SOURCE: Bowne & Co., Inc.

November 07, 2007 17:33 ET

Bowne & Co. Reports Strong 2007 Third Quarter Results

NEW YORK, NY--(Marketwire - November 7, 2007) - Bowne & Co., Inc. (NYSE: BNE)

--  Revenue for Quarter and Year-to-Date Highest since 2000
--  Quarterly EPS Increases to $0.03 from $0.01; YTD EPS Increases to
    $0.86 from $0.37
--  Income from Continuing Operations Increases 124% YTD
--  Cash Provided by Operating Activities Increases $72 Million
    

Bowne & Co., Inc. (NYSE: BNE), a global leader in providing shareholder and marketing communications services, today announced continued solid operating results for the 2007 third quarter and year-to-date.

Revenue of $181.4 million in the third quarter of 2007 -- the Company's highest third quarter since 2000 -- compared to $175.1 million in 2006. Gross margin improved to 34.7% from 33.8%. Income from continuing operations increased to $0.9 million from $0.3 million. Earnings per diluted share from continuing operations were $0.03, compared to $0.01 for the same period last year.

For the nine months ended September 30, 2007, revenue was $654.9 million -- the highest level since 2000 -- up from $641.2 million reported in the comparable 2006 period. Gross margin increased $21.8 million, or 9.7%, and as a percentage of revenue improved to 37.4% from 34.8% in the nine months ended September 30, 2006. Income from continuing operations increased $14.8 million, or 124%, to $26.8 million from $11.9 million reported in 2006, with resulting earnings per diluted share of $0.86 versus $0.37 in 2006.

Pro forma income from continuing operations increased 53% to $2.2 million and 40% to $27.9 million for the quarter and year-to-date, respectively. Pro forma earnings per diluted share from continuing operations were $0.08 and $0.90 for the 2007 third quarter and year-to-date, compared to $0.05 and $0.60 in the comparable 2006 periods. (See page 9, Pro Forma Supplemental Income Information for a reconciliation of these non-GAAP financial measures to our Condensed Consolidated Statements of Operations.)

"We continue to be pleased with our overall performance," said David J. Shea, Bowne Chairman, President and Chief Executive Officer. "Our margin and profitability improvement is a direct result of the effective implementation of our strategic initiatives to grow non-transactional revenue and improve the efficiency and utilization of our operations. We're also excited about the acquisition of Alliance Data Mail Services, an affiliate of Alliance Data Systems Corporation (NYSE: ADS), which directly supports our strategy to grow non-transactional revenue with strategic, bolt-on acquisitions and accelerate our growth in marketing and business communications services by expanding our geographic reach and industry verticals, while adding new technology capabilities."

Financial Communications (FC): Financial Communications reported third quarter revenue of $157 million, a 6% increase over $148 million for the same period last year. Transactional revenue of $77.2 million -- the strongest third quarter since 2000 -- increased $10.1 million, or 15%, as compared to the 2006 third quarter. Non-transactional revenue decreased slightly from the third quarter of 2006, principally the result of decreased commercial revenue partially offset by revenue increases in mutual funds, translations and one of the Company's newest product offerings, Bowne Virtual Dataroom™.

For the nine months ended September 30, 2007, revenue increased $23.5 million, or 4%, to $568 million, primarily due to increased non-transactional revenue. This increase in revenue includes mutual fund business and compliance reporting, as well as significantly improved revenue in translations and virtual data room services. Non-transactional revenue of $350.4 million achieved a record high for the September year-to-date period. Transactional revenue increased 2% over the 2006 comparable period.

Revenue from international operations increased 23% to $44.4 million for the quarter ended September 30, 2007, compared to $36.1 million for the comparable 2006 period, primarily attributable to growth in Europe. Year-to-date international revenue of $138.5 million represents the Company's highest level ever.

Gross profit increased $3.7 million and $20.7 million for the three and nine month periods ended September 30, 2007 as compared to the comparable 2006 periods. As a percentage of sales, gross margins increased to 35.7% and 38.3% for the quarter and nine months ended September 30, 2007, respectively, compared to 35.4% and 36.1% for the comparable 2006 periods. The increases in gross margin reflect the favorable impact of the Company's strategic initiatives including cost saving measures.

Segment Profit for the quarter increased to $18.6 million from $17.7 million in 2006. Year-to-date segment profit was $97.2 million, an increase of $12.8 million, or 15%, and as a percentage of revenue was 17.1%, compared to 15.5% for the same period in 2006.

Marketing & Business Communications (MBC): MBC reported third quarter revenue of $24.4 million, $2.7 million lower than the third quarter of last year, principally the result of Vestcom transition revenue and other non-recurring revenue included in 2006. Year-to-date revenue of $87 million was $9.8 million lower than 2006. The 2006 year-to-date results included approximately $11.3 million of non-recurring revenue as previously noted including revenue related to the initial rollout of the Medicare Part D open enrollment program.

Gross margin for the quarter decreased to 8.4% from 9.6% as a result of lower revenue. Year-to-date gross margin increased to 15.6% from 13.7% in 2006, primarily due to improved operating efficiencies and the reduction of costs as a result of the consolidation of production facilities.

Segment Profit for the quarter was a loss of $2 million, flat with the 2006 third quarter. Year-to-date Segment Profit of $0.2 million improved $1.6 million from a loss of $1.4 in 2006.

Restructuring, integration and asset impairment charges: These charges totaled $2.1 and $12.2 million for the 2007 third quarter and year-to-date respectively, compared to $1.9 and $12.1 million in the comparable 2006 periods. Third quarter 2007 charges include $1.4 million related to the previously announced consolidation of the digital Milwaukee facility into the existing South Bend manufacturing facility, creating the Company's first fully-integrated offset and digital distributive platform. This consolidation should result in annual cost savings of approximately $2 to $3 million. Year-to-date 2007 charges include facility exit costs and asset impairment charges related to the consolidation of leased space at 55 Water Street in New York City, severance, integration and facility costs related to the integration of the St Ives Financial business and the aforementioned consolidation of the Milwaukee facility.

Balance Sheet and Cash Flow: For the nine months ended September 30, 2007, cash and marketable securities of $82.4 million declined $3.2 million from year-end 2006. This includes the funding of $40.1 million in stock repurchases, $12.6 million for acquisitions, $14.3 million in capital expenditures (including $3.0 million related to the consolidation of the 55 Water Street facility) and a $3.3 million contribution to the Company's pension plan.

The cash expenditures above were funded by an increase in net cash provided by operations of $72 million. Net cash provided by operating activities of $57 million for the nine months ended September 30, 2007 compared to net cash used in operating activities of $15.1 million for the nine months ended September 30, 2006. This significant increase is primarily due to improved operating results, reduced accounts receivable -- the result of improved billing and collection efforts -- and decreases in income taxes paid and in the funding of the Company's pension plans in 2007 as compared to 2006.

Accounts receivable declined approximately $10.0 million compared to December 2006. Compared to September 2006, accounts receivable decreased approximately $4.8 million as days sales outstanding improved to 71 days in September 2007 from 76 days in September 2006. Financial Communications work-in-process inventory was $17.9 million at September 30, 2007 compared to $21.2 million at September 30, 2006.

The Company has no borrowings outstanding under its $150 million five-year senior, unsecured revolving credit facility, maturing in May 2010.

Share Repurchase Program: In the 2007 third quarter, the Company spent $21.4 million repurchasing 1.3 million shares of its common stock at an average price per share of $16.71. During the nine months ended September 30, 2007, the Company repurchased 2.4 million shares of its common stock for $40.1 million (an average price of $16.37).

From December 2004, the inception of the Company's share repurchase program, through September 30, 2007, Bowne has spent approximately $185.3 million to repurchase 12.3 million shares at an average price per share of $15.08. As of November 5, 2007, $5.8 million of its share repurchase authorization remained.

Total shares outstanding as of November 1, 2007 were 26,691,860.

Business Outlook: Consistent with the Company's policy of not adjusting annual guidance unless it believes the actual results will be materially outside the range provided, the Company disclosed certain adjustments in the quarterly report on Form 10-Q for the six months ended June 30, 2007 to the estimates that it had previously provided in its 2007 Outlook included in its annual report on Form 10-K for the year ended December 31, 2006.

The Company expects overall operating performance will be in the range of the full-year guidance previously provided in August.

Forward-Looking Statements: The Company notes that forward-looking statements of future performance contained in this release are based upon current expectations and are subject to factors that could cause actual results to differ materially from those suggested here, including demand for and acceptance of the Company's services, new technological developments, competition and general economic or market conditions, particularly in the domestic and international capital markets, regulatory rule changes, and the effect of potential dilution from the Convertible Subordinated Debt and the impact from any future purchases under the Company's share repurchase program.

Bowne & Co. will hold its earnings conference call to review the 2007 third quarter results and to discuss the acquisition of Alliance Data Mail Services on Thursday, November 8, 2007, at 11 a.m. Eastern Time. To join the Web cast, log on to http://www.bowne.com. To access the call via telephone, please dial (877) 407-0778 (domestic) or (201) 689-8565 (international), conference ID # 259575.

About Bowne & Co., Inc.

Bowne & Co., Inc. (NYSE: BNE) provides financial, marketing and business communications services around the world. Dealmakers rely on Bowne to handle critical transactional communications with speed and accuracy. Compliance professionals turn to Bowne to prepare and file regulatory and shareholder communications online and in print. Marketers look to Bowne to create and distribute customized, one-to-one communications on demand. With 3,200 employees in 60 offices around the globe, Bowne has met the ever-changing demands of its clients for more than 230 years. For more information, please visit www.bowne.com.

[Tables follow]


                             BOWNE & CO., INC.
                                (NYSE: BNE)
              Condensed Consolidated Statements of Operations
                                (unaudited)


                                    For the Periods Ended September 30,
(in thousands, except per       ------------------------------------------
 share information)                   Quarter             Year-to-Date
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------

Revenue                         $ 181,379  $ 175,110  $ 654,915  $ 641,155
Expenses:
  Cost of revenue                (118,442)  (115,890)  (409,862)  (417,859)
  Selling and administrative      (53,543)   (51,326)  (174,285)  (166,327)
  Depreciation                     (5,972)    (5,628)   (19,979)   (18,797)
  Amortization                       (409)      (139)    (1,204)      (410)
  Restructuring, integration
   and asset impairment
   charges(1)                      (2,106)    (1,907)   (12,154)   (12,103)
  Purchased in-process research
   and development                      -         43          -       (958)
                                ---------  ---------  ---------  ---------
                                 (180,472)  (174,847)  (617,484)  (616,454)
                                ---------  ---------  ---------  ---------
Operating income                      907        263     37,431     24,701
  Interest expense                 (1,339)    (1,336)    (4,043)    (4,081)
  Other (expense) income, net        (259)       464        262      2,469
                                ---------  ---------  ---------  ---------
(Loss) income from continuing
 operations before income taxes      (691)      (609)    33,650     23,089
Income tax benefit (expense)(2)     1,575        905     (6,870)   (11,152)
                                ---------  ---------  ---------  ---------
Income from continuing
 operations                           884        296     26,780     11,937
Discontinued operations:
(Loss) income from discontinued
 operations, net of tax               (80)   (12,068)       400    (15,939)
                                ---------  ---------  ---------  ---------
Net income (loss)               $     804  $ (11,772) $  27,180  $  (4,002)
                                =========  =========  =========  =========

Earnings per share from
 continuing operations:
  Basic                         $    0.03  $    0.01  $    0.94  $    0.38
  Diluted                       $    0.03  $    0.01  $    0.86  $    0.37
(Loss) earnings per share from
 discontinued operations:
  Basic                         $    0.00  $   (0.40) $    0.01  $   (0.51)
  Diluted                       $    0.00  $   (0.39) $    0.01  $   (0.50)
Total earnings (loss) per
 share:
  Basic                         $    0.03  $   (0.39) $    0.95  $   (0.13)
  Diluted                       $    0.03  $   (0.38) $    0.87  $   (0.13)
Weighted-average shares
 outstanding:
  Basic                            28,309     30,375     28,481     31,697
  Diluted(3)                       28,933     30,596     33,102     32,012

Dividends per share             $   0.055  $   0.055  $   0.165  $   0.165

(1) 2007 includes charges of $1.5 million year-to-date related to the
integration of the January 2007 acquisition of St Ives Financial and $5.9
million year-to-date related to the consolidation of leased space at 55
Water Street.  The third quarter and nine month period also include $1.4
million for the consolidation of the Milwaukee digital print facility with
our existing South Bend operation.  2006 includes charges of $1.8 million
for the quarter and $8.8 million year-to-date related to the integration of
the Marketing and Business Communications division of Vestcom International
into MBC.

(2) In 2007, the Company recorded a tax benefit of $6.3 million for the
year-to-date period related to the settlement of audits which was completed
in the first half of 2007of our 2001-2004 federal income tax returns .  In
addition, the 2007 quarter and nine month periods include the favorable
impact of $1.0 million related to the 2006 tax return to provision true-up.

(3) Includes the potential dilution from the Convertible Subordinated Debt
of 4,058,445 shares for the nine months ended September 30, 2007. In
addition, net income used in the calculation of diluted earnings per share
has been adjusted to reflect the addition of interest expense, net of tax,
related to the Convertible Debt.These shares are not included in the
diluted share count for the other periods presented since the effect would
be anti-dilutive.



                             BOWNE & CO., INC.
                                (NYSE: BNE)
                  Condensed Consolidated Balance Sheets


                                                   Sept. 30,     Dec. 31,
(in thousands)                                        2007         2006
                                                  ------------ ------------
                                                  (unaudited)
                                                  ------------
Assets
Cash and cash equivalents                         $     44,983 $     42,986
Marketable securities                                   37,443       42,628
Accounts receivable, net                               143,004      153,016
Inventories                                             26,074       25,591
Prepaid expenses and other current assets               40,054       33,901
Assets held for sale                                     2,852        2,796
                                                  ------------ ------------
      Total current assets                             294,410      300,918
                                                  ------------ ------------

Property, plant and equipment, net                     122,078      132,767
Goodwill and other intangibles, net                     45,336       35,015
Other assets                                            35,911       47,543
                                                  ------------ ------------
      Total assets                                $    497,735 $    516,243
                                                  ============ ============

Liabilities and Stockholders' Equity
Current portion of long-term debt and short-term
 borrowings                                       $        940 $      1,017
Accounts payable and accrued liabilities               109,059      126,827
Liabilities held for sale                                  584          683
                                                  ------------ ------------
      Total current liabilities                        110,583      128,527
                                                  ------------ ------------

Long-term debt                                          75,986       76,492
Deferred employee compensation                          34,938       52,509
Deferred rent and other                                 18,429       23,480
Stockholders' equity                                   257,799      235,235
                                                  ------------ ------------
    Total liabilities and stockholders' equity    $    497,735 $    516,243
                                                  ============ ============



                             BOWNE & CO., INC.
                                (NYSE: BNE)
              Condensed Consolidated Statements of Cash Flows
                                (unaudited)

                                                        Nine Months Ended
                                                            Sept. 30,
                                                      --------------------
(in thousands)                                          2007       2006
                                                      ---------  ---------
Cash flows from operating activities:
 Net income (loss)                                    $  27,180  $  (4,002)
 Net (income) loss from discontinued operations            (400)    15,939
 Depreciation and amortization                           21,183     19,207
 Purchased in-process research and development                -        958
 Asset impairment charges                                 3,393      2,501
 Changes in assets and liabilities, net of
  acquisitions, discontinued operations and certain
  non-cash transactions                                   9,082    (43,360)
 Net cash used in operating activities of
  discontinued operations                                (3,434)    (6,373)
                                                      ---------  ---------
Net cash provided by (used in) operating activities      57,004    (15,130)
                                                      ---------  ---------

Cash flows from investing activities:
 Proceeds from the sale of subsidiaries                       -      6,364
 Purchase of property, plant and equipment              (14,295)   (22,098)
 Purchase of marketable securities                      (41,200)   (50,600)
 Proceeds from the sale of marketable securities
  and other                                              46,591     97,339
 Acquisition of businesses, net of cash acquired        (12,588)   (32,908)
 Net cash provided by investing activities of
  discontinued operations                                     -     12,269
                                                      ---------  ---------
Net cash (used in) provided by investing activities     (21,492)    10,366
                                                      ---------  ---------

Cash flows from financing activities:
 Payment of debt                                           (677)      (634)
 Proceeds from stock options exercised                   11,153     11,194
 Payment of dividends                                    (4,617)    (5,085)
 Purchase of treasury stock                             (40,101)   (53,342)
 Other                                                      835         13
 Net cash used in financing activities of
  discontinued operations                                     -       (100)
                                                      ---------  ---------
Net cash used in financing activities                   (33,407)   (47,954)
                                                      ---------  ---------
Net increase (decrease) in cash and
 cash equivalents                                     $   2,105  $ (52,718)
Cash and Cash Equivalents--beginning of period           42,986     96,839

Cash and Cash Equivalents--end of period              $  45,091  $  44,121
                                                      =========  =========

Cash and cash equivalents for 2006 includes $155 as of the beginning of the
period and for 2007 includes $108 as of the end of the period related to
discontinued operations.



                                 BOWNE & CO., INC.
                                    (NYSE: BNE)
                                Segment Information

During the fourth quarter of 2006, the Company changed the way it reports and evaluates segment information. The Company had previously reported administrative, legal, finance and other support services which are not directly attributable to the segments in the category "Corporate/Other." The Company now also includes in the "Corporate/Other" category certain other expenses (such as stock-based compensation and supplemental retirement plan expenses) that had previously been allocated to the individual operating segments. This change in presentation more accurately reflects the way management evaluates the operating performance of its segments. The Company's previous years' segment information has been restated to conform to the current presentation.

Information regarding the operations of each business segment is set forth below. Performance is evaluated based on several factors, of which the primary financial measure is Segment Profit. Segment Profit is defined as gross margin (revenue less cost of revenue) less selling and administrative expenses. Segment performance is evaluated exclusive of interest, income taxes, depreciation, amortization, certain shared corporate expenses, restructuring, integration and asset impairment charges, purchased in-process research and development, other expenses and other income. Therefore, this information is presented in order to reconcile to income from continuing operations before income taxes.


                                    For Periods Ended Sept. 30,
                           -----------------------------------------------
(in thousands)                    Quarter                Year-to-Date
                           ----------------------   ----------------------
                              2007        2006         2007        2006
                           ----------  ----------   ----------  ----------
Revenues:
Financial Communications   $  157,002  $  148,043   $  567,957  $  544,438
Marketing & Business
 Communications                24,377      27,067       86,958      96,717
                           ----------  ----------   ----------  ----------
                           $  181,379  $  175,110   $  654,915  $  641,155
                           ==========  ==========   ==========  ==========
Segment Profit/(Loss):
Financial Communications   $   18,566  $   17,731   $   97,233  $   84,435
Marketing & Business
 Communications                (1,999)     (2,051)         248      (1,389)
Corporate/Other
 (see detail below)            (9,538)     (9,186)     (38,605)    (36,669)
                           ----------  ----------   ----------  ----------
                                7,029       6,494       58,876      46,377
                           ----------  ----------   ----------  ----------

Depreciation                   (5,972)     (5,628)     (19,979)    (18,797)

Amortization                     (409)       (139)      (1,204)       (410)

Interest expense               (1,339)     (1,336)      (4,043)     (4,081)
                           ----------  ----------   ----------  ----------
(Loss) income from
 continuing operations
 before income taxes       $     (691) $     (609)  $   33,650  $   23,089
                           ==========  ==========   ==========  ==========

Corporate/Other (by type):
Shared corporate expenses  $   (7,173) $   (7,786)  $  (26,713) $  (26,077)
Other (expense) income, net      (259)        464          262       2,469
Restructuring charges,
 integration costs and
 asset impairment charges      (2,106)     (1,907)     (12,154)    (12,103)
Purchased in-process
 research and development           -          43            -        (958)
                           ----------  ----------   ----------  ----------
   Total                   $   (9,538) $   (9,186)  $  (38,605) $  (36,669)
                           ==========  ==========   ==========  ==========



                                 BOWNE & CO., INC.
                                    (NYSE: BNE)
                    PRO FORMA SUPPLEMENTAL INCOME INFORMATION
         Reconciliation to Condensed Consolidated Statements of Operations
                                    (unaudited)

Pro forma supplemental income information, which is not prepared in accordance with generally accepted accounting principles, excludes restructuring, integration and asset impairment charges, tax benefits associated with tax refunds, and purchased in-process research and development. The Company believes that presentation of this supplemental information is useful to investors to evaluate performance in comparison to prior year's results. This pro forma supplemental information is an alternative to, and not a replacement measure of, operating performance as determined in accordance with generally accepted accounting principles.

                                     For the Periods Ended September 30,
                                  -----------------------------------------
                                        Quarter           Year-to-Date
(in thousands, except per         -----------------------------------------
 share information)                  2007      2006       2007       2006
                                  ---------  --------  ---------  ---------

Net income from continuing
 operations                       $     884  $    296  $  26,780  $  11,937
Add back:
Restructuring, integration and
 asset impairment charges, net of
 pro forma tax effect(1)              1,301     1,163      7,480      7,381
Tax benefit associated with tax
 refunds received and related
 reduction of tax liabililty(2)           -         -     (6,328)         -
Purchased in-process research and
 development, net of pro forma tax
 effect(3)                                -       (27)         -        584
                                  ---------  --------  ---------  ---------
Income from continuing operations,
 pro forma                        $   2,185  $  1,432  $  27,932  $  19,902
                                  =========  ========  =========  =========

Earnings per share from continuing
 operations:
     Basic                        $    0.03  $   0.01  $    0.94  $    0.38
     Diluted                      $    0.03  $   0.01  $    0.86  $    0.37

Earnings per share from continuing
 operations--pro forma:
     Basic                        $    0.08  $   0.05  $    0.98  $    0.63
     Diluted                      $    0.08  $   0.05  $    0.90  $    0.60

Weighted-average shares
 outstanding:
     Basic                           28,309    30,375     28,481     31,697
     Diluted(4)                      28,933    30,596     33,102     36,071

(1) In 2007, restructuring, integration and asset impairment charges of
$2.1 million for the quarter and $12.2 million year-to-date are net of tax
benefits of $0.8 and $4.7 million, respectively. In 2006, restructuring,
integration and asset impairment charges of $1.9 million for the quarter
and $12.1 million year-to-date are net of tax benefits of $0.7 and
$4.7 million, respectively.

(2) In 2007, the Company recorded a tax benefit of $6.3 million for the
year-to-date period related to the settlements of audits in the first half
of 2007 for our 2001-2004 federal income tax returns.

(3) In 2006, purchased in-process research and development of $1.0 million
is net of tax benefit of $0.4 million. These costs are associated with the
acquisition of certain assets of PLUM Computer Consulting, Inc. during the
second quarter of 2006.

(4) The weighted-average diluted shares outstanding for the nine months
ended September 30, 2007 and 2006 include the potential dilution from the
Convertible Subordinated Debt of 4,058,000 shares. In addition, net income
used in the calculation of diluted earnings per share for these periods has
been adjusted to reflect the addition of interest expense, net of tax,
related to the convertible debt. The diluted share count for the three
month periods does not include the potential dilution from the Convertible
Subordinated Debt shares since the effect would be anti-dilutive.

Contact Information