DBRS Confirms Pitney Bowes Inc. and Pitney Bowes of Canada Ltd. at AA (low) and R-1 (middle)

Dominion Bond Rating Service (DBRS) has today confirmed the ratings of Pitney Bowes Inc. (Pitney Bowes or the Company) at AA (low) and Pitney Bowes of Canada Ltd. at AA (low) and R-1 (middle). The trends remain Stable.

DBRS expects the ratings to remain stable over the near term as Pitney Bowes’ overall operating results are likely to continue to trend upward gradually amid healthy global economic conditions. Other factors are the Company’s strong global market position and product-mix expansion, which should bolster volume.

Pitney Bowes’ postal equipment sales and services continued to be solid in 2005 particularly in international markets, which are experiencing robust economic expansion. Further, revenue strength has been broad based in segments such as sales, finance and services, thus reinforcing stability. Increased unit volume also contributed to good profitability in the Financial Services segment.

However, structural changes in the mail/postal industry persist with a gradual shift away from print to digital-based mail services and document solutions. Pitney Bowes has to some extent effectively countered these challenging trends with (1) an emphasis on providing customers with an innovative full-service platform of mail and documentation services, thus creating more value-added offerings and cross-selling opportunities, and (2) developing a broader scope of electronic information delivery to deal with a new competitive environment. Furthermore, these strategies also diversify Pitney Bowes’ revenue streams, thus reducing risk, and benefit from companies that are increasingly outsourcing document services functions.

Pitney Bowes will likely continue to build its document solutions and digital/software base presence partially through acquisitions. This underscores a shifting business model and industry where the Company seeks to enhance its competitive position. Acquisitions are facilitated by the Company’s operational stability, considerable free cash flow (before working capital) of nearly $350 million in the recent 12 months, and acceptable balance sheet given the leverage capability (approximately 7:1) of the Company’s finance unit. However, acquisitions normally entail integration risks, which create obstacles for Pitney Bowes.

In May 2006, the Company announced an agreement to sell off the Capital Services division. DBRS views this positively as it enables Pitney Bowes to allocate resources to higher-growth areas and facilitates management focus on enhancing core competencies and leveraging customer relationships. Furthermore, reduced third-party financing mitigates the Company’s overall risk profile.

Note: All figures are in U.S. dollars unless otherwise noted.