SOURCE: Bowne & Co., Inc.

November 08, 2006 17:17 ET

Bowne & Co. Reports 2006 Third Quarter Results

Revenue Increases 15%, E.P.S. From Continuing Operations Improves

NEW YORK, NY -- (MARKET WIRE) -- November 8, 2006 -- Bowne & Co., Inc. (NYSE: BNE), a leader in financial, marketing and business communications services, today announced improved results from continuing operations over 2005. For the quarter, revenue increased 15.0% to $175.1 million from $152.3 million and diluted earnings per share from continuing operations improved to $0.01 from a loss of $0.04 in the third quarter of 2005.

For the nine months ended September 30, 2006, revenue was $641.2 million, up 26.0% from $509.9 million reported in 2005. Income from continuing operations was $11.9 million, as compared to $7.0 million for the same period last year, a 71.0% increase, with resulting diluted earnings per share of $0.37 as compared to $0.20 in 2005, a 85.0% increase.

Pro forma diluted earnings per share from continuing operations for the third quarter was $0.05, as compared to a loss of $0.01 in the third quarter of 2005. Year-to-date pro forma diluted earnings per share from continuing operations more than doubled to $0.60 as compared to $0.29 in 2005. (See Pro Forma Supplemental Income Information attached hereto for a reconciliation of these non-GAAP financial measures to our Condensed Consolidated Statements of Operations.)

"Our sharpened focus on our core businesses is paying off, as demonstrated by our strongest third quarter in six years," said Bowne Chairman and Chief Executive Officer Philip E. Kucera. "We've accelerated the integration of Marketing & Business Communications and we continue to be optimistic about its future performance."

"This was another strong quarter for Bowne," added David J. Shea, Bowne President and Chief Operating Officer. "We're particularly pleased with Financial Print's gains in transactional market share despite a decline in market activity in the third quarter. We believe the strategic decisions we've made in 2006 position us well for 2007 in all of the markets we serve."

Bowne Financial Print: Financial Print third quarter revenue increased to $148.0 million as compared to $143.2 million for the same period last year. Transactional revenue increased 9.0% primarily due to an increase in the Company's market share. Segment profit for the quarter of $15.3 million increased $3.0 million, or 24.8% compared to the same period in 2005. On a year-to-date basis, segment profit of $77.2 million increased $12.4 million, or 19.1%, and as a percentage of revenue was 14.2% compared to 13.5% for 2005.

Marketing & Business Communications (MBC): The 2006 results include the January 2006 acquisition of the Marketing and Business Communications division of Vestcom International. MBC reported revenue of $27.1 million and $96.7 million for the third quarter and year-to-date, respectively. Due to the seasonality of the business, the second and third quarters generally represent the lowest level of business activity during the year. Segment profit for the quarter was a loss of $2.3 million and $2.6 million year-to-date, and includes certain non-recurring costs associated with the integration of operations. These results compare to losses of $2.7 million and $5.6 million in the comparable 2005 periods. The Company is adjusting its guidance for MBC's segment profit as discussed below.

Discontinued Operations: During the quarter the Company completed the sale of DecisionQuest. The 2006 third quarter loss of $12.1 million from discontinued operations includes the $5.1 million loss, net of tax, from the sale, and a $4.9 million charge, net of tax, for the costs associated with exiting the leased facilities of DecisionQuest and Bowne Business Solutions. The year-to-date loss, net of tax, of $15.9 million includes the aforementioned items, a $6.0 million gain, net of tax, on the sale of CaseSoft (a joint venture investment held by DecisionQuest which was sold in May 2006), and a $10.0 million goodwill impairment charge, net of tax, recorded in the second quarter related to DecisionQuest.

Balance Sheet and Cash Flow: For the nine months ended September 30, 2006, cash and marketable securities declined $98.9 million. This decline includes the funding of $53.3 million in stock repurchases, $33.0 million for acquisitions and $22.1 million in capital expenditures (including $6.5 million related to the MBC segment, $3.3 million related to the relocation of our London print facility and $2.9 million for the 55 Water Street facility).

Accounts receivable increased $27.3 million since year-end due to the increased revenue levels (including the MBC segment) and normal cyclical trends. Days sales outstanding increased to 76 days in September 2006 from 74 days in September 2005. Financial Print work-in-process inventory was $20.9 million at both September 30, 2006 and September 30, 2005.

Share Repurchase Program: From the inception of the Company's share repurchase program in December 2004 through September 30, 2006, Bowne has spent approximately $131.0 million, repurchasing 8.9 million shares at an average price per share of $14.66. In 2006 through September 30, the Company spent $53.3 million repurchasing 3.7 million shares at an average price per share of $14.37, of which 1.3 million shares were purchased in the third quarter. As of October 31, 2006, approximately $61.0 million of its authorization remained for share repurchases.

Business Outlook: Consistent with the Company's policy of adjusting annual guidance unless when it believes the actual results will be materially outside the range provided, Bowne is adjusting downward MBC's expected 2006 full-year segment profit range. Previously, Bowne had forecast a range of $2 million to $9 million which it is now adjusting to a range of a loss of $1 million to a $1 million profit. The change is primarily the result of incremental operating costs related to the accelerated integration of MBC, in our efforts to achieve ongoing synergies and operating efficiencies earlier. The Company expects the results of the Financial Print segment and the Company's overall operating performance will be in the range of the full-year guidance previously provided.

Bowne & Co., Inc. will hold its earnings conference call to review the 2006 third quarter results on Thursday, November 9, 2006, at 11 a.m. Eastern Time. To join the Webcast, log on to http://www.bowne.com. To access the call via telephone, please dial (800) 910-5497 (domestic) or (973) 935-8450 (international), conference ID # 8007472.

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.


                            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
                          ----------------------  ----------------------
                             2006        2005        2006        2005
                          ----------  ----------  ----------  ----------
                                         (as                     (as
                                       restated)               restated)
Revenue                   $  175,110  $  152,337  $  641,155  $  509,889
Expenses:
  Cost of revenue           (115,890)   (101,394)   (417,859)   (326,165)
  Selling and
   administrative            (51,326)    (45,730)   (166,327)   (139,135)
  Depreciation                (5,628)     (5,746)    (18,797)    (18,539)
  Amortization                  (139)          -        (410)          -
  Restructuring,
   integration and asset
   impairment charges (1)     (1,907)     (1,593)    (12,103)     (4,750)
  Purchased in-process
   research and
   development                    43           -        (958)          -
                          ----------  ----------  ----------  ----------
                            (174,847)   (154,463)   (616,454)   (488,589)
                          ----------  ----------  ----------  ----------
Operating income (loss)          263      (2,126)     24,701      21,300
  Interest expense            (1,336)     (1,198)     (4,081)     (3,788)
  Other income (expense),
   net                           464        (178)      2,469         463
                          ----------  ----------  ----------  ----------
(Loss) income from
 continuing operations
 before income taxes            (609)     (3,502)     23,089      17,975
Income tax benefit
 (expense)                       905       2,144     (11,152)    (11,005)
                          ----------  ----------  ----------  ----------
Income (loss) from
 continuing operations           296      (1,358)     11,937       6,970
Discontinued operations
 (see note):
(Loss) income from
 discontinued operations,
 net of tax                  (12,068)      3,691     (15,939)        334
                          ----------  ----------  ----------  ----------
Net (loss) income         $  (11,772) $    2,333  $   (4,002) $    7,304
                          ==========  ==========  ==========  ==========
Earnings (loss) per share
 from continuing
 operations:
  Basic                   $     0.01  $    (0.04) $     0.38  $     0.20
  Diluted                 $     0.01  $    (0.04) $     0.37  $     0.20

(Loss) earnings per share
 from discontinued
 operations:
  Basic                   $    (0.40) $     0.11  $    (0.51) $     0.01
  Diluted                 $    (0.39) $     0.11  $    (0.50) $     0.01

Total (loss) earnings per
 share:
  Basic                   $    (0.39) $     0.07  $    (0.13) $     0.21
  Diluted                 $    (0.38) $     0.07  $    (0.13) $     0.21

Weighted-average shares
 outstanding:
  Basic                       30,375      34,489      31,697      34,693
  Diluted                     30,596      34,871      32,012      35,144

Dividends per share       $    0.055  $    0.055  $    0.165  $    0.165


Notes: The Condensed Consolidated Statements of Operations for the prior
periods have been reclassified to reflect the results of the following
business units as discontinued operations: DecisionQuest Discovery Services
(which was sold in January 2006), DecisionQuest (which was sold in
September 2006) and JFS (which is held for sale).

The Company has recorded an immaterial adjustment to its operating results
for the three and six months ended June 30, 2006 to reflect an increase of
$529 for restructuring charges, integration costs and asset impairment
charges.  The effect of this adjustment is an after-tax decrease of $269 in
income from continuing operations and net income for the three and six
months ended June 30, 2006.

As restated: As previously disclosed in the Company's 2005 Form 10-K, the
results for the quarter and year-to-date ended September 30, 2005 have been
restated to correct errors in accounting for income taxes.

(1) Included in 2006 are charges related to the integration of the
Marketing and Business Communications division of Vestcom International
into MBC, totalling $1.8 million for the quarter and $8.8 million
year-to-date.



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

                                                 Sept. 30,       Dec. 31,
                                                   2006           2005
(in thousands)                                -------------- --------------
                                                (unaudited)
Assets
Cash and cash equivalents                     $       44,121 $       96,684
Marketable securities                                 44,335         90,675
Accounts receivable, net                             147,759        120,450
Inventories                                           27,910         25,957
Prepaid expenses and other current assets             35,485         28,414
Assets held for sale (1)                               2,904          7,815
                                              -------------- --------------
      Total current assets                           302,514        369,995
                                              -------------- --------------

Property, plant and equipment, net                   133,113        106,908
Goodwill and other intangibles, net                   42,397         24,550
Other assets                                          39,526         28,238
Assets held for sale, non current (1)                      -         33,557
                                              -------------- --------------
      Total assets                            $      517,550 $      563,248
                                              ============== ==============

Liabilities and Stockholders' Equity
Current portion of long-term debt and
 short-term borrowings                        $          806 $          252
Accounts payable and accrued liabilities             122,096        135,431
Liabilities held for sale (1)                            639          3,417
                                              -------------- --------------
      Total current liabilities                      123,541        139,100
                                              -------------- --------------

Long-term debt                                        76,810         75,528
Deferred employee compensation                        31,174         33,935
Deferred rent and other                               21,412          2,259
Liabilities held for sale, non current (1)                 -            653
Stockholders' equity                                 264,613        311,773
                                              -------------- --------------
    Total liabilities and stockholders'
     equity                                   $      517,550 $      563,248
                                              ============== ==============

(1) Includes the assets and liabilities of JFS in September 2006 and
December 2005 and the assets and liabilities of DecisionQuest Discovery
Services and DecisionQuest in December 2005.



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

                                              Nine Months Ended Sept. 30,
                                              ----------------------------
(in thousands)                                    2006           2005
                                              -------------  -------------
                                                             (as restated)
Cash flows from operating activities:
 Net (loss) income                            $      (4,002) $       7,304
 Net loss (income) from discontinued
  operations                                         15,939           (334)
 Depreciation and amortization                       19,207         18,539
 Purchased in-process research and
  development                                           958              -
 Asset impairment charges                             2,501          2,623
 Changes in assets and liabilities, net of
  acquisitions, discontinued operations and
  certain non-cash transactions                     (43,360)       (41,653)
 Net cash (used in) provided by operating
  activities of discontinued operations              (6,373)         3,102
                                              -------------  -------------
Net cash used in operating activities               (15,130)       (10,419)
                                              -------------  -------------

Cash flows from investing activities:
 Proceeds from the sale of subsidiaries               6,364        108,910
 Purchase of property, plant and equipment          (22,098)       (14,246)
 Purchase of marketable securities                  (50,600)       (98,010)
 Proceeds from the sale of marketable
  securities and other                               97,339         51,520
 Acquisitions, net of cash acquired                 (32,908)             -
 Net cash provided by (used in) investing
  activities of discontinued operations              12,269         (3,127)
                                              -------------  -------------
Net cash provided by investing activities            10,366         45,047
                                              -------------  -------------

Cash flows from financing activities:
 Payment of debt                                       (634)       (34,000)
 Proceeds from borrowings                                 -         34,000
 Proceeds from stock options exercised               11,194          7,455
 Payment of dividends                                (5,085)        (5,611)
 Purchase of treasury stock                         (53,342)       (18,122)
 Other                                                   13              -
 Net cash used in financing activities of
  discontinued operations                              (100)        (1,223)
                                              -------------  -------------
Net cash used in financing activities               (47,954)       (17,501)
                                              -------------  -------------

Net (decrease) increase in cash and cash
 equivalents                                  $     (52,718) $      17,127
Cash and Cash Equivalents - beginning of period      96,839         61,222
                                              -------------  -------------
Cash and Cash Equivalents - end of period     $      44,121  $      78,349
                                              =============  =============

Cash and cash equivalents at the beginning of 2006 and 2005 includes $155
and $9,918, respectively, related to discontinued operations.



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


Beginning with the reporting of financial results for the fourth quarter
and full year 2005, the Company changed the way it reports and evaluates
segment information.  The Company's operations are now classified into
the reportable business segments of Financial Print and Marketing &
Business Communications.  The Company had previously reported Marketing
& Business Communications (formerly Bowne Enterprise Solutions) within its
Financial Print segment. In addition, the results from the Company's
Litigations Solutions business are not presented below since these
results are presented as discontinued operations. The Company's
previous years' segment information has been restated to conform to
the new 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 (loss) from continuing operations before income
taxes. The Corporate/Other category includes (i) corporate expenses
for shared administrative, legal, finance and other support services
which are not directly attributable to the operating segments, (ii)
restructuring, integration and asset impairment charges, (iii) other
expenses and other income and (iv) purchased in-process research
and development.


                                      For Periods Ended September 30,
                                ------------------------------------------
(in thousands)                        Quarter             Year-to-Date
                                --------------------  --------------------
                                  2006       2005       2006       2005
                                ---------  ---------  ---------  ---------
Revenues:
Financial Print                 $ 148,043  $ 143,202  $ 544,438  $ 478,388
Marketing & Business
 Communications                    27,067      9,135     96,717     31,501
                                ---------  ---------  ---------  ---------
                                $ 175,110  $ 152,337  $ 641,155  $ 509,889
                                =========  =========  =========  =========
Segment profit:
Financial Print                    15,327     12,278     77,216     64,818
Marketing & Business
 Communications                    (2,294)    (2,737)    (2,636)    (5,626)
Corporate/Other (see detail
 below)                            (6,539)    (6,099)   (28,203)   (18,890)
                                ---------  ---------  ---------  ---------
                                    6,494      3,442     46,377     40,302
                                ---------  ---------  ---------  ---------
Depreciation                       (5,628)    (5,746)   (18,797)   (18,539)
Amortization                         (139)         -       (410)         -
Interest expense                   (1,336)    (1,198)    (4,081)    (3,788)
                                ---------  ---------  ---------  ---------
(Loss) income from continuing
 operations before income taxes $    (609) $  (3,502) $  23,089  $  17,975
                                =========  =========  =========  =========

Corporate/Other (by type):
Shared corporate expenses (1)   $  (5,139) $  (4,328) $ (17,611) $ (14,603)
Other income (expense), net(2)        464       (178)     2,469        463
Restructuring charges,
 integration costs and asset
 impairment charges                (1,907)    (1,593)   (12,103)    (4,750)
Purchased in-process research
 and development                       43          -       (958)         -
                                ---------  ---------  ---------  ---------
   Total                        $  (6,539) $  (6,099) $ (28,203) $ (18,890)
                                =========  =========  =========  =========

(1) Shared corporate expenses increased $811 in the third quarter of 2006
compared to 2005 due primarily to increased facilities expenses and
stock-based compensation expenses.  Shared corporate expenses increased
$3,008 for the year-to-date 2006 period compared to 2005 due primarily to
increased professional fees, facilities expenses and stock-based
compensation expenses.

(2) Reflects higher income of $642 and $2,006 for the quarter and
year-to-date periods ended September 30, 2006 compared to the same periods
in 2005, primarily due to increased interest income earned and the
favorable impact of foreign currency translation adjustments.


                             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 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)     2006         2005         2006         2005
                        -----------  -----------  ------------ ------------
                                     (as restated)            (as restated)

Net income (loss) from
 continuing operations  $       296  $    (1,358) $     11,937 $      6,970
Add back:
Restructuring,
 integration and asset
 impairment charges,
 net of pro forma tax
 effect (1)                   1,163        1,084         7,381        3,060
Purchased in-process
 research and
 development, net of
 pro forma tax effect(2)        (27)           -           584            -
                        -----------  -----------  ------------ ------------
Income (loss) from
 continuing operations,
 pro forma              $     1,432  $      (274) $     19,902 $     10,030
                        ===========  ===========  ============ ============

Earnings (loss) per
 share from continuing
 operations:
     Basic              $      0.01  $     (0.04) $       0.38 $       0.20
     Diluted            $      0.01  $     (0.04) $       0.37 $       0.20
Earnings (loss) per
 share from continuing
 operations--pro forma:
     Basic              $      0.05  $     (0.01) $       0.63 $       0.29
     Diluted            $      0.05  $     (0.01) $       0.60 $       0.29
Weighted-average shares
 outstanding:
     Basic                   30,375       34,489        31,697       34,693
     Diluted                 30,596       34,871        32,012       35,144
     Diluted--pro forma(3)   30,596       34,871        36,071       35,144

(1) 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.  In 2005, the
restructuring, integration and asset impairment charges of $1.6 million for
the quarter and $4.7 million year-to-date, are net of tax benefits of $0.5
million and $1.7 million, respectively.

(2) In 2006, year-to-date 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.

(3) The 2006 year-to-date weighted-average diluted shares outstanding
includes the potential dilution from the Convertible Subordinated Debt of
4,058,445 shares. In addition, net income used in the calculation of pro
forma earnings (loss) from continuing operations has been adjusted to
reflect the addition of interest expense, net of tax, related to the
Convertible Debt.  The potential dilution of the convertible shares is not
reflected in the other periods since the effect would be anti-dilutive.

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