8-K: Current report

United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004


FORM 8 - K
CURRENT REPORT

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




Date of Report (Date of earliest event reported): January 28, 2003



PITNEY BOWES INC.



Commission File Number: 1-3579




State of Incorporation IRS Employer Identification No.
Delaware 06-0495050





World Headquarters
Stamford, Connecticut 06926-0700
Telephone Number: (203) 356-5000



Item 5 - Other Events.

The registrant's press release dated January 28, 2003 regarding its financial
results for the period ended December 31, 2002, including consolidated
statements of income, selected segment data and reconciliation of reported
consolidated results to proforma results for the three and twelve months ended
December 31, 2002 and 2001, and consolidated balance sheets at December 31,
2002, September 30, 2002 and December 31, 2001, are attached.


Item 7 - Financial Statements and Exhibits.

c. Exhibits.
The following exhibits are furnished in accordance with the provisions of Item
601 of Regulation S-K:
Exhibit Description
- ------- --------------------------------------------------------
(1) Pitney Bowes Inc. press release dated January 28, 2003.


Signatures


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


PITNEY BOWES INC.
January 30, 2003




/s/ B.P. Nolop
--------------
B. P. Nolop
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)




/s/ A.F Henock
--------------
A. F. Henock
Vice President - Finance
(Principal Accounting Officer)


EXHIBIT 1
--------
FOR IMMEDIATE RELEASE
- ---------------------

PITNEY BOWES MEETS 2002 GUIDANCE
- --------------------------------
o Strong Fourth Quarter Financial Performance
o Generated Significant Free Cash Flow for the Year
o Completed $300 Million Share Repurchase Program
o Made a $339 Million Cash Contribution to Pension Plans
o Increased Dividend on Common Stock for 21st Consecutive Year
o Strategic Decisions Position for Future Growth
o Discontinued Long-Term Capital Services Financing
o Liquidated About $225 Million of Capital Services Assets
o Increased Capital Services Reserves by $115 Million in Addition to
$98 Million Charge for US Air and United Aircraft Leases

Stamford, Conn., January 28, 2003 - Pitney Bowes Inc. (NYSE:PBI) today reported
fourth quarter and full year 2002 performance in line with previous guidance and
the generation of significant cash flow from continuing operations.
In providing an overview of the company's financial performance
Chairman and CEO Michael J. Critelli noted, "We are very pleased with the
performance of our core business during the fourth quarter and the full-year. We
met earnings guidance and generated approximately $682 million in free cash
flow, excluding special items. Our strong cash flow and reduced Capital Services
investments enabled us to make a $339 million pre-tax cash contribution to our
pension plans during the quarter. Overall, the underlying strength of our core
business gave us the ability to continue to pursue new opportunities, invest for
the future, and grow despite the lingering political and economic uncertainty in
the global marketplace."
For the fourth quarter 2002, revenue increased seven percent to $1.16
billion from $1.09 billion in 2001. Excluding special items, pro forma income
from continuing operations was $152.5 million and pro forma diluted earnings per
share from continuing operations were 64 cents. Including special items, income
from continuing operations was $18.2 million dollars or eight cents per diluted
share.
For the full year 2002, revenue grew seven percent to $4.41 billion
from $4.12 billion in 2001. Excluding special items, pro forma income from
continuing operations was $572.0 million and pro forma diluted earnings per
share were $2.37. Including special items, full year net income was $475.8
million or $1.97 per diluted share.
Special items include charges to continuing operations related to the
company's Capital Services business and a non-cash, after-tax credit to
discontinued operations of approximately $38 million or 16 cents per diluted
share, due to the favorable resolution of certain contingent liabilities
associated with the previous sale of two businesses, Colonial Pacific Leasing
Corporation in 1998 and Atlantic Mortgage & Investment Corporation in 2000.
"We took a number of steps to transition the Capital Services business
in the fourth quarter," explained Chairman and CEO Michael J. Critelli. "First,
we liquidated about $225 million of financing assets. Second, we have begun a
strategic analysis of our existing portfolio to develop the best asset
disposition strategy. Next, we decided to stop active pursuit of, and growth in,
long-term financing transactions, including postal financing. Originating
profitable Capital Services investments increasingly requires complex
transactions of very long duration which leave little flexibility to restructure
or transfer those assets prior to maturity. To help position us for growth and
to maintain our financial flexibility, going forward we will not seek to
originate these types of long-term financial commitments."
"And finally, in light of our new strategic direction as well as the
accelerating deterioration of the U.S. airline industry, we increased our credit
loss reserves by taking a non-cash pre-tax charge of $115 million or 30 cents
per diluted share during the quarter. This charge was in addition to the
previously announced, non-cash pre-tax charge of $98 million or 26 cents per
diluted share, to write down investments in commercial aircraft leases with US
Airways and United Airlines."
Excluding cash flows primarily associated with the pension contribution
and severance payments related to a previously announced restructuring, free
cash flow from continuing operations for the year was approximately $682
million. Including these payments, free cash flow for the year was approximately
$278 million, as further detailed in the attached table. During the quarter, the
company repurchased approximately 1.5 million of its shares outstanding, at a
net cost of $50 million, bringing the company's full-year share repurchase total
to approximately 7.9 million shares at a net cost of $300 million. In the fourth
quarter the Board of Directors also authorized the repurchase of up to $300
million of the company's common stock over the next 12 to 24 months.

Demonstrating its confidence in the company's continued strong cash
flow generation, the board of directors of the company has approved an increase
in the dividend on common stock to an annualized rate of $1.20 per share. This
is the twenty-first consecutive year that the company has increased its dividend
on common stock.
Mr. Critelli added, "For Pitney Bowes, 2002 was a year in which we met
our financial targets while building momentum to produce long-term profitable
growth. Our fourth quarter performance was driven by the strong market
acceptance of our technologically advanced DM line of networked mailing systems
in the US, the increased demand for our global mailing systems in the UK and
Canada, and strong contributions resulting from the acquisitions of Secap and
PSI. During the year, we implemented a number of strategic initiatives to
enhance our positioning for future growth including acquisitions, investments in
technology, infrastructure and processes, and the reduction of our Capital
Services business."
The Global Mailing Segment includes worldwide revenue and related
expenses from the sale, rental and financing of mail finishing, mail creation
and shipping equipment, related supplies and services, presort mail services,
postal payment solutions, small business solutions and software, plus mail and
package tracking and tracing capability at the desktop. In the fourth quarter,
Global Mailing revenue and operating profit both increased nine percent when
compared with the prior year. Excluding the revenue from the acquisitions of
Secap SA and PSI Group Inc., Global Mailing revenue increased four percent.
Global Mailing in the U.S. has grown its market share in meters on a
year-over-year basis and has continued to benefit from the placement of new
networked digital mailing systems and good demand for its mail creation
products. The company's digital mailing system line was further enhanced during
the quarter by the launch of the revolutionary flagship system DM1000TM, which
can process up to 260 mail pieces per minute, as well as offering premium mail
services through its IntellilinkTM technology.
Outside of the U.S., Global Mailing experienced double-digit revenue
growth, supported by improved performance in the UK, Canada, and Australia,
where the DM SeriesTM was launched and strong performance from Secap SA.
Excluding the revenue from Secap SA, Global Mailing's international revenue grew
eight percent. This revenue growth was achieved despite lower revenue in Germany
and several other European countries, where demand for mailing equipment has
continued to be slow in a post meter migration environment, and where the
company has not yet launched its new DM SeriesTM.
The Enterprise Solutions Segment includes Pitney Bowes Management
Services (PBMS) and Document Messaging Technologies (DMT). Revenue from PBMS
includes facilities management contracts for advanced mailing, reprographic,
document management and other value-added services to large enterprises. Revenue
from DMT includes sales, service and financing of high speed, software-enabled
production mail systems, sorting equipment, incoming mail systems, electronic
statement, billing and payment solutions, and mailing software. For the quarter,
the Enterprise Solutions segment reported revenue growth of two percent and
operating profit growth of 16 percent when compared with the prior year. We are
taking a series of actions within this segment to enhance its ability to grow
despite external conditions. For example, the company is diversifying its
customer base away from financial and legal markets, as indicated by the recent
contract with the U.S General Services Administration (GSA). During the quarter,
PBMS signed an agreement with the GSA that will make a broad array of enhanced
mail and document management services available to federal agencies, including
high-level on-site or off-site screening of suspicious packages and testing for
dangerous contents.
PBMS reported revenue growth of four percent to $251.5 million when
compared with the prior year while operating profit declined 14 percent. PBMS
continued to improve its competitive position and generate strong growth in new
written business, particularly in the higher value document management services.
This growth was partially offset by the contraction of large enterprise
accounts, especially in the financial services and legal sectors. Operating
profit was adversely impacted by ongoing investments in product technology and
infrastructure to improve margins and revenue, especially in Europe, and the
costs associated with acquiring and ramping up new accounts.
DMT reported revenue of $66.5 million for the quarter, a decrease of
six percent from the prior year, while operating profit increased substantially.
Though DMT revenue improved relative to the prior quarter, businesses continued
to delay large capital spending decisions, which in turn slowed demand for our
high-speed, software-enabled production mail equipment and mail processing
software. On-going cost reduction programs, initiated earlier in the year,
resulted in a substantial increase in operating profit over the prior year.
Support services revenue increased during the quarter while sales revenue
shifted to more of a rental model, which we believe will provide a more stable
revenue stream over time.
Total Messaging Solutions, the combined results of the Global Mailing
and Enterprise Solutions segments, reported a seven percent increase in revenue
and a nine percent increase in operating profit.
The Capital Services Segment includes primarily asset- and fee-based
income generated by financing or arranging transactions of critical large-ticket
customer assets and the strategic financing of third-party equipment. Revenue
for the quarter increased ten percent and pro forma operating profit increased
16 percent. During the quarter, the company stopped originating financing for
non-core assets and liquidated about $225 million of financing assets that it
had held for sale to investors. The company anticipates that it will liquidate
most of the remaining $195 million of similar finance assets by year-end and
will transition out of other non-core financing assets over time when it is
economically prudent to do so.
Given the assumption that weak economic conditions will persist during
at least the first half of 2003, the company expects revenue growth in the range
of two percent to four percent for the first quarter and full year 2003. During
the year, the company anticipates it will undertake restructuring initiatives
related to realigned infrastructure requirements and reduced manufacturing needs
for digital equipment. It is expected that the after-tax cost of these
restructuring initiatives will be roughly $100 million over a two-year period
and be recorded as the various initiatives take effect. Excluding the impact of
these restructuring initiatives, the company expects pro forma first quarter
diluted earnings per share from continuing operations will range between 53
cents and 55 cents, and pro forma full year 2003 diluted earnings per share from
continuing operations will range between $2.38 and $2.45.
Mr. Critelli concluded, "We are excited about our opportunities to
enhance shareholder and customer value in 2003 and beyond. Our solid performance
in our core business last year was driven by our focus on three strategic
imperatives: enhancing the core business, streamlining our infrastructure, and
executing our growth strategies. We feel these three areas are essential for
increasing customer and shareholder value and we will maintain an unwavering
focus on them in 2003 as well. When combined, all of the actions emanating from
our strategic imperatives should help us build the momentum to be a bigger,
better and stronger Pitney Bowes today and in the future."
Fourth quarter 2002 consolidated revenue included $617.9 million from
sales and business services, up five percent from $589.9 million in the fourth
quarter of 2001; $393.8 million from rentals and financing, up nine percent from
$362.1 million; and $153.1 million from support services, up ten percent from
$138.8 million. Income from continuing operations for the period was $18.2
million, or eight cents per diluted share. Excluding special items in the fourth
quarter of 2002 and 2001, income from continuing operations was $152.5 million,
or 64 cents per diluted share compared to fourth quarter 2001 income from
continuing operations of $140.0 million, or 57 cents per diluted share. Fourth
quarter 2002 net income was $56.2 million, or 24 cents per diluted share
compared to $90.2 million, or 37 cents per diluted share in 2001. Fourth quarter
2002 consolidated net income included income of $38.0 million from discontinued
operations, or 16 cents per diluted share, while fourth quarter 2001 net income
included a loss of $10.3 million from discontinued operations, or four cents per
diluted share.
For the full year 2002, revenue was $4.41 billion, up seven percent
from $4.12 billion in 2001. Income from continuing operations, before special
items in both periods, was $572.0 million, or $2.37 per diluted share in 2002,
compared to $556.3 million, or $2.25 per diluted share in 2001. Special items
for the full year 2002 included a non-cash pre-tax charge of $98 million to
write down investments in commercial aircraft leases with US Airways and United,
and $115 million non-cash, pre-tax charge to increase credit loss reserves
primarily related to additional airline leasing assets. Special items for the
full year 2001 included a non-cash pre-tax charge of $268 million associated
with the company's plan to transition to the next generation of digital,
networked mailing technology, and a pre-tax charge of $116 million related to
restructuring plan initiatives. There was also a pre-tax charge of approximately
$24 million associated with the settlement of a class action lawsuit related to
lease upgrade pricing, and a $362 million net pre-tax gain as a result of
settling a lawsuit with Hewlett-Packard Company. Full year net income for 2002
included income of $38 million from discontinued operations, or 16 cents per
diluted share compared to a $26 million loss, or 10 cents per diluted share in
2001. As a result, full year net income for 2002 was $475.8 million, or $1.97
per diluted share compared to $488.3 million, or $1.97 per diluted share in
2001.

As noted above, the board of directors declared a quarterly cash
dividend of the company's common stock of 30 cents per share, payable March 12,
2003, to stockholders of record February 21, 2003. The board also declared a
quarterly cash dividend of 53 cents per share on the company's $2.12 convertible
preference stock, payable April 1, 2003, to stockholders of record March 14,
2003, and a quarterly cash dividend of 50 cents per share on the company's 4%
convertible cumulative preferred stock, payable May 1, 2003 to stockholders of
record April 15, 2003.
Management of Pitney Bowes will discuss the company's financial results
in a conference call today, scheduled for 5:00 p.m. EST. Instructions for
listening to the conference call over the web are available on the Investor
Relations page of the company's web site at
www.investorrelations.pitneybowes.com.
- -------------------------------------
Pitney Bowes is a $4.4 billion global provider of integrated mail and
document management solutions headquartered in Stamford, Connecticut. For more
information about the company, its products, services and solutions, visit
www.pitneybowes.com.
- -------------------
Pitney Bowes has presented in this earnings release income from
continuing operations and diluted earnings per share from continuing operations
on a pro forma basis. Also, management has included a presentation of free cash
flow from continuing operations on a pro forma basis.
Management believes this presentation provides a reasonable basis on
which to present the pro forma financial information, and is provided to assist
in investors' understanding of the Company's results of operations. In general,
results are adjusted to exclude the impact of special items of a non-recurring
nature, such as restructuring charges and write downs of assets, which
materially impact the comparability of the Company's results of operations.
While it is not possible to predict future results, the pro forma information is
intended to be more indicative of the ongoing operations of the Company.
This pro forma financial information should not be construed as an
alternative to our reported results determined in accordance with generally
accepted accounting principles (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 pro forma financial information and a quantitative reconciliation of
the differences between the pro forma financial measures with the financial
measures calculated and presented in accordance with GAAP.

The statements contained in this press release that are not purely
historical are forward-looking statements with the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements may be identified by their use of forward-looking terminology
such as the words "expects," "projects," "estimates," "anticipates," "intends,"
and other similar words. Such forward-looking statements include, but are not
limited to, statements about our restructuring plan and our future guidance,
including our expected revenue in the first quarter and full year 2003, and our
expected diluted earnings per share from continuing operations for the first
quarter and for the full year 2003. Such 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: severe adverse changes in the economic environment, changes in international
or national political or economic conditions, 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 2001 Annual Report on Form 10-K 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. The forward-looking statements contained in this news release are
made as of the date hereof and we do not assume any obligation to update the
reasons why actual results could differ materially from those projected in the
forward-looking statements.

Note: Consolidated statements of income for the three and twelve months ended
December 31, 2002 and 2001, and consolidated balance sheets at December 31,
2002, September 30, 2002 and December 31, 2001 are attached.



Pitney Bowes Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended December 31, Twelve Months Ended December 31,
-------------------------------------- -------------------------------------
2002 2001 2002 2001
---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue from:

Sales and business services $ 617,886 $ 589,892 $ 2,320,254 $ 2,125,745
Rentals and financing 393,838 362,141 1,507,839 1,460,915
Support services 153,130 138,774 581,665 535,814
--------------- --------------- -------------- --------------

Total revenue 1,164,854 1,090,807 4,409,758 4,122,474
--------------- --------------- -------------- --------------

Costs and expenses:

Cost of sales and business services 376,673 356,225 1,407,350 1,271,445
Cost of rentals and financing 94,124 84,641 365,878 350,870
Cost of meter transition (*) - 10,300 - 268,300
Capital services charges (*) 213,182 - 213,182 -
Selling, services and administrative 387,546 366,262 1,483,480 1,370,152
Research and development 37,180 35,084 141,269 133,105
Restructuring charges (*) - 27,503 - 116,142
Other income (*) - 24,075 - (338,097)
Interest, net 47,339 43,972 179,154 184,173
--------------- --------------- -------------- --------------

Total costs and expenses 1,156,044 948,062 3,790,313 3,356,090
--------------- --------------- -------------- --------------

Income from continuing operations
before income taxes 8,810 142,745 619,445 766,384
Provision for income taxes (9,390) 42,316 181,739 252,064
---------------- --------------- -------------- --------------

Income from continuing operations 18,200 100,429 437,706 514,320
Discontinued operations 38,044 (10,266) 38,044 (25,977)
---------------- --------------- -------------- --------------

Net income $ 56,244 $ 90,163 $ 475,750 $ 488,343
================ =============== ============= ==============

Basic earnings per share
Continuing operations $ 0.08 $ 0.41 $ 1.83 $ 2.09
Discontinued operations 0.16 (0.04) 0.16 (0.11)
--------------- --------------- -------------- --------------
Net income 0.24 0.37 1.99 1.99
Special items after-tax (*) 0.57 0.16 0.56 0.17
Discontinued operations (0.16) 0.04 (0.16) 0.11
--------------- --------------- -------------- --------------

Income from continuing operations
excluding special items $ 0.65 $ 0.58 $ 2.39 $ 2.26
=============== =============== ============== ==============

Diluted earnings per share
Continuing operations $ 0.08 $ 0.41 $ 1.81 $ 2.08
Discontinued operations 0.16 (0.04) 0.16 (0.10)
--------------- --------------- -------------- --------------
Net income 0.24 0.37 1.97 1.97
Special items after-tax (*) 0.56 0.16 0.56 0.17
Discontinued operations (0.16) 0.04 (0.16) 0.10
--------------- --------------- -------------- --------------

Income from continuing operations
excluding special items $ 0.64 $ 0.57 $ 2.37 $ 2.25
=============== =============== ============== ==============

Average common and potential common
shares outstanding 238,114,574 245,015,133 241,483,539 247,615,560
=============== =============== ============== ==============
<FN>
Note: Special items are indicated by the asterisks above or are otherwise
explained in the press release. Special items for the three months
ended December 31, 2002 and December 31, 2001 resulted in a net
after-tax charge of $134,305 and $39,533, respectively. Special items
for the twelve months ended December 31, 2002 and December 31, 2001
resulted in a net after-tax charge of $134,305 and $41,954, respectively.

The sum of the earnings per share amounts may not equal the totals above
due to rounding.
</FN>
</TABLE>



Pitney Bowes Inc.
Consolidated Balance Sheets

<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
(Unaudited)
Assets 12/31/02 9/30/02 12/31/01
- ------ ------------ ------------ -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 315,156 $ 268,487 $ 231,588
Short-term investments, at cost which
approximates market 3,491 12,631 1,790
Accounts receivable, less allowances:
12/02 $35,139 9/02 $34,064 12/01 $32,448 404,366 423,160 408,414
Finance receivables, less allowances:
12/02 $71,373 9/02 $68,228 12/01 $61,451 1,446,460 1,675,731 1,601,189
Inventories 210,888 206,498 163,012
Other current assets and prepayments 172,264 172,568 150,615
------------ ------------ -------------

Total current assets 2,552,625 2,759,075 2,556,608
------------ ------------ -------------

Property, plant and equipment, net 622,244 595,875 534,595
Rental equipment and related inventories, net 422,717 428,934 472,186
Property leased under capital leases, net 1,974 1,719 1,489
Long-term finance receivables, less allowances:
12/02 $82,635 9/02 $66,395 12/01 $65,967 1,686,168 1,799,052 1,898,976
Investment in leveraged leases 1,559,915 1,438,484 1,337,282
Goodwill, net 827,241 809,690 635,873
Other assets 1,059,430 923,622 881,462
------------ ------------ -------------

Total assets $ 8,732,314 $ 8,756,451 $ 8,318,471
============ ============ =============

Liabilities and stockholders' equity
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 1,248,337 $ 1,313,603 $ 1,425,809
Income taxes payable 98,897 231,115 250,895
Notes payable and current portion of
long-term obligations 1,647,338 1,568,571 1,072,057
Advance billings 355,737 336,598 334,281
------------ ------------ -------------

Total current liabilities 3,350,309 3,449,887 3,083,042
------------ ------------ -------------

Deferred taxes on income 1,535,618 1,340,809 1,273,593
Long-term debt 2,316,844 2,379,565 2,419,150
Other noncurrent liabilities 366,216 358,340 341,331
------------ ------------ -------------

Total liabilities 7,568,987 7,528,601 7,117,116
------------ ------------ -------------

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

Stockholders' equity:
Cumulative preferred stock, $50 par value,
4% convertible 24 24 24
Cumulative preference stock, no par value,
$2.12 convertible 1,432 1,475 1,603
Common stock, $1 par value 323,338 323,338 323,338
Capital in excess of par value - - 6,979
Retained earnings 3,848,562 3,864,245 3,658,481
Accumulated other comprehensive income (121,615) (119,403) (155,380)
Treasury stock, at cost (3,198,414) (3,151,829) (2,943,690)
------------ ------------ -------------

Total stockholders' equity 853,327 917,850 891,355
------------ ------------ -------------

Total liabilities and stockholders' equity $ 8,732,314 $ 8,756,451 $ 8,318,471
============ ============ =============
</TABLE>




Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
December 31, 2002
(Unaudited)

<TABLE>
<CAPTION>
(Dollars in thousands)
%
2002 2001 Change
----------- ------------ ---------
<S> <C> <C> <C>
Fourth Quarter
- --------------
Revenue
-------

Global Mailing $ 799,454 $ 736,550 9%
Enterprise Solutions 317,973 311,097 2%

----------- ------------ ---------
Total Messaging Solutions 1,117,427 1,047,647 7%
----------- ------------ ---------

Capital Services 47,427 43,160 10%
----------- ------------ ---------

Total Revenue $ 1,164,854 $ 1,090,807 7%
=========== ============ =========

Operating Profit (1)
--------------------

Global Mailing $ 241,361 $ 221,882 9%
Enterprise Solutions 24,303 20,891 16%

----------- ------------ ---------
Total Messaging Solutions 265,664 242,773 9%
----------- ------------ ---------

Capital Services 17,601 15,147 16%
----------- ------------ ---------

Total Operating Profit $ 283,265 $ 257,920 10%
=========== ============ =========


<FN>
(1) Operating profit excludes general corporate expenses, income taxes and net
interest other than that related to finance operations.
</FN>
</TABLE>


Pitney Bowes Inc.
Revenue and Operating Profit
By Business Segment
December 31, 2002

<TABLE>
<CAPTION>
(Dollars in thousands)
%
2002 2001 Change
----------- ------------ ---------
<S> <C> <C> <C>
Year to Date
- ------------
Revenue
-------

Global Mailing $3,011,378 $ 2,846,844 6%
Enterprise Solutions 1,218,291 1,083,450 12%

----------- ------------ ---------
Total Messaging Solutions 4,229,669 3,930,294 8%
----------- ------------ ---------

Capital Services 180,089 192,180 (6%)
----------- ------------ ---------

Total Revenue $4,409,758 $ 4,122,474 7%
=========== ============ =========

Operating Profit (1)
-------------------

Global Mailing $ 894,150 $ 859,821 4%
Enterprise Solutions 83,152 77,447 7%

----------- ------------ ---------
Total Messaging Solutions 977,302 937,268 4%
----------- ------------ ---------

Capital Services 75,396 72,396 4%
----------- ------------ ---------

Total Operating Profit $1,052,698 $ 1,009,664 4%
=========== ============ =========
<FN>
(1) Operating profit excludes general corporate expenses, income taxes and net
interest other than that related to finance operations.
</FN>
</TABLE>


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

<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)

Three months ended Twelve months ended
December 31, December 31,
------------ ------------
2002 2001 2002 2001
---------------------------- -----------------------------

<S> <C> <C> <C> <C>
GAAP income from continuing operations
before income taxes, as reported $ 8,810 $ 142,745 $ 619,445 $ 766,384
Special items:
Capital services charges:
Write-down of commercial aircraft 98,182 - 98,182 -
Additional provision for credit losses 115,000 - 115,000 -
Restructuring charges - 27,503 - 116,142
Cost of meter transition - 10,300 - 268,300
Legal settlements, net - 24,075 - (338,097)
---------------------------- -----------------------------
Proforma income from continuing operations
before income taxes 221,992 204,623 832,627 812,729
Proforma provision for income taxes 69,487 64,661 260,616 256,455
---------------------------- -----------------------------
Proforma income from continuing operations $ 152,505 $ 139,962 $ 572,011 $ 556,274
============================ =============================


GAAP diluted earning per share, as reported $ 0.24 $ 0.37 $ 1.97 $ 1.97
(Income)/loss on discontinued operations (0.16) 0.04 (0.16) 0.10
---------------------------- -----------------------------
GAAP diluted earning per share from continuing
operations, as reported $ 0.08 $ 0.41 $ 1.81 $ 2.08
Special items:
Capital services charges:
Write-down of commercial aircraft 0.26 - 0.26 -
Additional provision for credit losses 0.30 - 0.30 -
Restructuring charges - 0.07 - 0.30
Cost of meter transition - 0.03 - 0.68
Legal settlements, net - 0.06 - (0.82)
---------------------------- -----------------------------
Proforma diluted earning per share from continuing
operations $ 0.64 $ 0.57 $ 2.37 $ 2.25
============================ =============================



GAAP net cash provided by operating activities,
as reported $ 502,559 $ 1,035,887
Net investment in fixed assets (224,834) (256,204)
-----------------------------
Proforma free cash flow 277,725 779,683
Pension plan investment 338,579 30,000
Payments related to special items:
Restructuring charges 49,032 49,065
Legal settlements, net 11,856 (243,391)
Spin-off of Imagistics, Inc. 4,772 31,253
-----------------------------
Proforma free cash flow from continuing operations
excluding special items $ 681,964 $ 646,610
=============================

<FN>
The sum of the earnings per share amounts may not equal the totals above due to
rounding.
</FN>
</TABLE>