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October 23, 2006

STAMFORD, Conn., Oct. 23 /PRNewswire-FirstCall/ -- Pitney Bowes Inc. (NYSE: PBI) today reported third quarter 2006 financial results.

For the third quarter 2006, revenue increased eight percent to $1.43 billion and income from continuing operations also rose eight percent to $144 million or $.64 per diluted share versus $.57 per diluted share for the prior year. This was a 12 percent increase in earnings per share over the prior year.

During the quarter, the company recorded an after-tax charge of $4 million or $.02 per diluted share as part of its previously announced restructuring program.

Excluding the impact of the restructuring charges in both periods, adjusted diluted earnings per share from continuing operations increased nine percent from $.61 in the prior year to $.66 this quarter. This was in line with the company's guidance of $.65 to $.67 per diluted share.

The company's Chairman and CEO Michael J. Critelli, noted, "This quarter we continued to enhance the strength and resiliency of our business model as we invested in growth opportunities, while improving operating efficiency. Our confidence in the sustainability of our results was underscored during the quarter as our revenue and earnings per share were again both within our targeted growth ranges. We believe the company is uniquely positioned to take advantage of the many large and growing opportunities in the mailstream."

Net cash used in operating activities was $68 million during the quarter. The net use of cash during the quarter includes the payment of approximately $238 million of taxes related to the sale of Capital Services and the settlement with the IRS as previously disclosed. Free cash flow was $133 million. Year-to-date the company has generated $390 million of free cash flow.

The company used $19 million to repurchase 440 thousand of its shares during the quarter and has $229 million of remaining authorization for future share repurchases. Year-to-date the company has repurchased $312 million of its shares and plans to buy a total of $350 million to $400 million by year- end.

Mailstream Solutions includes worldwide revenue and related expenses from the sale, rental, and financing of mail finishing, mail creation, shipping, and production mail equipment; supplies; support services; payment solutions; and mailing and customer communication software.

In the third quarter, Mailstream Solutions revenue increased nine percent to $1.0 billion and earnings before interest and taxes (EBIT) increased four percent to $297 million, when compared with the prior year.

Within Mailstream Solutions:

U.S. Mailing operations had third quarter revenue growth of five percent to $587 million and EBIT growth of three percent to $232 million. Growth in the quarter was driven by supplies and payment solutions as the meter base continued to transition to new digital technology and customers took advantage of our broad range of financial offerings. There was also good growth in the company's shipping solutions that allow businesses to determine the best and most cost effective way to ship packages and documents.

International Mailing revenue grew 17 percent to $253 million while EBIT increased by eight percent to $44 million. International Mailing revenue particularly benefited from growth in mailing systems equipment in the U K driven by the new requirement to pay postage based on the size and shape of the mail piece, as well as weight. Improved performance in Canada also contributed to revenue growth during the quarter. Transitional expenses related to the consolidation and outsourcing of administrative functions adversely affected the growth of International Mailing EBIT. We expect to start seeing the benefits of these initiatives in 2007.

Worldwide revenue for Production Mail grew 15 percent to $146 million and EBIT increased 43 percent to $14 million. In the U.S. revenue growth was favorably affected by continued strong placements of inserting systems and the company's advanced, high-speed metering system. The strong U.S. results were partially offset by lower sales in Europe.

Software revenue increased two percent to $50 million and EBIT declined 18 percent to $8 million. Revenue growth for the quarter was negatively affected by the comparison to the prior year, which included a large contract. EBIT was adversely impacted by investments in sales and marketing to position the business for longer-term growth.

Mailstream Services includes worldwide revenue and related expenses from facilities management contracts, reprographics, document management, and other value-added services for targeted customer markets; mail services operations, which include presort mail services and international outbound mail services; and marketing services.

For the quarter, Mailstream Services reported revenue growth of five percent to $397 million and EBIT growth of 32 percent to $35 million, versus the prior year.

Within Mailstream Services:

Management Services revenue increased one percent to $263 million for the quarter while EBIT increased 14 percent to $19 million, consistent with the company's strategy to focus on higher value service offerings and administrative cost reductions. The strong improvement in EBIT in the U.S. was partially offset by lower EBIT outside of the U.S.

Mail Services revenue grew nine percent to $91 million and EBIT grew 81 percent to $9 million. Revenue reflects growth in presort and international mail services, while EBIT benefited from the ongoing successful integration of acquired sites and increased operating efficiencies.

Marketing Services revenue increased 32 percent to $43 million and EBIT grew 42 percent to $6 million. Revenue growth benefited from the continued expansion of our marketing services programs.

Outlook

The company anticipates fourth quarter revenue growth in the range of seven to nine percent, which would result in full year revenue growth in the range of six to seven percent.

The company expects adjusted earnings per share in fourth quarter 2006 in the range of $0.76 to $0.78 and $2.68 to $2.70 for the full year. Earnings per share on a Generally Accepted Accounting Principles (GAAP) basis is expected to be $0.71 to $0.75 for the fourth quarter and $2.49 to $2.53 for the full year. The earnings expectations for fourth quarter and the full year are further summarized as follows:

                         4Q06          4Q05   Full Year 2006  Full Year 2005
  Adjusted EPS      $0.76 to $0.78    $0.69    $2.68 to $2.70     $2.46
  Restructuring    ($0.03 to $0.05)  ($0.09)  ($0.08 to $0.10)   ($0.15)
  Foundation
   Contributions          N/A          N/A           N/A         ($0.03)
  Tax Reserve
   Increase               N/A        ($0.24)       ($0.09)       ($0.24)
  GAAP EPS          $0.71 to $0.75    $0.36    $2.49 to $2.53     $2.04

During the fourth quarter, the company expects to record a restructuring charge in the range of $.03 to $0.05 per diluted share, which will complete the charges associated with the restructuring program.

Mr. Critelli added, "The consistency of performance and enhanced visibility of our operating results after the sale of Capital Services allowed us to provide 2007 revenue and earnings guidance during our recent Investor Update meeting in September. This was the earliest we have ever provided guidance for an ensuing year."

The company reconfirmed that in 2007 it expects revenue growth of five to eight percent with earnings per share in the range of $2.90 to $2.98.

Management of Pitney Bowes will discuss the company's results in a conference call today at 5:00 p.m. EDT. Instructions for listening to the conference call over the WEB are available on the Investor Relations page of the company's web site at http://www.pb.com/investorrelations.

Pitney Bowes engineers the flow of communication. The company is a $5.6 billion global leader of mailstream solutions headquartered in Stamford, Connecticut. For more information about the company, its products, services and solutions, visit http://www.pitneybowes.com/.

Pitney Bowes has presented in this earnings release diluted earnings per share on an adjusted basis. Also, management has included a presentation of free cash flow on an adjusted basis and earnings before interest and taxes (EBIT). Management believes this presentation provides a reasonable basis on which to present the adjusted financial information, and is provided to assist in investors' understanding of the company's results of operations. The company's financial results are reported in accordance with generally accepted accounting principles (GAAP). However, the earnings per share and free cash flow results are adjusted to exclude the impact of special items such as restructuring charges and write downs of assets, which materially impact the comparability of the company's results of operations. Restructuring charges often reflect retooling of the business in an episodic way. Although they represent actual expenses to the company, these episodic charges might mask the periodic income associated with our business had there not been a retooling. The use of free cash flow has limitations. GAAP cash flow has the advantage of including all cash available to the company after actual expenditures for all purposes. Free cash flow permits a shareholder insight into the amount of cash that management could have available for discretionary uses if it made different decisions about employing its cash. It adjusts for long-term commitments such as capital expenditures, as well as special items like cash used for restructuring charges and contributions to its pension funds. Of course, these items use cash that is not otherwise available to the company and are important expenditures. Management compensates for these limitations by using a combination of GAAP cash flow and free cash flow in doing its planning.

The adjusted financial information and certain financial measures such as EBIT are intended to be more indicative of the ongoing operations and economic results of the company. EBIT excludes interest payments and taxes, both cash items, and as a result, has the effect of showing a greater amount of earnings than net income. The company uses EBIT, in addition to net income, for purposes of measuring the performance of its unit management team. The interest rates and tax rates applicable to the company generally are outside the control of management, and it can be useful to judge performance independent of those variables.

The adjusted financial information should be viewed as a supplement to, rather than a replacement for, the financial results reported in accordance with GAAP. Further, our definition of this adjusted financial information may differ from similarly titled measures used by other companies.

Pitney Bowes has provided in supplemental schedules attached for reference adjusted financial information and a quantitative reconciliation of the differences between the adjusted financial measures with the financial measures calculated and presented in accordance with GAAP, except with respect to our guidance because it would not be meaningful. Additional reconciliation of adjusted financial measures to financial measures calculated and presented in accordance with GAAP may be found at the company's web site http://www.pb.com/investorrelations in the Investor Relations section.

The information contained in this document is as of October 23, 2006. Quarterly results are preliminary and unaudited. This document contains "forward-looking statements" about our expected future business and financial performance. Pitney Bowes assumes no obligation to update any forward-looking statements contained in this document as a result of new information or future events or developments. Words such as "estimate," "project," "plan," "believe," "expect," "anticipate," "intend," and similar expressions may identify forward-looking statements. For us forward-looking statements include, but are not limited to, statements about possible restructuring charges and our future guidance, including our expected revenue in the fourth quarter and full year 2006 and full year 2007, and our expected diluted earnings per share for the fourth quarter and for the full year 2006 and full year 2007. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to: negative developments in economic conditions, including adverse impacts on customer demand, timely development and acceptance of new products or gaining product approval; successful entry into new markets; changes in interest rates; and changes in postal regulations, as more fully outlined in the company's 2005 Form 10-K Annual Report filed with the Securities and Exchange Commission. In addition, the forward-looking statements are subject to change based on the timing and specific terms of any announced acquisitions or dispositions.

Note: Consolidated statements of income for the three months ended September 30, 2006 and 2005, and consolidated balance sheets at September 30, 2006, June 30, 2006, and September 30, 2005, are attached.

                              Pitney Bowes Inc.
                      Consolidated Statements of Income
                                 (Unaudited)

  (Dollars in thousands, except per share data)

                         Three Months Ended Sept
                                   30,            Nine Months Ended Sept 30,
                                2006     2005 (1)         2006     2005 (1)
  Revenue from:
    Equipment sales         $337,291     $295,026     $959,683     $883,603
    Supplies                  84,728       73,165      250,412      222,797
    Software                  49,979       49,236      139,614      123,291
    Rentals                  196,219      198,894      590,257      606,029
    Financing                185,547      162,810      538,139      488,334
    Support services         182,294      172,216      529,399      518,176
    Business services        397,273      377,682    1,176,682    1,097,335

           Total revenue   1,433,331    1,329,029    4,184,186    3,939,565

  Costs and expenses:
    Cost of equipment
     sales                   173,068      146,147      485,828      443,500
    Cost of supplies          26,071       18,105       66,475       54,372
    Cost of software          11,044       10,260       32,326       26,787
    Cost of rentals           42,231       38,975      128,070      125,261
    Cost of support
     services                104,042       97,574      298,791      290,898
    Cost of business
     services                307,378      299,863      917,285      888,522
    Selling, general and
     administrative          443,426      412,049    1,293,619    1,220,930
    Research and
     development              41,893       40,265      124,409      122,551
    Interest, net             51,962       49,421      160,600      136,486
    Restructuring charge       6,771       12,918       17,409       23,480
    Charitable
     contribution                -            -            -         10,000

           Total costs
            and expenses   1,207,886    1,125,577    3,524,812    3,342,787

  Income from continuing
   operations
    before income taxes      225,445      203,452      659,374      596,778

  Provision for income
   taxes                      77,565       68,023      247,222      200,243
  Minority interest            3,653        2,410        9,814        6,914

  Income from continuing
   operations                144,227      133,019      402,338      389,621
  Discontinued
   operations                  4,393        6,789     (456,264)      30,420

  Net income (loss)         $148,620     $139,808     $(53,926)    $420,041

  Basic earnings per
   share
    Continuing
     operations                $0.65        $0.58        $1.80        $1.70
    Discontinued
     operations                 0.02         0.03        (2.05)        0.13

    Net income (loss)          $0.67        $0.61       $(0.24)       $1.83

  Diluted earnings per
   share
    Continuing
     operations                $0.64        $0.57        $1.78        $1.67
    Discontinued
     operations                 0.02         0.03        (2.02)        0.13

    Net income (loss)          $0.66        $0.60       $(0.24)       $1.80

  Average common and
   potential common
    shares outstanding   224,082,673  231,466,231  225,848,482  232,718,298


  (1) Prior year amounts have been reclassified to conform with the current
      year presentation.

Note: The sum of the earnings per share amounts may not equal the totals above due to rounding.

                            Pitney Bowes Inc.
                       Consolidated Balance Sheets
                               (Unaudited)

  (Dollars in thousands, except per share data)

  Assets                           09/30/06       6/30/06      09/30/05 (1)
  Current assets:
    Cash and cash equivalents       $202,865      $196,315      $294,527
    Short-term investments, at
     cost which approximates
     market                          830,711        81,504        50,703
    Accounts receivable, less
     allowances:
     09/06 $46,470   06/06 $46,856
     09/05 $47,726                   674,267       660,092       637,054
    Finance receivables, less
     allowances:
     09/06 $44,693   06/06 $46,435
     09/05 $63,950                 1,325,764     1,285,907     1,354,119
    Inventories                      244,523       243,225       228,708
    Other current assets and
     prepayments                     239,940       225,588       214,087
    Assets of discontinued
     operations                            -     1,218,435             -

      Total current assets         3,518,070     3,911,066     2,779,198

  Property, plant and
   equipment, net                    614,817       621,627       626,737
  Rental property and
   equipment, net                    491,777       480,942     1,015,875
  Property leased under
   capital leases, net                 2,427         2,396         3,667
  Long-term finance receivables,
   less allowances:
   09/06 $39,140   06/06 $37,540
   09/05 $77,162                   1,522,162     1,511,722     1,771,356
  Investment in leveraged leases     255,993       255,724     1,464,218
  Goodwill                         1,788,081     1,753,812     1,623,505
  Intangible assets, net             378,279       375,826       360,585
  Other assets                       849,333       799,506       874,646

  Total assets                    $9,420,939    $9,712,621   $10,519,787

  Liabilities and stockholders' equity
  Current liabilities:
    Accounts payable and
     accrued liabilities          $1,568,610    $1,478,114    $1,465,538
    Income taxes payable           1,007,700       220,503       135,684
    Notes payable and current
     portion of long-term
     obligations                   1,007,712       707,050       962,504
    Advance billings                 466,511       491,856       467,522
    Liabilities of
     discontinued operations               -     1,448,121             -

      Total current liabilities    4,050,533     4,345,644     3,031,248

  Deferred taxes on income           487,657       527,538     1,725,108
  Long-term debt                   3,348,990     3,363,665     3,689,759
  Other noncurrent liabilities       266,631       270,901       331,642

      Total liabilities            8,153,811     8,507,748     8,777,757

  Preferred stockholders'
   equity in a subsidiary
   company                           310,000       310,000       310,000

  Stockholders' equity:
    Cumulative preferred stock,
     $50 par value,
     4% convertible                       12            17            17
    Cumulative preference stock,
     no par value,
     $2.12 convertible                 1,092         1,105         1,160
    Common stock, $1 par value       323,338       323,338       323,338
    Capital in excess of par value   227,440       229,745       215,232
    Retained earnings              4,056,278     3,978,614     4,299,121
    Accumulated other
     comprehensive income            163,406       181,521       118,121
    Treasury stock, at cost       (3,814,438)   (3,819,467)   (3,524,959)

      Total stockholders' equity     957,128       894,873     1,432,030

  Total liabilities and
   stockholders' equity           $9,420,939    $9,712,621   $10,519,787

  (1) Prior period amounts have been reclassified to conform with the
      current year presentation.



                            Pitney Bowes Inc.
                             Revenue and EBIT
                            Business Segments
                            September 30, 2006
                               (Unaudited)

  (Dollars in thousands)
                                                                        %
                                              2006        2005 (2)    Change
  Third Quarter

      Revenue

      U.S. Mailing                          $587,226      $558,901      5%
      International Mailing                  252,641       216,254     17%
      Production Mail                        146,212       126,956     15%
      Software                                49,979        49,236      2%
      Mailstream Solutions                 1,036,058       951,347      9%

      Management Services                    263,229       261,535      1%
      Mail Services                           91,067        83,610      9%
      Marketing Services                      42,977        32,537     32%
      Mailstream Services                    397,273       377,682      5%

      Total Revenue                       $1,433,331    $1,329,029      8%

      EBIT (1)

      U.S. Mailing                          $232,337      $225,387      3%
      International Mailing                   43,843        40,741      8%
      Production Mail                         13,668         9,525     43%
      Software                                 7,566         9,259    (18%)
      Mailstream Solutions                   297,414       284,912      4%

      Management Services                     18,976        16,627     14%
      Mail Services                            9,444         5,232     81%
      Marketing Services                       6,087         4,291     42%
      Mailstream Services                     34,507        26,150     32%

      Total EBIT                            $331,921      $311,062      7%

      Unallocated amounts:
         Interest, net                       (51,962)      (49,421)
         Corporate expense                   (47,743)      (45,271)
         Restructuring charge                 (6,771)      (12,918)
      Income before income taxes            $225,445      $203,452


  (1) Earnings before interest and taxes (EBIT) excludes general corporate
      expenses.

  (2) Prior year amounts have been reclassified to conform with the current
      year presentation.



                            Pitney Bowes Inc.
                             Revenue and EBIT
                            Business Segments
                            September 30, 2006
                               (Unaudited)

  (Dollars in thousands)
                                                                       %
                                              2006        2005 (2)   Change
  Year to Date

      Revenue

      U.S. Mailing                        $1,729,983    $1,670,784      4%
      International Mailing                  741,639       676,421     10%
      Production Mail                        396,268       371,734      7%
      Software                               139,614       123,291     13%
      Mailstream Solutions                 3,007,504     2,842,230      6%

      Management Services                    798,280       805,008     (1%)
      Mail Services                          275,914       247,525     11%
      Marketing Services                     102,488        44,802    129%
      Mailstream Services                  1,176,682     1,097,335      7%

      Total Revenue                       $4,184,186    $3,939,565      6%

      EBIT (1)

      U.S. Mailing                          $697,816      $669,160      4%
      International Mailing                  131,565       134,160     (2%)
      Production Mail                         32,512        20,094     62%
      Software                                17,183        15,822      9%
      Mailstream Solutions                   879,076       839,236      5%

      Management Services                     61,367        48,622     26%
      Mail Services                           30,100        12,579    139%
      Marketing Services                      11,803         6,557     80%
      Mailstream Services                    103,270        67,758     52%

      Total EBIT                            $982,346      $906,994      8%

      Unallocated amounts:
         Interest, net                      (160,600)     (136,486)
         Corporate expense                  (144,963)     (140,250)
         Restructuring charge                (17,409)      (23,480)
         Other expense                           -         (10,000)
      Income before income taxes            $659,374      $596,778


  (1) Earnings before interest and taxes (EBIT) excludes general corporate
      expenses.

  (2) Prior year amounts have been reclassified to conform with the current
      year presentation.



                              Pitney Bowes Inc.
     Reconciliation of Reported Consolidated Results to Adjusted Results
                                 (Unaudited)

  (Dollars in thousands, except per share amounts)

                         Three months ended Sept
                                   30,            Nine months ended Sept 30,
                                2006         2005         2006         2005

  GAAP income from
   continuing operations
   after income taxes,
   as reported              $144,227     $133,019     $402,338     $389,621
    Restructuring
     charge                    4,332        8,268       11,141       15,934
    Tax settlement               -            -         20,000          -
    Contributions to
     charitable foundations      -            -            -          6,100
  Income from continuing
   operations after income
   taxes, as adjusted       $148,559     $141,287     $433,479     $411,655

  GAAP diluted earnings
   per share from continuing
   operations, as reported     $0.64        $0.57        $1.78        $1.67
    Restructuring charge        0.02         0.04         0.05         0.07
    Tax settlement               -            -           0.09          -
    Contributions to
     charitable foundations      -            -            -           0.03
  Diluted earnings per
   share from continuing
   operations, as
   adjusted                    $0.66        $0.61        $1.92        $1.77


  GAAP net cash provided
   by operating activities,
   as reported              $(67,634)    $216,202     $328,710     $425,735
    Capital
     expenditures            (81,430)     (67,766)    (243,858)    (215,446)
    Reserve account
     deposits                 10,390          100       10,390       (9,100)
    Restructuring payments
     and discontinued
     operations               33,045         (105)      56,437       (9,634)
    Contributions to
     charitable foundations      -            -            -         10,000
    IRS/ Capital Services
     tax payment             238,500                   238,500
    IRS bond payment             -            -            -        200,000

  Free cash flow, as
   adjusted                 $132,871     $148,431     $390,179     $401,555

Note: The sum of the earnings per share amounts may not equal the totals above due to rounding.

  Editorial - Sheryl Y. Battles
              VP, Corp. Communications
              203/351-6808

SOURCE: Pitney Bowes Inc.

CONTACT: Editorial - Sheryl Y. Battles, VP, Corp. Communications,
+1-203-351-6808; Financial - Charles F. McBride, VP, Investor Relations,
+1-203-351-6349

Web site: http://www.pb.com/