, — 2011	2010		2011		2010
Pre-tax leveraged lease
income	$ 1,457	$	1,326	$	4,551	$	4,061
Income tax effect	(641	)	(68	)	(804	)	(215	)
Income from leveraged
leases	$ 816	$	1,258	$	3,747	$	3,846

During the quarter, we completed a sale of non-U.S. leveraged lease assets for cash. The investment in that leveraged lease at the date of termination was approximately $109 million and an after-tax gain of $27 million was recognized.

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

14. Segment Information

We conduct our business activities in seven reporting segments within two business groups, Small & Medium Business Solutions and Enterprise Business Solutions. As a result of certain organizational changes effective January 1, 2011, we have reclassified prior year amounts to conform to the current year presentation. 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. |

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. EBIT excludes interest, taxes, general corporate expenses and restructuring charges, which are generally managed across the entire company on a consolidated basis, and asset impairments, including charges to goodwill. EBIT is useful to management in demonstrating the operational profitability of the segments excluding centrally managed costs, and is also used for purposes of measuring the performance of our management team. Segment EBIT, however, may not be indicative of our overall consolidated performance and therefore, should be read in conjunction with our consolidated results of operations.

Revenue and EBIT by business segment for the three and nine months ended September 30, 2011 and 2010 is as follows:

	Three Months Ended September 30, — 2011	2010	Nine Months Ended September 30, — 2011	2010
Revenue:
North America Mailing	$ 475,663	$ 515,949	$ 1,478,355	$ 1,571,193
International Mailing	177,797	166,108	524,488	493,710
Small & Medium Business Solutions	653,460	682,057	2,002,843	2,064,903
Production Mail	117,220	135,886	382,595	383,231
Software	109,153	95,222	304,921	260,424
Management Services	235,428	245,113	717,513	748,538
Mail Services	143,055	147,941	421,611	425,103
Marketing Services	41,408	39,523	107,784	109,013
Enterprise Business Solutions	646,264	663,685	1,934,424	1,926,309
Total
revenue	$ 1,299,724	$ 1,345,742	$ 3,937,267	$ 3,991,212

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

	Three Months Ended September 30, — 2011	2010		2011		2010
EBIT:
North America Mailing	$ 177,280	$	189,670	$	532,727	$	555,475
International Mailing	25,105		18,668		75,033		56,231
Small & Medium Business Solutions	202,385		208,338		607,760		611,706
Production Mail	(3,426	)	15,770		12,971		36,687
Software	16,564		7,571		31,618		17,082
Management Services	18,248		23,508		59,256		65,781
Mail Services	35,107		15,501		55,191		45,975
Marketing Services	8,716		8,571		19,668		20,430
Enterprise Business Solutions	75,209		70,921		178,704		185,955
Total EBIT	277,594		279,259		786,464		797,661
Reconciling items:
Interest, net (1)	(49,097	)	(51,106	)	(148,219	)	(150,269	)
Corporate and
other expenses	(50,046	)	(51,404	)	(135,426	)	(137,634	)
Restructuring charges and asset impairments	(32,956	)	(33,805	)	(63,974	)	(103,039	)
Goodwill impairment	(45,650	)			(45,650	)
Income from continuing operations before
income taxes	$ 99,845	$	142,944	$	393,195	$	406,719

(1) Interest, net includes financing interest expense, other interest expense and interest income.

15. 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 nine months ended September 30, 2011 and 2010 are as follows:

	Three Months Ended September 30,
	United States			Foreign
	2011	2010		2011		2010
Service cost	$ 4,862	$	5,770	$	1,836	$	1,620
Interest cost	21,935		22,523		7,089		6,895
Expected return on plan
assets	(30,765	)	(30,772	)	(7,945	)	(7,206	)
Amortization of transition
credit					(2	)	(2	)
Amortization of prior service
cost (credit)	36		(644	)	42		69
Recognized net actuarial loss	9,381		8,059		2,782		2,594
Settlement			521
Special termination benefits
(1)	229
Curtailment (1)	435
Net periodic benefit cost	$ 6,113	$	5,457	$	3,802	$	3,970

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

	Nine Months Ended September 30,
	United States			Foreign
	2011	2010		2011		2010
Service cost	$ 14,587	$	17,312	$	5,650	$	5,114
Interest cost	65,805		67,572		21,344		20,523
Expected return on plan
assets	(92,294	)	(92,320	)	(23,978	)	(21,476	)
Amortization of transition
credit					(6	)	(6	)
Amortization of prior service
cost (credit)	109		(1,933	)	130		208
Recognized net actuarial loss	28,142		24,177		8,307		7,595
Settlement			3,961
Special termination benefits
(1)	989				10
Curtailment (1)	2,531				224
Net periodic benefit cost	$ 19,869	$	18,769	$	11,681	$	11,958

(1) Amounts charged to restructuring. See Note 11 for further information.

Through September 30, 2011, we contributed $129 million and $18 million to our U.S. and foreign pension plans, respectively, which includes a special contribution of $123 million to our U.S. plan. We will continue to assess our funding alternatives as the year progresses.

Nonpension Postretirement Benefit Plans

The components of net periodic benefit cost for nonpension postretirement benefit plans for the three and nine months ended September 30, 2011 and 2010 are as follows:

	Three Months Ended September 30, — 2011	2010		2011		2010
Service cost	$ 834	$	931	$	2,501	$	2,793
Interest
cost	3,387		3,455		10,158		10,367
Amortization
of prior service credit	(626	)	(628	)	(1,878	)	(1,883	)
Amortization
of net loss	1,917		1,699		5,750		5,096
Special
termination benefits (1)	44				157
Curtailment
(1)	416				1,652
Net periodic
benefit cost	$ 5,972	$	5,457	$	18,340	$	16,373

(1) Amounts charged to restructuring. See Note 11 for further information.

Contributions for benefit payments were $9 million and $12 million for the three months ended September 30, 2011 and 2010, respectively, and $23 million and $25 million for the nine months ended September 30, 2011 and 2010, respectively.

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

16. Earnings per Share

The calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2011 and 2010 is presented below. The sum of earnings per share amounts may not equal the totals due to rounding.

| | Three
Months Ended September 30, — 2011 | 2010 | | 2011 | | 2010 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Numerator: | | | | | | | | |
| Amounts attributable to common stockholders: | | | | | | | | |
| Income from continuing operations | $ 112,339 | $ | 91,471 | $ | 302,095 | $ | 237,687 | |
| Income (loss) from discontinued operations | 60,428 | | (2,536 | ) | 57,911 | | (8,332 | ) |
| Net income (numerator for diluted EPS) | 172,767 | | 88,935 | | 360,006 | | 229,355 | |
| Less: Preference stock dividend | (15 | ) | (17 | ) | (44 | ) | (50 | ) |
| Income attributable to common stockholders (numerator for basic EPS) | $ 172,752 | $ | 88,918 | $ | 359,962 | $ | 229,305 | |
| Denominator
(in thousands): | | | | | | | | |
| Weighted-average shares used in basic EPS | 201,294 | | 205,761 | | 202,664 | | 206,745 | |
| Effect of dilutive shares: | | | | | | | | |
| Preferred stock | 2 | | 2 | | 2 | | 2 | |
| Preference stock | 447 | | 498 | | 451 | | 511 | |
| Stock options and stock purchase plans | | | 13 | | 4 | | 20 | |
| Other stock plans | 451 | | 8 | | 362 | | 13 | |
| Weighted-average shares used in diluted EPS | 202,194 | | 206,282 | | 203,483 | | 207,291 | |
| Basic
earnings per share: | | | | | | | | |
| Income from continuing operations | $ 0.56 | $ | 0.44 | $ | 1.49 | $ | 1.15 | |
| Income (loss) from discontinued operations | 0.30 | | (0.01 | ) | 0.29 | | (0.04 | ) |
| Net income | $ 0.86 | $ | 0.43 | $ | 1.78 | $ | 1.11 | |
| Diluted
earnings per share: | | | | | | | | |
| Income from continuing operations | $ 0.56 | $ | 0.44 | $ | 1.48 | $ | 1.15 | |
| Income (loss) from discontinued operations | 0.30 | | (0.01 | ) | 0.28 | | (0.04 | ) |
| Net income | $ 0.85 | $ | 0.43 | $ | 1.77 | $ | 1.11 | |
| Anti-dilutive
shares (in thousands): | | | | | | | | |
| Anti-dilutive shares not used in calculating diluted weighted-average
shares | 15,442 | | 16,107 | | 15,435 | | 15,704 | |

On February 14, 2011, we granted approximately 1.3 million stock options and 0.6 million restricted stock units to employees.

I tem 2: Managements Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements contained in this report and our Annual Report to Stockholders on Form 10-K for the year ended December 31, 2010, as such financial statements have been amended by the financial information included in the Current Report on Form 8-K dated September 22, 2011 (together, the 2010 Annual Report). All table amounts are presented in millions of dollars, unless otherwise stated.

Forward-Looking Statements

| This Managements 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: | |
| --- | --- |
| | negative developments in economic conditions, including adverse
impacts on customer demand |
| | changes in
postal or banking regulations or in the financial health of national posts |
| | timely
development and acceptance of new products |
| | declining
physical mail volumes |
| | success in
gaining product approval in markets where regulatory approval is required |
| | successful
entry into new markets |
| | mailers
utilization of alternative means of communication or competitors products |
| | our success
at managing customer credit risk |
| | our success at managing costs associated with our
strategy of outsourcing functions and operations not central to our business |
| | changes in
interest rates |
| | foreign
currency fluctuations |
| | cost, timing
and execution of our transformation plans including any potential asset
impairments |
| | regulatory
approvals and satisfaction of other conditions to consummate and integrate
any acquisitions |
| | interrupted
use of key information systems |
| | changes in
international or national political conditions, including any terrorist
attacks |
| | intellectual
property infringement claims |
| | impact on
mail volume due to concerns over the use of the mail for transmitting harmful
biological agents |
| | third-party
suppliers ability to provide product components, assemblies or inventories |
| | income tax adjustments or other regulatory levies for prior
audit years and changes in tax laws or regulations |
| | changes in
pension, health care and retiree medical costs |
| | changes in
privacy laws |
| | acts of
nature, fire, explosions and other disasters beyond our control |

Overview

For the third quarter 2011, revenue decreased 3% to $1,300 million compared to the prior year. Foreign currency translation had a 2% favorable impact on revenue. Excluding the effects of foreign currency translation in the quarter, revenue was adversely impacted by decreases in equipment sales (13%), supplies revenue (7%), rental revenue (9%), financing revenue (6%) and business and support services revenue (4%), but was partially offset by an increase of 12% in software revenue.

Net income from continuing operations attributable to common stockholders was $112 million, or $0.56 per diluted share for the quarter compared to $91 million or $0.44 per diluted share for the same period in the prior year. These results include the following items:

| | In July 2011, we entered into a series of settlements with the IRS in
connection with its examination of our tax years 2001-2004 under which we
agreed upon both the tax treatment of a number of disputed issues and revised
tax calculations. As a result of this settlement, we reversed $16 million of
previously established tax and interest reserves into income from continuing
operations. See Note 7 to the
unaudited Condensed Consolidated Financial Statements; |
| --- | --- |
| | In September 2011, we completed a sale of non-U.S.
leveraged lease assets resulting in an after-tax gain of $27 million; |
| | We recognized in other income $18 million from
insurance recoveries related to the February 2011 fire at our Dallas presort
facility; |
| | We recorded a goodwill impairment charge of $46
million and asset impairment charges of $12 million associated with our
International Mailing Services operations within our Mail Services segment. |

The disruption caused by the fire at our Dallas mail presort facility resulted in a loss of $2 million in revenue and $0.01 per diluted share in the quarter. The Dallas presort facility has now reached operational efficiency comparable to the previous facility. To date, we have received $40 million of insurance proceeds, $34 million of which had been received as of September 30, 2011.

For the nine months ended September 30, 2011, we generated $750 million in cash from operations, which was used primarily to pay $226 million of dividends to our common stockholders, fund capital investments of $123 million, reduce debt by $50 million, make a special pension contribution of $123 million and repurchase $100 million of our common stock.

Outlook

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

Our growth strategies focus on leveraging our expertise in physical communications with our expanding capabilities in digital and hybrid communications. We see long-term opportunities in delivering products, software, services and solutions that help customers grow their business by more effectively managing their physical and digital communications with their customers.

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

During the fourth quarter of 2011, in connection with the 2005-2008 IRS examination, we entered into a settlement with the IRS under which we agreed upon both the tax treatment of disputed issues and revised tax calculations. In the fourth quarter, we expect to release at least $30 million of 2005-2008 tax and interest reserves, about $5 million of which will be released through Discontinued Operations. Our additional liability for tax and interest arising from the 2001-2008 IRS examinations is approximately $400 million, which was previously paid through the purchase of tax bonds.

The IRS exam of tax years 2001-2004 is estimated to be closed to audit within the next six months and the examination of years 2005-2008 within the next 12 months. The ultimate resolution of any remaining matters could have a material impact, positive or negative, on our results of operations, financial position and cash flows. See Note 7 to the unaudited Condensed Consolidated Financial Statements for further information.

A variety of post-2000-tax years remain subject to examination by tax authorities, including the U.S., UK, Canada, France, Germany and various U.S. states. 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. It is reasonably possible that the amount of our tax uncertainties will decrease in the next 12 months, and we expect this change could be up to two-thirds of those uncertainties. See Note 7 to the unaudited Condensed Consolidated Financial Statements for further information.

RESULTS OF OPERATIONS

Third Quarter 2011 compared to Third Quarter 2010

Business segment results

We conduct our business activities in seven reporting segments within two business groups, Small & Medium Business Solutions (SMB Solutions) and Enterprise Business Solutions (EB Solutions). The following table shows revenue and EBIT for the business segments for the three months ended September 30, 2011 and 2010. EBIT, a non-GAAP measure, is determined by deducting from segment revenue the related costs and expenses attributable to the segment. EBIT excludes interest, taxes, general corporate expenses and restructuring charges, which are generally managed across the entire company on a consolidated basis, and asset impairments, including charges to goodwill. EBIT is useful to management in demonstrating the operational profitability of the segments excluding centrally managed costs, and is also used for purposes of measuring the performance of our management team. Segment EBIT, however, 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 14 to the Condensed Consolidated Financial Statements for a reconciliation of segment EBIT to income from continuing operations before income taxes. Amounts in the table below may not sum to the total due to rounding.

	Three Months Ended September 30,
	Revenue				EBIT
	2011	2010	% change		2011	2010	% change
North America Mailing	$ 476	$ 516	(8	)%	$ 177	$	190	(7	)%
International Mailing	178	166	7	%	25		19	34	%
SMB Solutions	653	682	(4	)%	202		208	(3	)%
Production Mail	117	136	(14	)%	(3	)	16	(122	)%
Software	109	95	15	%	17		8	119	%
Management Services	235	245	(4	)%	18		24	(22	)%
Mail Services	143	148	(3	)%	35		16	126	%
Marketing Services	41	40	5	%	9		9	2	%
EB Solutions	646	664	(3	)%	75		71	6	%
Total	$ 1,300	$ 1,346	(3	)%	$ 278	$	279	(1	)%

Small & Medium Business Solutions

During the quarter, Small & Medium Business Solutions revenue decreased 4% to $653 million and EBIT decreased 3% to $202 million, compared to the prior year. Foreign currency translation had a favorable impact on revenue of 3%. Within the Small & Medium Business Solutions group during the quarter:

North America Mailing revenue decreased 8% to $476 million compared to the prior year. Foreign currency translation had a less than 1% favorable impact on revenue. Equipment sales were down 9% as increased concerns about economic conditions resulted in customers delaying purchases of new equipment and extending leases of existing equipment. Lease extensions are profitable transactions but generate less revenue in the current period than new equipment sales. Lower equipment sales in prior periods is also driving a 9% decline in financing revenue. Rental, supplies and service revenues were 9%, 9% and 6% lower than prior year, respectively, primarily due to lower volumes and fewer placements of new meters. EBIT decreased 7% to $177 million, compared to the prior year due to the decline in revenue.

International Mailing revenue increased 7% to $178 million compared to the prior year, but was down 1% excluding the impact of foreign currency translation. Equipment sales decreased 3% due to lower sales in the UK and some parts of Europe because of increased concerns about economic conditions throughout the region. The decrease was partially offset by increased sales in France primarily due to a higher mix of equipment sales revenue compared to rentals revenue. EBIT increased 34% to $25 million compared to the prior year, primarily due to past and ongoing productivity initiatives. Foreign currency translation had a favorable impact of 7% on EBIT.

Enterprise Business Solutions

During the quarter, Enterprise Business Solutions revenue decreased 3% to $646 million but EBIT increased 6% to $75 million, compared to the prior year. Foreign currency translation had a positive impact on revenue of 1%. Within the Enterprise Business Solutions group during the quarter:

Production Mail revenue decreased 14% to $117 million compared to the prior year. Foreign currency translation had a positive impact of 2%. The decrease in revenue was primarily due to lower equipment sales as customers delayed capital investment decisions due to increased concerns about economic conditions. Production Mail EBIT was a loss of $3 million compared to $16 million in the prior year. EBIT in the quarter was primarily impacted by lower revenue and continuing investments in the development of Volly TM , our secure digital mail delivery service.

Software revenue increased 15% over the prior year to $109 million. Foreign currency translation had a positive impact of 4%. The underlying increase was primarily due to higher licensing revenue in most regions, particularly North America and Asia Pacific. We continue to enter into multi-year software licensing agreements, which will provide improved recurring revenue streams in future periods. Software EBIT more than doubled to $17 million primarily due to the increase in licensing revenue and the benefits from past and ongoing productivity initiatives.

Management Services revenue decreased 4% to $235 million compared to the prior year. Foreign currency translation had a positive impact of 2%. EBIT decreased 22% to $18 million compared to the prior year. The decrease in revenue and EBIT was primarily due to account contractions and terminations in the U.S. last year, pricing pressure on contract renewals and lower volumes in Europe.

Mail Services revenue decreased 3% to $143 million primarily due to lower international shipping volumes and lost revenue of $2 million due to the residual effects of the fire at our Dallas mail presort facility. EBIT for the quarter more than doubled compared to the prior year to $35 million. EBIT included $18 million from insurance recoveries related to the Dallas fire and the remaining increase was primarily due to the benefits from past and ongoing productivity initiatives.

Marketing Services revenue increased 5% to $41 million compared to the prior year primarily due to higher vendor advertising. EBIT increased slightly compared to the prior year as margin improvements from productivity initiatives were partially offset by ongoing investments in our new online service.

Revenue and Cost of revenue by source

The following tables show revenue and cost of revenue by source for the three months ended September 30, 2011 and 2010. Amounts in the tables may not sum to the total due to rounding.

Revenue

	Three Months Ended September 30, — 2011	2010	% change
Equipment
sales	$ 221	$ 246	(10	)%
Supplies	74	77	(4	)%
Software	113	98	15	%
Rentals	140	151	(7	)%
Financing	150	157	(5	)%
Support
services	175	176		%
Business
services	425	440	(3	)%
Total revenue	$ 1,300	$ 1,346	(3	)%
Cost of revenue
	Three Months Ended September 30,
			Percentage of Revenue
	2011	2010	2011	2010
Cost of
equipment sales	$ 98	$ 113	44.0	%	46.1 %
Cost of
supplies	23	24	30.4	%	30.8 %
Cost of
software	23	24	20.7	%	24.0 %
Cost of
rentals	33	36	23.2	%	24.0 %
Financing
interest expense	21	22	14.3	%	14.1 %
Cost of
support services	114	112	65.1	%	63.4 %
Cost of
business services	326	336	76.8	%	76.3 %
Total cost of revenue	$ 638	$ 666	49.1	%	49.5 %

| Equipment
sales |
| --- |
| Equipment sales revenue decreased 10% to $221 million compared to the
prior year. Foreign currency translation had a positive impact of 3%. The
decrease was driven by increasing concern over the continuing global economic
uncertainties causing customers to delay capital investment decisions.
Equipment sales in our Small and Medium Business Solutions group declined 7%
and Production Mail equipment sales declined over 30% compared to the prior
year period. Cost of equipment sales as a percentage of revenue decreased to
44.0% compared to 46.1% in the prior year primarily due to the mix of higher
margin product sales in the mailing businesses and lease extensions. |
| Supplies |
| Supplies revenue decreased 4% to $74 million compared to the prior
year due to reduced mail volumes and fewer installed meters worldwide.
Foreign currency translation had a positive impact of 3%. Cost of supplies as a percentage of
revenue improved to 30.4% compared with 30.8% in the prior year. |
| Software |
| Software revenue increased 15% to $113 million compared to the prior
year primarily due to higher licensing revenue in most regions, particularly
North America and Asia Pacific. Foreign currency translation had a favorable
impact of 3%. Cost of software as a
percentage of revenue improved to 20.7% compared with 24.0% in the prior year
due to an increase in high margin licensing revenue. |
| Rentals |
| Rentals revenue decreased 7% to $140 million compared to the prior
year due to the continuing downsizing to smaller, fully featured machines by
existing customers in the United States and fewer installed meters worldwide.
Internationally, rentals revenue has been impacted by increased concerns
about economic conditions and the higher mix of equipment sales revenue
compared to rentals revenue in France. Foreign currency translation had a
favorable impact of 2%. Cost of rentals as a percentage of revenue improved
to 23.2% compared to 24.0% in the prior year due to lower depreciation from
increased lease extensions. |
| Financing |
| Financing revenue decreased 5% to $150 million compared to the prior
year due to lower equipment sales in prior periods. Foreign currency
translation had a favorable impact of 2%. |
| Financing interest expense as
a percentage of revenue increased to 14.3% compared to 14.1% in the prior
year, principally due to a higher overall effective interest rate. In
computing our financing interest expense, which represents our cost of
borrowing associated with the generation of financing revenues, we assume a
10:1 leveraging ratio of debt to equity and apply our overall effective
interest rate to the average outstanding finance receivables. |
| Support
Services |
| Support services revenue of $175 million was flat compared to the
prior year. Foreign currency translation had a 3% favorable impact. The
underlying decrease in revenue is due to lower new mailing equipment
placements in the United States. Cost
of support services as a percentage of revenue increased to 65.1% compared
with 63.4% in the prior year primarily due to a more complex installation
process associated with the Connect+ TM product. |
| Business
Services |
| Business services revenue decreased 3% to $425 million compared to
the prior year. Foreign currency translation had a positive impact of 1%. The
decrease is primarily driven by the loss of several large contracts in the
U.S. during 2010 and reduced volumes in Europe. Cost of business services as a percentage of revenue increased to
76.8% compared with 76.3% in the prior year due to the reduction in revenue
and pricing pressures on some of our larger contract renewals. |

Selling, general and administrative (SG&A)

SG&A expense decreased $5 million. Foreign currency translation increased SG&A by $11 million. The underlying decrease in SG&A of $16 million, or 4% is primarily due to the decrease in revenue. As a percentage of revenue, SG&A increased to 33.1% compared with 32.3% in the prior year.

Research and development

Research and development expense decreased $3 million, or 7% from the prior year due to cost reduction initiatives.

Restructuring charges and asset impairments

See Note 11 to the unaudited Condensed Consolidated Financial Statements.

Goodwill impairment

We perform our annual goodwill impairment test during the fourth quarter of each year, or sooner, if circumstances indicate an impairment may exist. Due to continuing underperformance of our IMS operations and in connection with the companys long-term planning and budgeting process during the third quarter, management concluded that it was appropriate to perform a goodwill impairment review for IMS at September 30, 2011.

Other income, net

Other income, net of $11 million is comprised of income of $18 million from the recognition of insurance proceeds in connection with the February 2011 fire at our Dallas presort mail facility partially offset by a pre-tax loss of $7 million on the sale of non-U.S. leveraged lease assets.

Income taxes

The benefit for income taxes for the quarter includes a $34 million tax benefit from the aforementioned sale of non-U.S. leveraged lease assets and a $16 million tax benefit arising from the findings of tax examinations. See Note 7 to the unaudited Condensed Consolidated Financial Statements.

Discontinued operations

See Note 3 to the unaudited Condensed Consolidated Financial Statements.

Preferred stock dividends of subsidiaries attributable to noncontrolling interests

See Note 8 to the unaudited Condensed Consolidated Financial Statements.

Nine Months Ended September 30, 2011 compared to Nine Months Ended September 30, 2010

The following tables show revenue and cost of revenue by source for the nine months ended September 30, 2011 and 2010. Amounts in the tables may not sum to the total due to rounding.

Revenue

	Nine Months Ended September 30, — 2011	2010	% change
Equipment sales	$ 706	$ 713	(1	)%
Supplies	236	240	(2	)%
Software	318	271	18	%
Rentals	426	457	(7	)%
Financing	454	477	(5	)%
Support services	531	531		%
Business services	1,266	1,303	(3	)%
Total revenue	$ 3,937	$ 3,991	(1	)%

Cost of revenue

	Nine Months Ended September 30,
			Percentage of Revenue
	2011	2010	2011	2010
Cost of
equipment sales	$ 317	$ 320	44.9 %	44.9 %
Cost of
supplies	74	73	31.5 %	30.6 %
Cost of
software	74	66	23.1 %	24.4 %
Cost of
rentals	98	108	23.0 %	23.6 %
Financing
interest expense	67	66	14.7 %	13.8 %
Cost of
support services	345	338	65.0 %	63.6 %
Cost of
business services	985	1,004	77.8 %	77.0 %
Total cost of revenue	$ 1,960	$ 1,975	49.8 %	49.5 %

| Equipment sales |
| --- |
| Equipment sales revenue decreased 1% to $706 million compared to the
prior year. Foreign currency translation had a positive impact of 3%. The
decline in equipment sales is due to increasing concerns over global economic
conditions causing many customers to postpone capital investment decisions.
Cost of equipment sales as a percentage of revenue was unchanged at 44.9%
compared to the prior year. |
| Supplies |
| Supplies revenue decreased 2% to $236 million compared to the prior
year due to reduced mail volumes and fewer installed meters worldwide.
Foreign currency translation had a positive impact of 2%. Cost of supplies as
a percentage of revenue increased to 31.5% compared with 30.6% in the prior
year primarily due to the increasing mix of lower margin product sales
worldwide. |
| Software |
| Software revenue increased 18% to $318 million compared to the prior
year. Higher licensing revenue accounted for 9% of this increase while prior
year acquisitions contributed 5% and foreign currency translation had a 4%
favorable impact. Cost of software as a percentage of revenue improved to
23.1% compared with 24.4% in the prior year primarily due to the increase in
high margin licensing revenue. |
| Rentals |
| Rentals revenue decreased 7% to $426 million compared to the prior
year as customers in the U.S. continue to downsize to smaller, fully featured
machines and fewer installed meters worldwide. Internationally, rentals
revenue has been impacted by increased concerns about economic conditions and
the higher mix of equipment sales revenue compared to rentals revenue in
France. Foreign currency translation had a positive impact of 1%. Cost of
rentals as a percentage of revenue improved to 23.0% compared with 23.6% in
the prior year primarily due to lower depreciation associated with higher
levels of lease extensions. |

| Financing |
| --- |
| Financing revenue decreased 5% to $454 million compared to the prior
year due to lower equipment sales in prior periods. Foreign currency translation
had a favorable impact of 1%. Financing interest expense as a percentage of
revenue increased to 14.7% compared to 13.8% in the prior year primarily due
to higher overall effective interest rates. |
| Support Services |
| Support services revenue of $531 million was flat compared to the
prior year. Foreign currency translation had a positive impact of 3%. The
underlying decrease was driven by lower new equipment placements worldwide.
Cost of support services as a percentage of revenue increased to 65.0% compared
with 63.6% in the prior year primarily due to a more complex installation
process associated with the Connect+ TM product. |
| Business Services |
| Business services revenue decreased 3% to $1,266
million compared to the prior year primarily due to the loss of several
large contracts during 2010 and the impact of the fire at our Dallas mail
presort facility. The impact of the Dallas fire accounted for 1% of the
revenue decrease. Foreign currency translation and prior year acquisitions
each had a 1% positive impact on revenue. Cost of business services as a
percentage of revenue increased to 77.8% compared with 77.0% in the prior
year primarily due to lower revenues and higher shipping costs in our International
Mail Services operation. |

Selling, general and administrative (SG&A)

SG&A expense decreased $8 million. Foreign currency translation increased SG&A by $31 million and prior year acquisitions increased SG&A by $12 million. The underlying decrease in SG&A of $51 million, or 4%, was due to lower revenue. As a percentage of revenue, SG&A was 32.9% compared with 32.7% in the prior year.

Research and development

Research and development expense decreased $10 million, or 8% from the prior year due to cost reduction initiatives and the completion of development work for Connect+ TM , launched in May 2010.

Restructuring charges and asset impairments

See Note 11 to the unaudited Condensed Consolidated Financial Statements.

Goodwill impairment

See Results Of Operations Third Quarter 2011 Compared to Third Quarter 2010 Goodwill impairment in this MD&A.

Other income, net

See Results Of Operations Third Quarter 2011 Compared to Third Quarter 2010 Other income, net in this MD&A.

Income taxes

See Note 7 to the unaudited Condensed Consolidated Financial Statements.

Discontinued operations

See Note 3 to the unaudited Condensed Consolidated Financial Statements.

Preferred stock dividends of subsidiaries attributable to noncontrolling interests

See Note 8 to the unaudited Condensed Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

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

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

Cash Flow Summary

The change in cash and cash equivalents is as follows:

	Nine Months Ended September 30, — 2011	2010
Net cash provided by operating activities	$ 750	$	666
Net cash used in investing activities	(140	)	(276	)
Net cash used in financing activities	(374	)	(417	)
Effect of exchange rate changes on cash and cash equivalents	(5	)
Increase in cash and cash equivalents	$ 231	$	(27	)

| 2011 Cash Flows |
| --- |
| Net
cash provided by operating activities consists primarily of net income
adjusted for non-cash items and changes in operating assets and liabilities.
Decreases in finance receivables and accounts receivables contributed $169
million and $113 million of cash, respectively. Due to declining equipment
sales, finance receivables have declined as cash collections exceed the
financing of new business. Similarly, accounts receivables have declined
primarily due to cash collections in excess of new billings. In addition, the
timing of tax payments and tax refunds received contributed $169 million.
Partially offsetting these inflows was a special contribution to our U.S.
pension plan of $123 million, restructuring payments of $78 million and
payments of accounts payable and accrued liabilities of $102 million. |

Net cash used in investing activities consisted of capital expenditures of $123 million and the net purchase of investment securities of $100 million partially offset by the proceeds from the sale of non-U.S. leveraged lease assets of $102 million.

Net cash used in financing activities consisted primarily of dividends paid to common stockholders of $226 million, net payments of commercial paper borrowings of $50 million and the repurchase of $100 million of our common stock.

| 2010 Cash Flows |
| --- |
| Cash
provided by operating activities included decreases in finance receivable and
accounts receivable balances of $169 million and $110 million, respectively.
Due to declining equipment sales since 2008, our finance receivables
portfolio has declined as strong cash collections exceed the financing of new
business. Similarly, the decrease in accounts receivable is primarily due
to strong cash collections in excess of new billings. Cash flow also benefited
from the proceeds of $32 million from the unwinding of interest rate swaps
related to a March 2008 debt issuance. Partially offsetting these factors
was an increase in inventory of $31 million, payments of accounts payable
and accrued liabilities of $68 million and restructuring payments of $91
million. |

Net cash used in investing activities consisted of the net purchase of investment securities of $113 million, acquisitions of $76 million and capital expenditures of $90 million.

Net cash used in financing activities included net payments on commercial paper borrowings of $89 million, dividends paid to common stockholders of $227 million and the repurchase of our common stock of $100 million.

Capital Expenditures

Capital expenditures for the nine months ended September 30, 2011 and 2010 included additions to property, plant and equipment of $73 million and $45 million, respectively, and additions to rental equipment and related inventories of $50 million and $46 million, respectively. Capital expenditures for property, plant and equipment were significantly higher this year compared to the prior year

due to the replacement of equipment destroyed by the fire at our Dallas presort mail facility. We have no material commitments for capital expenditures at September 30, 2011.

Financings and Capitalization

We are a Well-Known Seasoned Issuer with the SEC, which allows us to issue debt securities, preferred stock, preference stock, common stock, purchase contracts, depositary shares, warrants and units in an expedited fashion. We have a commercial paper program that is a significant source of liquidity for us and a committed line of credit of $1.25 billion which supports our commercial paper issuance. The line of credit expires in 2013. We have not experienced any problems to date in accessing the commercial paper market. As of September 30, 2011, the line of credit had not been drawn upon.

At September 30, 2011, there was no outstanding commercial paper. During the quarter ended September 30, 2011, borrowings under our commercial paper program averaged $182 million at a weighted-average interest rate of 0.21% and the maximum amount of commercial paper issued at any point in time during the quarter was $450 million.

There have been no significant changes to long-term debt since December 31, 2010. In April 2011, we entered into interest rate swap agreements with an aggregate notional value of $450 million that effectively converted the fixed rate interest payments on our $450 million 4.875% notes due in 2014 into variable rates. Under the terms of these agreements, we pay a weighted-average variable rate based on three month LIBOR plus 305 basis points and receive fixed rate payments of 4.875%.

At September 30, 2011, we had $439 million of cash and cash equivalents held by our foreign subsidiaries. It is our intention to permanently reinvest these funds in our foreign operations and we do not currently foresee a need to repatriate these funds in order to fund our U.S. operations or obligations. However, if these funds are needed for our operations in the U.S., we could be required to pay additional U.S. taxes to repatriate these funds.

We expect to contribute approximately $130 million and $25 million to our U.S. and foreign pension plans, respectively in 2011. Through September 30, 2011, total contributions to our U.S. and foreign pension plans were $129 million and $18 million, respectively, which included a special contribution of $123 million to our U.S. plan. We will continue to assess our funding alternatives as the year progresses.

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

Recent Accounting Pronouncements

See Note 2 to the unaudited Condensed Consolidated Financial Statements.

Regulatory Matters

There have been no significant changes to the regulatory matters disclosed in our 2010 Annual Report.

It em 3: Quantitative and Qualitative Disclosures about Market Risk

There were no material changes to the disclosures made in the 2010 Annual Report regarding this matter.

I tem 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 Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs 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) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) and internal control over financial reporting. Our CEO and CFO concluded that such disclosure controls and procedures were effective as of September 30, 2011, based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Exchange Act. In addition, no changes in internal control over financial reporting occurred during the three months ended September 30, 2011 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.

P ART II. OTHER INFORMATION

I tem 1: Legal Proceedings

See Note 12 to the unaudited Condensed Consolidated Financial Statements.

I tem 1A: Risk Factors

There were no material changes to the risk factors identified in the 2010 Annual Report.

I tem 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. In February 2011, our Board of Directors approved an increase of $100 million in our share repurchase authorization to $150 million. Through September 30, 2011, we repurchased 4,692,200 shares of our common stock at a total cost of $100 million. At September 30, 2011, we have remaining authorization to repurchase up to $50 million of our common stock.

The following table summarizes our share repurchase activity under active programs through September 30, 2011:

| Beginning balance | | Average
price paid per share | | $ 50,000 |
| --- | --- | --- | --- | --- |
| January
2011 | | | | $ 50,000 |
| February
2011 | | | | $ 150,000 |
| March
2011 | | | | $ 150,000 |
| April
2011 | | | | $ 150,000 |
| May
2011 | 1,320,200 | $ 24.34 | 1,320,200 | $ 117,868 |
| June
2011 | 769,300 | $ 23.22 | 769,300 | $ 100,002 |
| July
2011 | | | | $ 100,002 |
| August
2011 | 884,400 | $ 18.63 | 884,400 | $ 83,530 |
| September
2011 | 1,718,300 | $ 19.51 | 1,718,300 | $ 50,003 |
| | 4,692,200 | $ 21.31 | 4,692,200 | |

I tem 6: Exhibits

See Index of Exhibits.

S ignatures

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.


Date: November 4, 2011
/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)

Exhibit Index

Exhibit Number	Description	Status or incorporation by reference
(3.1)	Restated Certificate of
Incorporation of Pitney Bowes Inc.	Incorporated by reference
to Exhibit 3(c) to Form 8-K as filed with the Commission on May 12, 2011
(Commission file number 1-3579)
(3.2)	Pitney Bowes Inc. Amended
and Restated By-laws (effective May 10, 2011)	Incorporated by reference
to Exhibit 3(d) to Form 8-K as filed with the Commission on May 12, 2011
(Commission file number 1-3579)
(11)	Statement regarding
computation of per share earnings	Incorporated by reference
to Note 16 to Item 1. Financial Statements of this Form 10-Q
(12)	Computation of ratio of
earnings to fixed charges	Page
39
(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	Page
40
(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	Page
41
(32.1)	Certification of Chief
Executive Officer Pursuant to 18 U.S.C. Section 1350	Page
42
(32.2)	Certification of Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350	Page
43
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

AI assistant

PITNEY BOWES INC /DE/ Interim / Quarterly Report 2011

31710_10-q_2011-11-04_ac2f93ea-56fd-4ccd-8b48-be9923aacf32.zip

AI assistant

PITNEY BOWES INC /DE/ — Interim / Quarterly Report 2011

31710_10-q_2011-11-04_ac2f93ea-56fd-4ccd-8b48-be9923aacf32.zip

More from PITNEY BOWES INC /DE/

PITNEY BOWES INC /DE/ Interim / Quarterly Report 2011