Pitney Bowes (PBI)

Treasury Lock & Forward Starting Swap Agreements

We utilized forward starting swap agreements (forward swaps) in order to hedge the interest rate risk on the forecasted issuance of fixed-rate debt. On March 2, 2009, we unwound these derivatives at a loss (and cash payment) of $20.3 million in connection with the $300 million debt issuance that took place on the same date. The loss was recorded to other comprehensive income, net of tax, and will be amortized to net interest expense over the 10-year term of the notes. No amount of ineffectiveness was recorded in the Condensed Consolidated Statements of Income for this cash flow hedge.

Treasury Lock & Forward Starting Swap Agreements

We utilize forward starting swap agreements (forward swaps) in order to hedge the interest rate risk on the forecasted issuance of fixed-rate debt. These derivatives are treated as cash flow hedges, protecting against the risk of changes in future interest payments resulting from changes in LIBOR rates between the date of hedge inception and the date of the debt issuance. We consider counterparty credit risk in the hedge assessments and continue to expect the forward-starting swaps to be effective in protecting against the risk of changes in future interest payments.