SOURCE: Bowne & Co., Inc.

March 12, 2008 17:45 ET

Bowne & Co. Reports Outstanding 2007 Results

Earnings per Share From Continuing Operations of $0.90 vs. $0.39 in 2006

NEW YORK, NY--(Marketwire - March 12, 2008) - Bowne & Co., Inc. (NYSE: BNE), a global leader in shareholder and marketing communications services, today announced strong operating results for 2007.

For the year ended December 31, 2007, revenue was $850.6 million, up $16.9 million from $833.7 million in 2006. Gross margin improved to 37.5% from 34.8% and segment profit increased 29.7%, or $16.2 million, to $70.6 million in 2007 compared to 2006. Income from continuing operations increased to $27.3 million from $12.2 million in 2006, with resulting diluted earnings per share increasing to $0.90 from $0.39 in 2006.

For the fourth quarter, revenue increased to $194.7 million from $191.4 million. Gross margin improved to 38.0% from 34.7% and segment profit increased 45.4%, or $3.6 million to $11.4 million in 2007 from $7.9 million in 2006. Diluted earnings per share from continuing operations remained constant at $0.01 for both 2007 and 2006.

Full year 2007 pro forma earnings from continuing operations of $31.7 million increased 41.1%, or $9.2 million, from 2006, resulting in diluted earnings per share of $1.03 compared to $0.70 in 2006. Fourth quarter pro forma diluted earnings per share from continuing operations were $0.08 in 2007 versus $0.06 in 2006. (See page 9, Pro Forma Supplemental Income Information for a reconciliation of these non-GAAP financial measures to our Condensed Consolidated Statements of Operations.)

David J. Shea, Chairman and Chief Executive Officer, said, "2007 was a year of strong operating performance and we effectively positioned the Company for future growth. Since 2006, we have successfully implemented our strategic vision by introducing new products and services, completing several strategic acquisitions and continuing to grow our non-transactional revenue. During this two-year period of growth, we have also streamlined and automated many processes thereby improving efficiencies while reducing costs."

William P. Penders, President of Bowne, said, "Client demand for more of our services increasingly overlaps; the technology serving them and the marketing and channel requirements for reaching them are virtually identical. Last year, we announced several significant changes to our organizational structure and manufacturing capabilities to consolidate our operations into a unified model that supports our ability to market and deliver our full range of services."

Financial Communications: For the 2007 full year, revenue increased $23.2 million, or 3.3% to $729.1 million, segment profit of $120.3 million increased 17.5%, or $17.9 million, and segment profit margin increased to 16.5% from 14.5% in 2006. Transactional revenue increased 2% to $304.4 million -- the highest level since 2000; non-transactional revenue grew $17.1 million or 4.2%.

Financial Communications reported 2007 fourth quarter revenue of $160.2 million, consistent with 2006. Transactional revenue of $86.8 million -- the strongest fourth quarter since 2000 -- increased $1.5 million from the 2006 fourth quarter. Non-transactional revenue decreased $1.6 million from the fourth quarter of 2006, primarily the result of work lost due to mergers. Segment profit for the quarter increased to $22.8 million from $17.7 million in 2006, with segment profit margin increasing to 14.2% from 11.0% in 2006.

Gross profit increased $28.2 million and $7.6 million for the year and fourth quarter periods ended December 31, 2007, respectively, from the comparable 2006 periods. As a percentage of sales, gross margin increased to 38.6% and 39.7% for the year and fourth quarter periods ended December 31, 2007, respectively, from 35.9% and 34.9% for the comparable 2006 periods.

Marketing & Business Communications (MBC): MBC reported revenue of $121.5 and $34.5 million for the 2007 full year and fourth quarter, respectively. Both periods include revenue of $4.8 million from the November 2007 acquisition of Alliance Data Mail Services (ADMS). The 2006 year-to-date results include approximately $11.6 million of non-recurring revenue including revenue related to the initial rollout of the Medicare Part D open enrollment program and revenue from Vestcom's retail customers that transferred back to Vestcom as part of our transitions services agreement.

The gross margin percentage for the years ended December 31, 2007 and 2006 were 15.2% and 14.5%, respectively, due to improved operating efficiencies and the reduction of costs as a result of the consolidation of production facilities.

For the 2007 full-year, segment profit of $200,000 improved from a loss of $600,000 in 2006, with a fourth quarter segment loss of $100,000 compared to a profit of $700,000 in the comparable 2006 quarter. Both the 2007 fourth quarter and year-to-date periods include a loss of $800,000 related to the operations of ADMS since its acquisition in November 2007. Management expects ADMS to make a positive contribution to segment profit in 2008 as a result of approximately $10.0 million of annualized synergies from the consolidation of manufacturing facilities and back office operations.

Balance Sheet and Cash Flow: For the year ended December 31, 2007, cash and marketable securities increased $18.1 million from December 31, 2006. The Company had net cash provided by operating activities of $98.4 million for the year ending December 31, 2007 as compared to $3.6 million for the year ending December 31, 2006. This $95 million increase was primarily driven by the improvement in operating results and by the reduction in accounts receivable resulting from higher collections of receivables during 2007 and as a result of improved billing and collection efforts.

Accounts receivable decreased approximately $18.7 million from December 2006 principally due to lower days sales outstanding. Days sales outstanding improved 10 days to 62 days in December 2007 from 72 days in December 2006. Financial Communications work-in-process inventory was $15.5 million at December 31, 2007 compared to $18.7 million at December 31, 2006. The Company had no borrowings outstanding under its $150 million five-year senior, unsecured revolving credit facility as of December 31, 2007.

Share Repurchase Program: The share repurchase authorization was completed in 2007. From December 2004, the inception of the Company's share repurchase program, through December 31, 2007, Bowne spent $196.3 million to repurchase 12.9 million shares. In 2007, the Company spent $51.7 million repurchasing 3.1 million shares at an average price per share of $16.52, of which approximately 700,000 shares were purchased in the fourth quarter. Total shares outstanding as of February 29, 2008 were 26,307,627.

About Bowne & Co., Inc.

Bowne & Co., Inc. (NYSE: BNE) provides shareholder and marketing 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 3,400 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.

Business Outlook

The Company notes that forward-looking statements of future performance in the following statements and certain statements made elsewhere 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, and excludes the impact from future share purchases, if any. Except for the impact of ten months of results from the acquisition of GCom2 Solutions Inc., which was completed on February 29, 2008, the Outlook does not reflect any additional acquisitions.

(in millions, except share amounts)       2007 Actual     2008 Outlook (1)
                                        ----------------  ----------------
Revenue:                                     $850.6        $845 to $920
  Transactional                              $304.4        $245 to $275
  Non-transactional                          $546.2        $600 to $645
Segment Profit (2)                            $70.6         $70 to $100
Integration, restructuring and
 impairment charges                           $17.0          $7 to $10
Depreciation and amortization                 $28.8         $29 to $31
Interest expense                               $5.4          $6 to $6.5 (3)
Diluted E.P.S. from continuing
 operations                                    $0.90 (4)  $0.70 to $1.25
Diluted E.P.S. from continuing
 operations-pro forma (5)                      $1.03      $0.88 to $1.43
Diluted shares (6)                             33.0            32.4
Capital expenditures                          $20.8 (7)     $19 to $21

(1)  Includes the full-year estimated results of the November 2007
     acquisition of Alliance Data Mail Services and ten months of results
     from the acquisition of GCom2 Solutions Inc., which was completed on
     February 29, 2008.
(2)  2007 and 2008 includes integration, restructuring and asset impairment
     charges and non-cash stock compensation expense under LTEIP. 2007 also
     includes the $9.2 million gain on sale of equity investment, and the
     $1.7 million curtailment gain on a Canadian post retirement plan.
(3)  Assumes that the Convertible Subordinated Debt ($75 million) which has
     a put/call date of October 1, 2008, will remain in place for all of
     2008, or if put by the Note Holders, will be replaced with a similar
     facility.
(4)  Includes the benefits from the gain on sale of equity investment, the
     Canadian post retirement benefit plan curtailment gain, and the tax
     benefit associated with tax refunds and related reduction of tax
     liability.
(5)  Pro forma has been adjusted to exclude the charges and benefits
     detailed in Note 2 above and, in 2007 a $6.3 million tax benefit
     related to the settlement of audits for our 2001-2004 federal income
     tax returns.
(6)  Includes the impact of the potential dilution from the Convertible
     Subordinated Debt (4,058,445 shares). At February 29, 2008, 26.3
     million shares were outstanding. In addition, another 2.0 million
     shares from the potential dilutive effect of stock options and
     deferred stock units is assumed. Net income used in the calculation of
     diluted earnings per share has been adjusted to reflect the addition
     of $2.3 million of interest expense, net of tax, related to the
     Convertible Debt.
(7)  Includes non-recurring capital expenditures of approximately $4.4
     million.

Bowne & Co., Inc. will hold its earnings conference call to review its 2007 results on Thursday, March 13, 2008, 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 (877) 407-0778 (domestic) or (201) 689-8565 (international), conference ID # 277222.

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


                                    For the Periods Ended December 31,
                                ------------------------------------------
(in thousands, except per share        Quarter            Year-to-Date
 information)                   --------------------  --------------------
                                   2007       2006       2007       2006
                                ---------  ---------  ---------  ---------

Revenue                         $ 194,719  $ 191,362  $ 850,617  $ 833,734
Expenses:
  Cost of revenue                (120,819)  (125,035)  (531,230)  (543,502)
  Selling and administrative(1)   (67,708)   (57,353)  (242,118)  (224,011)
  Depreciation                     (7,216)    (6,585)   (27,205)   (25,397)
  Amortization                       (434)      (124)    (1,638)      (534)
  Restructuring, integration and
   asset impairment charges(2)     (4,847)    (1,994)   (17,001)   (14,159)
  Purchased in-process research
   and development                      -          -          -       (958)
                                ---------  ---------  ---------  ---------
                                 (201,024)  (191,091)  (819,192)  (808,561)
                                ---------  ---------  ---------  ---------
Operating (loss) income            (6,305)       271     31,425     25,173
 Interest expense                  (1,390)    (1,397)    (5,433)    (5,477)
 Gain on sale of equity
  investment                        9,210          -      9,210          -
 Other income, net                    863        871      1,127      3,340
                                ---------  ---------  ---------  ---------
Income (loss) from continuing
 operations before income taxes     2,378       (255)    36,329     23,036
Income tax (expense) benefit(3)    (2,016)       430     (9,002)   (10,800)
                                ---------  ---------  ---------  ---------
Income from continuing
 operations                           362        175     27,327     12,236
Net (loss) income from
 discontinued operations             (438)     2,059       (223)   (14,004)
                                ---------  ---------  ---------  ---------
Net (loss) income               $     (76) $   2,234  $  27,104  $  (1,768)
                                =========  =========  =========  =========

Earnings per share from
 continuing operations:
   Basic                        $    0.01  $    0.01  $    0.97  $    0.39
   Diluted                      $    0.01  $    0.01  $    0.90  $    0.39
(Loss) earnings per share from
 discontinued operations:
   Basic                        $   (0.01) $    0.07  $   (0.01) $   (0.45)
   Diluted                      $   (0.01) $    0.06  $   (0.01) $   (0.45)
Total earnings (loss) per
 share:
   Basic                        $    0.00  $    0.08  $    0.96  $   (0.06)
   Diluted                      $    0.00  $    0.07  $    0.89  $   (0.06)
Weighted-average shares
 outstanding:
   Basic                           27,166     29,487     28,161     31,143
   Diluted(4)                      28,050     29,954     33,041     31,451

Dividends per share             $   0.055  $   0.055  $    0.22  $    0.22


(1)  2007 includes the impact of non-cash stock compensation expenses
     related to the Company's LTEIP of $8.9 million and $11.2 million for
     the quarter and year-to-date, respectively as compared to $0.7 million
     and $1.5 million in the comparable 2006 periods.

(2)  2007 quarter includes $3.0 million for asset impairment charges and
     $0.8 million for facility consolidation. 2007 year-to-date includes
     $1.5 million for the integration of the January 2007 acquisition of St
     Ives Financial, $9.2 million for the consolidation of leased space and
     manufacturing facilities, and $3.1 million for staff and facility
     reductions. 2006 includes charges of $1.3 million for the quarter and
     $10.1 million year-to-date for the integration of the Marketing &
     Business Communications division of Vestcom International.

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

(4)  Includes the potential dilution from the Convertible Subordinated Debt
     of 4,058,445 shares for the year ended December 31, 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 since the effect would be
     anti-dilutive.




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


                                              Dec. 31,        Dec. 31,
(in thousands)                                  2007            2006
                                                ----            ----

Assets
Cash and cash equivalents                     $  64,941       $  42,986
Marketable securities                            38,805          42,628
Accounts receivable, net                        134,489         153,169
Inventories                                      28,789          25,591
Prepaid expenses and other current assets        43,198          33,917
                                              ---------       ---------
            Total current assets                310,222         298,291
                                              ---------       ---------

Property, plant and equipment, net              121,848         132,784
Goodwill and other intangibles, net              45,451          37,625
Other assets                                     31,896          47,543
                                              ---------       ---------
                Total assets                  $ 509,417       $ 516,243
                                              =========       =========

Liabilities and Stockholders' Equity
Current portion of long-term debt
 and short-term borrowings                    $  75,923 (1)   $   1,017
Accounts payable and accrued liabilities        125,350         127,510
                                              ---------       ---------
            Total current liabilities           201,273         128,527
                                              ---------       ---------

Long-term debt                                    1,835          76,492 (1)
(1)
Deferred employee compensation                   36,808          52,509
Deferred rent and other                          19,022          23,480
Stockholders' equity                            250,479         235,235
                                              ---------       ---------
      Total liabilities and
       stockholders' equity                   $ 509,417       $ 516,243
                                              =========       =========

(1)  As a result of the redemption/repurchase features of the Company's
     $75 million Convertible Subordinated Debentures in October 2008, this
     debt is classified as current debt as of December 31, 2007, compared
     to a long-term debt classification as of December 31, 2006.





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


                                                  Years Ended December 31,
                                                  ------------------------
(in thousands)                                        2007         2006
                                                  -----------  -----------

Cash flows from operating activities:
  Net income (loss)                               $    27,104  $    (1,768)
  Net loss from discontinued operations                   223       14,004
  Depreciation and amortization                        28,843       25,931
  Purchased in-process research and development             -          958
  Asset impairment charges                              6,588        2,550
  Changes in assets and liabilities, net of
   acquisitions, discontinued operations and
   certain non-cash transactions                       39,716      (35,766)

  Net cash used in operating activities of
   discontinued operations                             (4,075)      (2,335)
                                                  -----------  -----------
Net cash provided by operating activities              98,399        3,574
                                                  -----------  -----------

Cash flows from investing activities:
  Purchase of property, plant and equipment           (20,756)     (28,668)
  Purchase of marketable securities                   (57,400)     (61,100)
  Proceeds from the sale of marketable securities
   and other                                           61,200      109,314
  Proceeds from the sale of fixed assets                  222          248
  Proceeds from the sale of subsidiaries                    -        6,738
  Acquisition of businesses, net of cash acquired     (25,791)     (32,923)
  Proceeds from sale of equity investment              10,817            -

  Net cash provided by investing activities of
   discontinued operations                              1,484       12,519
                                                  -----------  -----------
Net cash (used in) provided by investing
 activities                                           (30,224)       6,128
                                                  -----------  -----------

Cash flows from financing activities:
  Net payments of debt and capital lease
   obligations                                           (948)        (821)
  Proceeds from stock options exercised                11,714       12,533
  Payment of dividends                                 (6,083)      (6,680)
  Purchase of treasury stock                          (51,749)     (68,558)
  Other                                                   846           71

  Net cash used in financing activities of
   discontinued operations                                  -         (100)

Net cash used in financing activities                 (46,220)     (63,555)
                                                  -----------  -----------
Net increase (decrease) in cash and cash
 equivalents                                      $    21,955  $   (53,853)

Cash and Cash Equivalents--beginning of period         42,986       96,839
                                                  -----------  -----------

Cash and Cash Equivalents--end of period          $    64,941  $    42,986
                                                  ===========  ===========





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

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.
Segment profit is measured because management believes that such
information is useful in evaluating the results of certain segments
relative to other entities that operate within these industries and to its
affiliated segments. Therefore, this information is presented in order to
reconcile to income 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) stock-based
compensation and supplemental retirement plan expenses which are not
directly attributable to the segments (iii) restructuring, integration and
asset impairment charges, (iv) gains (losses), and other (expenses) income
and (v) purchased in-process research and development.


                                      For The Periods Ended Dec. 30,
                                ------------------------------------------
(in thousands)                        Quarter             Year-to-Date
                                --------------------  --------------------
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
Revenues:
Financial Communications        $ 160,185  $ 160,286  $ 729,125  $ 705,941
Marketing & Business
 Communications (1)                34,534     31,076    121,492    127,793
                                ---------  ---------  ---------  ---------
                                $ 194,719  $ 191,362  $ 850,617  $ 833,734
                                =========  =========  =========  =========
Segment Profit/(Loss):
Financial Communications        $  22,752  $  17,688  $ 120,296  $ 102,401
Marketing & Business
 Communications (1)                   (58)       749        190       (640)
Corporate/Other (see detail
 below)                           (11,276)   (10,586)   (49,881)   (47,317)
                                ---------  ---------  ---------  ---------
                                   11,418      7,851     70,605     54,444
                                ---------  ---------  ---------  ---------
Depreciation                       (7,216)    (6,585)   (27,205)   (25,397)
Amortization                         (434)      (124)    (1,638)      (534)
Interest expense                   (1,390)    (1,397)    (5,433)    (5,477)
                                ---------  ---------  ---------  ---------
Income(loss) from continuing
 operations before income taxes $   2,378  $    (255) $  36,329  $  23,036
                                =========  =========  =========  =========

Corporate/Other (by type):
Shared corporate expenses       $  (7,611) $  (8,782) $ (31,979) $ (34,079)
Non-cash stock compensation -
 LTEIP expense                     (8,891)      (681)   (11,238)    (1,461)
Other (expense) income, net           863        871      1,127      3,340
Gain on sale of equity
 investment                         9,210          -      9,210          -
Restructuring charges,
 integration costs and asset
 impairment charges                (4,847)    (1,994)   (17,001)   (14,159)
Purchased in-process research
 and development                        -          -          -       (958)
                                ---------  ---------  ---------  ---------
        Total                   $ (11,276) $ (10,586) $ (49,881) $ (47,317)
                                =========  =========  =========  =========

(1) 2007 quarter and year-to-date includes revenue of $4.8 million and a
    segment loss of $0.8 million from the November 2007 acquisition of
    Alliance Data Mail Services.





                           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, gain on sale of
equity investment, tax benefits associated with tax refunds, purchased
in-process research and development and non-cash stock compensation LTEIP
expense. The Company believes that the 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 December 31,
                                    --------------------------------------
                                          Quarter          Year-to-Date
                                    ------------------  ------------------
(in thousands, except per share
 information)                         2007      2006      2007      2006
                                    --------  --------- --------  ---------

Net income from continuing
 operations                         $    362  $     175 $ 27,327  $  12,236
Add back: (net of pro forma tax
 effect)
Restructuring, integration and
 asset impairment charges(1)           2,995      1,282   10,476      8,701
Gain on sale of equity investment(2)  (5,664)         -   (5,664)         -
Tax benefit associated with tax
 refunds received and related
 reduction of tax liability(3)             -          -   (6,328)         -
Purchased in-process research and
 development                               -          -        -        611
Benefit plan curtailment gain(4)      (1,049)         -   (1,049)         -
Non-cash stock compensation-LTEIP
 expense(5)                            5,467        419    6,911        899
                                    --------  --------- --------  ---------
Income from continuing operations,
 pro forma                          $  2,111  $   1,876 $ 31,673  $  22,447
                                    ========  ========= ========  =========
Earnings per share from continuing
 operations:
     Basic                          $   0.01  $    0.01 $   0.97  $    0.39
     Diluted                        $   0.01  $    0.01 $   0.90  $    0.39
Earnings per share from continuing
 operations--pro forma:
     Basic                          $   0.08  $    0.06 $   1.12  $    0.72
     Diluted                        $   0.08  $    0.06 $   1.03  $    0.70
Weighted-average shares
 outstanding:
     Basic                            27,166     29,487   28,161     31,143
     Diluted(6)                       28,050     29,954   33,041     35,509

(1)  2007 includes charges of $4.8 million for the quarter and $17.0
     million year-to-date, respectively. 2006 includes charges of $2.0
     million for the quarter and $14.2 million year-to-date, respectively.
(2)  Reflects the $9.2 million gain from the sale of the Company's share of
     an equity investment.
(3)  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.
(4)  Reflects a $1.7 million gain in the 2007 fourth quarter related to the
     curtailment of a Canadian post retirement benefit plan.
(5)  In 2007, the Company achieved the maximum performance targets under
     the Long-term Equity Incentive Program (LTEIP) which resulted in
     additional non-cash stock compensation expense. LTEIP expenses for the
     2007 fourth quarter and year-to-date were $8.9 and $11.2 million,
     respectively, compared to $0.7 and $1.5 million in the comparable 2006
     periods.
(6)  The weighted-average diluted shares outstanding used to calculate the
     pro forma EPS for the years ended December 31, 2007 and 2006 include
     the potential dilution from the Convertible Subordinated Debt of
     4,058,445 shares. 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. The
     diluted share count for the quarterly periods does not include the
     potential dilution from the Convertible Debt shares since the effect
     would be anti-dilutive.

Contact Information

  • Investor Relations Contact:
    William J. Coote
    VP & Treasurer
    212-658-5858
    bill.coote@bowne.com

    Media Contact:
    Pamela Blum
    Manager, Corporate Communications
    212-658-5884
    pamela.blum@bowne.com

    Bowne & Co., Inc.
    55 Water Street
    New York, NY 10041
    (212) 924-5500
    Fax: (212) 658-5871