SOURCE: Bowne & Co., Inc.

Bowne & Co., Inc.

August 04, 2009 16:05 ET

Bowne & Co. Reports Second Quarter 2009 Results

Generates Segment Profit of $19 Million, Segment Profit Margin Improves for Third Consecutive Quarter

NEW YORK, NY--(Marketwire - August 4, 2009) - Bowne & Co., Inc. (NYSE: BNE), a global leader in shareholder and marketing communications services, today announced second quarter and year-to-date operating results.

Revenue was $189 million in the second quarter of 2009 compared to $237 million in the second quarter of 2008, a decline of $48 million, or 20%. In the second quarter of 2009, the Company generated gross profit of $61.2 million, with a 32.4% gross margin contribution, compared to $86.9 million and a 36.7% gross margin contribution in the prior year period. Segment profit and segment profit margin were $18.8 million and 10%, respectively, in the second quarter of 2009, compared to $30.1 million and 12.7%, respectively, in the second quarter of 2008. Loss from continuing operations was ($3.7) million, or ($0.13) per diluted share, compared to income of $1.6 million, or $0.05 per diluted share, in the second quarter of 2008.

For the six months ended June 30, 2009, revenue was $358.1 million, down 20% from $445.8 million reported for the first six months of 2008. In the first half of 2009, the Company generated gross profit of $120.3 million, with a 33.6% gross margin contribution, compared to $157.5 million and a 35.3% gross margin contribution in the comparable prior year period. Segment profit and segment profit margin were $31.8 million and 8.9%, respectively, in the first half of 2009 compared to $42.8 million and 9.6% in the first half of 2008. Loss from continuing operations was ($5.6) million, or ($0.20) per diluted share for the six months ended June 30, 2009, compared to income of $2.9 million, or $0.10 per diluted share, in the first half of 2008.

Pro forma income from continuing operations totaled $2.4 million in the second quarter of 2009 and $4.5 million for the 2009 year-to-date period, compared to $12.3 million and $15.3 million, respectively, in the comparable prior year periods. This resulted in diluted earnings per share of $0.09 in the second quarter of 2009 and $0.16 for the 2009 year-to-date period, compared to $0.41 and $0.53, respectively, in the comparable 2008 periods. (See Pro Forma Supplemental Income Information, for a reconciliation between the non-GAAP financial measures and the Company's Condensed Consolidated Statements of Operations.)

"We are pleased that we achieved $32 million in segment profit during the first half of the year despite challenging economic conditions," said David J. Shea, Chairman and Chief Executive Officer. "We have been proactive in implementing a number of cost saving measures, have substantially completed the integration of our recent acquisitions and have introduced new technology solutions for our clients -- all of which will continue to benefit us on an ongoing basis. We are encouraged by increased momentum in the capital markets, and remain cautiously optimistic that activity will be stronger in the latter part of this year, particularly in the U.S. and Asia."

Additional comments on the operating results in the second quarter and first half of 2009 are provided below.

Revenue:

Capital markets services revenue was $32.7 million in the second quarter of 2009, which is $33.3 million, or 51%, lower than the comparable 2008 period. For the first half of 2009, capital markets services revenue was $58.2 million, which is $58.1 million, or 50%, lower than the first half of 2008. This decrease is directly related to the declines in overall IPO and M&A activity, which were particularly pronounced in the international markets. Included in capital market services revenue is Bowne Virtual Dataroom™ (VDR) revenue, which was $3.1 million and $6 million for the second quarter and year-to-date periods in 2009, compared to $3.6 million and $6.6 million in 2008.

Shareholder reporting services revenue, which includes compliance reporting, investment management services and translations services revenue, was $118.4 million and $212.6 million for the second quarter of 2009 and year-to-date periods, a decline of 3% and 7%, respectively, compared to the comparable 2008 periods. For the second quarter of 2009 and year-to-date periods, compliance reporting revenue decreased approximately 4% and 9%. Investment management services revenue increased slightly during the second quarter and decreased 2% during the first half of 2009. The decrease in revenue from shareholder reporting services is primarily the result of a decrease in the number of public filers due to bankruptcies and consolidations, partially offset by the addition of new clients and increased services to certain existing clients in 2009.

Marketing and business communications services revenue decreased $6.3 million, or 16%, to $32.8 million during the second quarter of 2009, and decreased $8 million, or 10%, to $74.5 million during the first half of 2009. The decline is primarily due to the loss of certain accounts from acquired businesses. The loss of these accounts did not have a significant impact on the Company's operating results since these clients generally had low margins or were break even. Also contributing to the decrease in revenue were lower activity levels and volumes from existing clients as companies reduced their marketing spending in the current economic downturn, as well as declines in client enrollment activities for health care and financial products, such as 401(k) enrollments.

Segment Profit: The Company generated segment profit of $18.8 million in the second quarter and $31.8 million year-to-date, compared to $30.1 million and $42.8 million in the comparable prior year periods, a decline of 38% and 26%, respectively. The Company's segment profit margin as reported in the quarter and year-to-date periods was 10% and 8.9%, respectively. Segment profit margin improved from 7.7% in the first quarter of 2009 to 10% in the second quarter of 2009, which continues a trend of improving segment profit margin for the past three quarters.

Cost Reduction Initiatives: Bowne continues to be proactive in reducing its fixed costs and consolidating operations, which have positioned the Company to respond to changing economic conditions and to compete more effectively.

As previously announced, during the second quarter of 2009, the Company implemented further reductions in its workforce and facilities resulting in approximately $20 million in additional annualized cost savings as part of its continued focus on improving its cost structure and realizing efficiencies. The Company estimates that the cost savings to be achieved in 2009 as a result of the cost savings measures implemented during 2008 and the first half of 2009 are approximately $50 to $60 million.

As a result of the Company's workforce reductions that occurred during the second quarter of 2009, the Company re-measured the funded status of its pension plan and recalculated the benefit obligations as of May 31, 2009. The re-measurement resulted in a $22.5 million reduction to the projected benefit liability, a $9.3 million reduction in deferred income tax assets, and a $13.2 million increase in stockholders' equity. In addition, the Company recognized a curtailment gain of approximately $1.6 million as a result of the workforce reductions during the six months ended June 30, 2009.

Balance Sheet and Cash Flow: During the quarter ended June 30, 2009, cash and marketable securities increased $2 million from December 31, 2008. Net cash used in operating activities was $11.1 million for the six months ended June 30, 2009, compared to $36.5 million for the six months ended June 30, 2008.

Average days sales outstanding was 71 days as of June 30, 2009 compared to 68 days as of June 30, 2008. Work-in-process inventory was $15.6 million at June 30, 2009 compared to $16.8 million at June 30, 2008.

As of June 30, 2009 the Company had $79.4 million outstanding under its $123 million revolving credit facility, $24.2 million of term loans outstanding, and $8.3 million outstanding under the Company's Convertible Subordinated Debentures. The Company was in compliance with its debt covenants as of June 30, 2009.

In July 2009, the Company filed a universal shelf registration statement on Form S-3 with the SEC, which was declared effective on July 31, 2009. The shelf registration statement permits Bowne to offer and sell from time to time, up to $150 million of equity, debt or other types of securities described in the registration statement, or any combination thereof, in one or more future public offerings. The shelf registration statement provides the Company with flexibility to quickly access the capital markets with equity, debt or other types of securities through one or more methods of distribution if its strategy warrants such access.

Business Outlook:

Due to the continued economic downturn, which has resulted in significant declines in IPO and M&A activity, as well as softness in non-transactional areas, including marketing communications and shareholder reporting services, the Company is revising its business outlook as indicated below. The revised outlook is based on Company results during the first six months of 2009, as well as estimates for the remainder of the year.

The Company notes that forward-looking statements of future performance made 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.

                                                 Original       Updated
(in millions)                                  2009 Outlook   2009 Outlook
                                              -------------- --------------
Revenue:
  Transactional                               $ 120 to $ 175 $ 110 to $ 140
  Total                                       $ 700 to $ 770 $ 640 to $ 700
Segment Profit (1)                            $   40 to $ 60 $   35 to $ 55

(1)  Excludes restructuring, integration and asset impairment charges.

Bowne & Co., Inc. will hold its earnings conference call to review its 2009 second quarter results on Wednesday, August 5, 2009, at 8:00 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 #329269.

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 capital markets communications with speed and accuracy. Compliance professionals turn to Bowne to prepare and file regulatory and shareholder communications online and in print. Investment managers and third party fund administrators count on Bowne's integrated solutions to streamline their document processes and produce high quality communications for their shareholders. Marketers look to Bowne to create and distribute customized, one-to-one communications on demand. With 2,800 employees in 50 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)



(in thousands, except per share        For the Periods Ended June 30,
 information)                         Quarter             Year-to-Date
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Revenue                         $ 188,976  $ 237,008  $ 358,081  $ 445,775
Expenses:
  Cost of revenue                (127,756)  (150,098)  (237,826)  (288,261)
  Selling and administrative      (42,392)   (56,800)   (88,477)  (114,762)
  Depreciation                     (7,056)    (7,506)   (14,457)   (14,136)
  Amortization                     (1,367)      (991)    (2,734)    (1,579)
  Restructuring, integration and
   asset impairment charges(1)    (10,379)   (17,479)   (16,964)   (20,034)
                                ---------  ---------  ---------  ---------
                                 (188,950)  (232,874)  (360,458)  (438,772)
                                ---------  ---------  ---------  ---------
Operating income (loss)                26      4,134     (2,377)     7,003
  Interest expense                 (2,485)    (2,621)    (3,352)    (4,904)
  Other (expense) income, net        (899)     1,424       (156)     2,190
                                ---------  ---------  ---------  ---------
(Loss) income from continuing
 operations before income taxes    (3,358)     2,937     (5,885)     4,289
Income tax (expense) benefit         (375)    (1,361)       284     (1,425)
                                ---------  ---------  ---------  ---------
(Loss) income from continuing
 operations                        (3,733)     1,576     (5,601)     2,864
Net loss from discontinued
 operations                           (79)      (285)      (171)      (863)
                                ---------  ---------  ---------  ---------
Net (loss) income               $  (3,812) $   1,291  $  (5,772) $   2,001
                                =========  =========  =========  =========
(Loss) earnings per share from
 continuing operations:
  Basic                         $   (0.13) $    0.06  $   (0.20) $    0.10
  Diluted                       $   (0.13) $    0.05  $   (0.20) $    0.10
(Loss) per share from
 discontinued operations:
  Basic                         $   (0.00) $   (0.01) $   (0.01) $   (0.03)
  Diluted                       $   (0.00) $   (0.01) $   (0.01) $   (0.03)
Total (loss) earnings per
 share:
  Basic                         $   (0.13) $    0.05  $   (0.21) $    0.07
  Diluted                       $   (0.13) $    0.04  $   (0.21) $    0.07
Weighted-average shares
 outstanding:
  Basic                            28,512     28,554     28,302     28,306
  Diluted                          28,512     28,839     28,302     28,760
Dividends per share(2)          $   0.055  $   0.055  $    0.11  $    0.11


(1) 2009 includes charges of approximately $7.0 million for the quarter and
    $12.1 million year-to-date in costs related to workforce reductions and
    facility consolidations, and approximately $1.0 million for the quarter
    and $2.0 million year-to-date related to the integration of acquired
    businesses. 2008 includes charges of approximately $3.8 million for the
    quarter and $4.9 million year-to-date related primarily to the
    integration of the acquisitions of Alliance (November 2007), GCom
    (February 2008) and RSG (April 2008). Also included in the 2008 second
    quarter and year-to-date periods are charges of approximately $13.7
    million and $15.2 million, respectively, related to workforce
    reductions and facility closures.

(2) Dividends for the quarter ended and year-to-date June 30, 2009 were
    paid in shares of Bowne Common Stock.  Dividends for the quarter ended
    and year-to-date June 30, 2008 were paid in cash.



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

                                                     June 30,    Dec. 31,
(in thousands)                                         2009        2008
                                                    ----------- -----------
                                                    (unaudited)
Assets
Cash and cash equivalents                           $    13,480 $    11,524
Marketable securities                                       210         193
Accounts receivable, net                                146,775     116,773
Inventories                                              24,026      27,973
Prepaid expenses and other current assets                39,811      45,990
                                                    ----------- -----------
     Total current assets                               224,302     202,453
                                                    ----------- -----------

Property, plant and equipment, net                      120,375     130,149
Goodwill and other intangibles, net                      89,983      92,195
Other assets                                             55,044      55,952
                                                    ----------- -----------
     Total assets                                   $   489,704 $   480,749
                                                    =========== ===========

Liabilities and Stockholders' Equity
Current portion of long-term debt and capital lease
 obligations                                        $    12,125 $       842
Accounts payable and accrued liabilities                104,052     109,042
                                                    ----------- -----------
     Total current liabilities                          116,177     109,884
                                                    ----------- -----------

Long-term debt                                          100,992      88,352
Deferred employee compensation(1)                        53,040      75,868
Deferred rent and other                                  20,431      20,062
Stockholders' equity                                    199,064     186,583
                                                    ----------- -----------
     Total liabilities and stockholders' equity     $   489,704 $   480,749
                                                    =========== ===========

(1) As a result of the Company's workforce reductions that occurred during
    the second quarter of 2009, the Company remeasured the funded status of
    its pension plan and recalculated the benefit obligations as of
    May 31, 2009. The remeasurement resulted in a $22.5 million reduction
    to the pension liability included in deferred employee compensation,
    a $9.3 million reduction in deferred income tax assets included in
    other assets, and a $13.2 million increase in stockholders' equity.



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

                                                       For the Six Months
                                                         Ended June 30,
                                                      --------------------
(in thousands)                                          2009       2008
                                                      ---------  ---------
Cash flows from operating activities:
  Net (loss) income                                   $  (5,772) $   2,001
  Net loss from discontinued operations                     171        863
  Depreciation and amortization                          17,191     15,715
  Asset impairment charges                                2,128          -
  Changes in assets and liabilities, net of
   acquisitions, discontinued operations and certain
   non-cash transactions                                (24,326)   (53,812)
  Net cash used in operating activities of
   discontinued operations                                 (484)    (1,287)
                                                      ---------  ---------
Net cash used in operating activities                   (11,092)   (36,520)
                                                      ---------  ---------

Cash flows from investing activities:
  Purchases of property, plant and equipment             (5,711)   (10,032)
  Purchase of marketable securities                           -     (5,000)
  Proceeds from the sale of marketable securities and
   other                                                    187     39,838
  Acquisitions of businesses                               (195)   (61,187)
                                                      ---------  ---------
Net cash used in investing activities                    (5,719)   (36,381)
                                                      ---------  ---------

Cash flows from financing activities:
  Proceeds from borrowings under revolving credit
   facility, net of debt issuance costs                  38,442     48,000
  Payment of debt                                       (19,833)         -
  Payment of capital lease obligations                     (417)      (542)
  Proceeds from stock options exercised                       -        732
  Payment of cash dividends                                   -     (2,926)
  Other                                                       -        221
                                                      ---------  ---------
Net cash provided by financing activities                18,192     45,485
                                                      ---------  ---------

Effects of exchange rates on cash flows and cash
 equivalents                                                575         73

Net increase (decrease) in cash and cash equivalents  $   1,956  $ (27,343)
Cash and cash equivalents--beginning of period           11,524     64,941
                                                      ---------  ---------
Cash and cash equivalents--end of period              $  13,480  $  37,598
                                                      =========  =========


                            BOWNE & CO., INC.
                               (NYSE: BNE)
                Supplemental Revenue and Profit Information
                               (unaudited)

The supplemental information presented below presents revenue by class of
service, gross profit and segment profit information, and is reconciled to
(loss) income from continuing operations.  Management uses gross profit
and segment profit to evaluate Company performance. Segment profit is
defined as gross profit (revenue less cost of revenue) less selling and
administrative expenses.  Segment performance is evaluated exclusive of
interest, income taxes, depreciation, amortization, restructuring,
integration and asset impairment charges, and other expenses and other
income. Gross profit and segment profit are measured because management
believes that such information is useful in evaluating the Company's
results relative to other entities that operate within our industry. Our
segment profit is also used as the primary financial measure for purposes
of evaluating financial performance under the Company's annual incentive
plan.  Gross profit and segment profit are alternatives to, and not
replacement measures of, operating performance as determined in accordance
with generally accepted accounting principles.


(in thousands)                        For The Periods Ended June 30,
                                ------------------------------------------
                                      Quarter             Year-to-Date
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

Capital markets services
 revenue:
                                ---------  ---------  ---------  ---------
  Transactional                 $  29,510  $  62,415  $  52,191  $ 109,685
                                ---------  ---------  ---------  ---------
  Virtual data room                 3,149      3,579      6,039      6,623
                                ---------  ---------  ---------  ---------
Total capital markets services
 revenue                           32,659     65,994     58,230    116,308
                                ---------  ---------  ---------  ---------
Shareholder reporting services
 revenue:
                                ---------  ---------  ---------  ---------
  Compliance reporting             63,785     66,529    109,133    119,977
                                ---------  ---------  ---------  ---------
  Investment management            51,176     50,974     96,674     99,040
                                ---------  ---------  ---------  ---------
  Translation services              3,438      5,005      6,825      9,038
                                ---------  ---------  ---------  ---------
Total shareholder reporting
 services revenue                 118,399    122,508    212,632    228,055
                                ---------  ---------  ---------  ---------
Marketing & communications
 services revenue                  32,761     39,039     74,530     82,519
                                ---------  ---------  ---------  ---------
Commercial printing and other
 revenue                            5,157      9,467     12,689     18,893
                                ---------  ---------  ---------  ---------
Total revenue                     188,976    237,008    358,081    445,775
                                ---------  ---------  ---------  ---------
Cost of revenue                  (127,756)  (150,098)  (237,826)  (288,261)
                                ---------  ---------  ---------  ---------
Gross profit                       61,220     86,910    120,255    157,514
                                ---------  ---------  ---------  ---------
Selling and administrative
 expenses                         (42,392)   (56,800)   (88,477)  (114,762)
                                ---------  ---------  ---------  ---------
Segment profit                     18,828     30,110     31,778     42,752

Depreciation                       (7,056)    (7,506)   (14,457)   (14,136)

Amortization                       (1,367)      (991)    (2,734)    (1,579)

Restructuring, integration and
 asset impairment charges         (10,379)   (17,479)   (16,964)   (20,034)
                                ---------  ---------  ---------  ---------
Operating income (loss)                26      4,134     (2,377)     7,003
                                ---------  ---------  ---------  ---------
Interest expense                   (2,485)    (2,621)    (3,352)    (4,904)
                                ---------  ---------  ---------  ---------
Other (expense) income, net          (899)     1,424       (156)     2,190
                                ---------  ---------  ---------  ---------
(Loss) income from continuing
 operations before income taxes    (3,358)     2,937     (5,885)     4,289
                                ---------  ---------  ---------  ---------
Income tax (expense) benefit         (375)    (1,361)       284     (1,425)
                                ---------  ---------  ---------  ---------
(Loss) income from continuing
 operations                     $  (3,733) $   1,576  $  (5,601) $   2,864
                                =========  =========  =========  =========



                         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. 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 June 30,
                                          Quarter          Year-to-Date
                                    ------------------  ------------------
(in thousands, except per share
 information)                         2009      2008      2009      2008
                                    --------  --------- --------  ---------
Net (loss) income from continuing
 operations                         $ (3,733) $   1,576 $ (5,601) $   2,864
Add back: (net of pro forma tax
 effect)
Restructuring, integration and
 asset impairment charges(1)           6,163     10,743   10,122     12,483
                                    --------  --------- --------  ---------
Income from continuing operations,
 pro forma                          $  2,430  $  12,319 $  4,521  $  15,347
                                    ========  ========= ========  =========
Earnings per share from continuing
 operations:
   Basic                            $  (0.13) $    0.06 $  (0.20) $    0.10
   Diluted                          $  (0.13) $    0.05 $  (0.20) $    0.10
Earnings per share from continuing
 operations--pro forma:
   Basic                            $   0.09  $    0.43 $   0.16  $    0.54
   Diluted                          $   0.09  $    0.41 $   0.16  $    0.53
Weighted-average shares
 outstanding:
   Basic                              28,512     28,554   28,302     28,306
   Diluted(2)                         28,547     32,897   28,303     32,818

(1) In 2009, restructuring, integration and asset impairment charges of
    $10.4 million for the quarter and $17.0 million year-to-date are net
    of tax benefits of $4.2 million and $6.9 million, respectively.
    In 2008, restructuring, integration and asset impairment charges of
    $17.5 million for the quarter and $20.0 million year-to-date are net of
    tax benefits of $6.8 million and $7.5 million, respectively.

(2) The weighted-average diluted shares outstanding used to calculate the
    pro forma EPS for the quarter and year-to-date periods ended
    June 30, 2008 includes 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 quarter and
    year-to-date periods ended June 30, 2009 does not include the potential
    dilution from the Convertible Subordinated Debt shares since the effect
    would be anti-dilutive.  In addition, the weighted-average basic and
    diluted shares for the three and six months ended June 30, 2009 and
    2008 include 786,228 of shares issued as a result of the stock
    dividends paid to shareholders in February and May 2009, and also
    include approximately 220,000 shares to be issued as a stock dividend
    to shareholders in August 2009, in accordance with SFAS No. 128,
    "Earnings Per Share".

Contact Information

  • Investor Relations Contact:
    Bryan Berndt
    Treasurer
    212-658-5817
    bryan.berndt@bowne.com

    Media Contact:
    Pamela Blum
    Director of 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