<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
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/X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended October 31, 1994, or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to
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COMMISSION FILE NO. 1-5842
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BOWNE & CO., INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 13-2618477
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
345 HUDSON STREET
NEW YORK, NEW YORK 10014
(Address of principal executive (Zip code)
offices)
(212) 924-5500
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
Common Stock, American Stock Exchange
Par Value $.01
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [ X ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the Common Stock issued and outstanding and
held by nonaffiliates of the Registrant, based upon the closing price for the
Common Stock on the American Stock Exchange on January 18, 1995, was
$241,453,000. For purposes of the foregoing calculation, the Registrant's
Employees' Stock Purchase Plan is deemed to be an affiliate of the Registrant.
The number of shares outstanding of each of the Registrant's classes of
common stock was 17,379,853 shares of Common Stock outstanding as at January 18,
1995.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the documents of the Registrant listed below have been
incorporated by reference into the indicated parts of this Annual Report on Form
10-K:
<TABLE>
<S> <C>
Notice of Annual Meeting of Stockholders and Proxy Statement
anticipated to be dated February 3, 1995.................... Part III, Items 10-12
Part IV, Item 14
</TABLE>
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<PAGE> 2
PART I
ITEM 1. BUSINESS
The Registrant was incorporated in the State of New York in 1968. The
Registrant and its subsidiaries are hereinafter collectively referred to as the
Company, unless otherwise noted. The Company, through its subsidiaries, is
engaged in providing the timely and accurate preparation and distribution of
documentation related to corporate and governmental financing, information
management and compliance documentation services throughout the United States
and Canada and also in London, Paris, Hong Kong, Singapore and Mexico City, with
affiliates worldwide.
The percentage of the Company's consolidated total sales attributable to
each class of service offered by the Company for the last five years is set
forth below.
<TABLE>
<CAPTION>
CLASS OF SERVICE 1994 1993 1992 1991 1990
- -------------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Financial and corporate printing.................. 82% 87% 84% 85% 81%
Commercial and legal printing..................... 18 13 16 15 19
---- ---- ---- ---- ----
100% 100% 100% 100% 100%
==== ==== ==== ==== ====
</TABLE>
The Company's financial printing includes registration statements,
tax-exempt offering circulars, prospectuses, loan agreements, special proxy
materials, tender offer materials and other documents related to corporate
financings, acquisitions and mergers, as well as mutual funds. Corporate
printing includes annual and interim reports and proxy materials prepared by
corporations for distribution to stockholders, Securities and Exchange
Commission reports on Form 10-K and stock exchange listing applications.
The Company's commercial printing includes business forms, sales aids and
literature, point of purchase materials, market letters, newsletters and other
custom-printed matter, prepared for customers engaged in general commerce. Legal
printing consists of the printing of legal briefs and records for use by
attorneys in trial, appellate and administrative proceedings.
Although substantial investment in equipment and facilities is required,
the Company's business is principally service-oriented. Financial and corporate
printing services rendered by the Company normally begin with the receipt of
customer copy, which may arrive as hard copy, on a diskette, magnetic tape or
through electronic transfer and typically involve the rapid computer typesetting
and printing of documents. Final copy for these documents is a composite
resulting from drafting and editing by parties interested in each transaction,
including corporate executives, investment bankers, attorneys and accountants.
Prior to approval of final copy, numerous proofs are usually required to be
supplied by the Company. When the parties have all agreed upon the contents of
the document, last minute changes are made, final proofs are approved, and the
job goes to press for printing. Thereafter, the document is bound into book form
and delivered by various means to parties in diverse locations. Speed and
accuracy are required at all stages, and frequently final alterations are made
when pages of a document are on press. While the time pressures in connection
with commercial and legal printing are not as great as in financial and
corporate printing, the basic process and techniques employed are the same.
The Company maintains conference rooms and telecommunication capabilities
at most of its offices for use by customers in conducting meetings associated
with jobs in progress and provides customers with on-site conveniences which
promote ease and speed of editorial copy changes and otherwise facilitate
completion of assignments. In addition, the Company has developed and utilizes
an extensive electronic communications network which facilitates document
handling and makes collaboration by customers at different sites practicable.
The Company's operations are conducted principally in the United States and
Canada. The Company also operates service centers in London, Paris, Hong Kong,
Singapore and Mexico City to support its customers' multi-national transactions.
Total sales, net income and identifiable assets attributable to the United
States and Canada for fiscal 1994, 1993 and 1992 are shown in Note 12 of the
Notes to Consolidated Financial Statements on page 21. Sales, income and assets
attributable to the Company's operations outside the United States and Canada
are not material.
1
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COMPETITION
The Company renders printing services to a wide variety of customers,
including business corporations, law firms, investment bankers, mutual funds,
bond dealers and other financial institutions. Competition with respect to each
of the services is intense and is based principally upon the ability to perform
the services described with speed and accuracy. Price and the quality of
supporting services are also important in this regard.
The Company competes directly with a number of other financial and
corporate printers (some of which have multiple locations) having the same
degree of specialization in these fields, some of which are subsidiaries or
divisions of companies having greater financial resources than those of the
Company. Although there is no published information available upon which to
determine its share of the total financial and corporate printing market, the
Company believes that it is the largest in these fields in terms of sales
volume. Competition based upon speed, accuracy of service and location of
facilities is particularly intense among financial and corporate printers. In
addition, the Company has experienced intense competition for sales personnel
and, to a lesser degree, production personnel relating to its financial and
corporate printing services.
In the commercial and legal printing fields, the Company competes not only
with other financial and corporate printers, but also with general, commercial
and legal printers, which are far more numerous than those in the financial and
corporate class. The Company's participation in and share of these markets are
minor.
RESEARCH AND DEVELOPMENT
As a result of technological developments in the field of computers and
peripheral equipment, the Company and its principal competitors utilize
computerized typesetting systems in the process of preparing documentation. A
research and development capability is maintained by the Company to continually
evaluate the advances in computer software, hardware and peripherals, computer
networking and telecommunication systems as they relate to the Company's
business and to develop and install enhancements to the Company's own
proprietary system. The Company's research and development expenditures,
determined in accordance with generally accepted accounting principles, are not
material.
MARKETING
The Company employs approximately 200 sales people. In addition to
soliciting business from existing and prospective customers, the sales people
act as a liaison between the customer and those in charge of service operations
and provide advice and assistance to customers. The Company regularly advertises
in financial newspapers and journals. Sales promotion is also carried on by
mail.
SEASONAL AND OTHER FACTORS AFFECTING THE COMPANY'S BUSINESS
The Company's business is generally affected by cyclical factors. A
substantial portion of the Company's sales and net income depends upon the
volume of public financings, particularly equity offerings, which is influenced
by corporate funding needs, stock market fluctuations, prevailing interest
rates, and general economic and political conditions. The above-mentioned
factors also affect the volume of corporate acquisitions, consolidations,
mergers and similar transactions, which in turn influence the demand for the
Company's services. In addition, the Company's corporate printing business is
seasonal to the extent that the greatest number of proxy statements and annual
reports are required to be printed during the Company's fiscal quarter ending
April 30.
As a result of the factors mentioned above, coupled with the general
necessity for rapid implementation of printing jobs after delivery of copy by
its customers, the Company must maintain physical plant and customer service
staff sufficient to meet maximum work loads. Consequently, the Company does not
always operate at full capacity.
2
<PAGE> 4
CUSTOMERS AND BACKLOG OF ORDERS
The Company has no significant long-term contracts with its customers. The
Company has no backlog, within the common meaning of that term, which is normal
throughout the industry. During the fiscal year ended October 31, 1994, no
customer accounted for 10% or more of the Company's sales.
EMPLOYEES
At October 31, 1994, the Company had 2,743 employees. Relations with the
Company's employees generally are considered to be satisfactory. Approximately
20% of the Company's production employees are members of various unions, which
represent different categories of workers. The subsidiaries of the Company which
have union employees in their plants enter into separate contracts with various
local unions. Such contracts include provisions for employer contributions to
pension and welfare plans. The Company also provides pension, profit-sharing,
certain insurance and other benefits to most non-union employees.
SUPPLIERS
The Company purchases various materials and services from a number of
suppliers, of which the most important items are paper and electrical energy.
The Company purchases paper from a paper mill and paper merchants. Alternate
sources of supply are presently available. No difficulty has been experienced to
date in obtaining adequate amounts of paper or electrical energy. However, a
severe paper or energy shortage could have an adverse effect upon the operations
of the Company.
PATENTS AND OTHER RIGHTS
The Company has no significant patents, licenses, franchises, concessions
or other rights except its trademarks, nor does it have specialized machinery,
facilities or contracts which are not available to other firms in the industry
except a proprietary computer typesetting and telecommunications system.
FOREIGN SALES
The Company's foreign operations are located in Canada, London, Paris, Hong
Kong, Singapore and Mexico City. In addition, the Company has affiliations with
certain printing firms abroad, but its sales and revenues derived from services
rendered in foreign countries other than Canada were less than 5% of the
Company's total sales in each of the past three fiscal years. See Note 12 of the
Notes to Consolidated Financial Statements on page 21.
RENEGOTIATION
No significant portion of the Company's sales is subject to renegotiation
of profits or termination of contracts or subcontracts at the election of the
government.
3
<PAGE> 5
ITEM 2. PROPERTIES
Information regarding the material facilities of the Company, as of October
31, 1994, seven of which are leased and ten of which are owned in fee, is set
forth below.
<TABLE>
<CAPTION>
YEAR
LEASE SQUARE
LOCATION EXPIRES DESCRIPTION FOOTAGE
- ------------------------ ------- ------------------------------- -------
<S> <C> <C> <C>
345 Hudson Street 2002 Typesetting, printing plant 98,000
New York, NY and general office space.
60 Gervais Drive 1997 Typesetting, printing plant and 57,000
Don Mills (Toronto), general office space.
Ontario, Canada
1570 Northside Drive 2002 Typesetting, printing plant and 44,000
Atlanta, GA general office space.
610 West Congress 1999 Typesetting, printing plant and 25,000
Detroit, MI general office space.
1201 West Pender Street 1998 Typesetting, printing plant and 15,500
Vancouver, British general office space.
Columbia, Canada
633 West Fifth Street 2000 Typesetting and general 15,000
Los Angeles, CA office space.
1341 G Street N.W. 1999 Typesetting and general 11,000
Washington, DC office space.
215 County Avenue Owned Printing plant and 105,000
Secaucus, NJ general office space.
1241 Superior Avenue Owned Typesetting, printing plant and 73,000
Cleveland, OH general office space.
325 West Ohio Street Owned Typesetting, printing plant and 60,000
Chicago, IL general office space.
5400 Chemin St. Francois Owned Typesetting, printing plant and 55,000
St. Laurent (Montreal), general office space.
Quebec, Canada
411 D Street Owned Typesetting, printing plant and 52,000
Boston, MA general office space.
1500 North Central Avenue Owned Typesetting, printing plant and 50,000
Phoenix, AZ general office space.
1200 Oliver Street Owned Typesetting, printing plant and 48,000
Houston, TX general office space.
1706 Maple Avenue Owned Printing plant and general 41,000
Los Angeles, CA office space.
1931 Market Center Blvd. Owned Typesetting, printing plant and 36,000
Dallas, TX general office space.
15 Seeley Avenue Owned Computer center and general 18,000
Piscataway, NJ office space.
</TABLE>
4
<PAGE> 6
All of the properties described above are well maintained, in good
condition and suitable for all presently anticipated requirements of the
Company. Virtually all of the Company's equipment is owned outright, free and
clear of any liens and encumbrances. A relatively minor amount of equipment
utilized by the Company is rented on short-term leases, and no renewal problems
are anticipated. All of the foregoing properties are used in the Company's
printing business. Reference is made to Notes 8 and 11 of the Notes to
Consolidated Financial Statements on pages 20 and 21.
ITEM 3. PENDING LEGAL PROCEEDINGS
The Company is involved in no pending legal proceedings other than routine
litigation incidental to the conduct of its business which is not material to
its business. Reference is made to Note 13 of the Notes to Consolidated
Financial Statements on page 22.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers of the Registrant is presented in
Part III below and incorporated here by reference.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the American Stock Exchange under
the symbol "BNE". The following is the range of high and low sales prices and
dividends paid per share for fiscal 1994 and 1993 by quarters.
<TABLE>
<CAPTION>
RANGE OF SALES
PRICES
-------------------- DIVIDENDS
HIGH LOW PER SHARE
----- ---- ---------
<S> <C> <C> <C>
1994
Fourth quarter...................................... $22 7/8 $15 3/4 $.090
Third quarter....................................... 23 5/8 19 5/8 .075
Second quarter...................................... 28 1/2 20 5/8 .075
First quarter....................................... 22 7/8 17 1/2 .075
------- ------- -----
Fiscal year.................................... $28 1/2 $15 3/4 $.315
------- ------- -----
1993
Fourth quarter...................................... $20 5/8 $18 1/2 $.075
Third quarter....................................... 20 5/8 16 3/4 .075
Second quarter...................................... 20 1/8 14 3/4 .075
First quarter....................................... 18 1/8 13 1/8 .075
------- ------- -----
Fiscal year.................................... $20 5/8 $13 1/8 $.30
------- ------- -----
</TABLE>
As of October 31, 1994, there were approximately 1,500 stockholders of
record of the Common Stock.
5
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes information with respect to the operations
of the Company.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating Data
Revenues:
Net sales.............. $380,653,000 $333,255,000 $282,201,000 $236,317,000 $201,217,000
Other.................. 5,233,000 4,334,000 3,813,000 3,750,000 3,919,000
------------ ------------ ------------ ------------ ------------
385,886,000 337,589,000 286,014,000 240,067,000 205,136,000
------------ ------------ ------------ ------------ ------------
Expenses:
Cost of sales.......... 221,943,000 173,061,000 145,729,000 127,231,000 116,309,000
Selling and
administrative....... 93,452,000 90,322,000 77,888,000 70,504,000 59,179,000
Depreciation and
amortization......... 15,158,000 12,859,000 12,478,000 13,693,000 11,764,000
Interest............... 1,130,000 2,336,000 2,881,000 3,548,000 3,419,000
------------ ------------ ------------ ------------ ------------
331,683,000 278,578,000 238,976,000 214,976,000 190,671,000
------------ ------------ ------------ ------------ ------------
Income before income
taxes.................. 54,203,000 59,011,000 47,038,000 25,091,000 14,465,000
Income taxes.............. 22,963,000 23,692,000 18,770,000 10,766,000 6,049,000
------------ ------------ ------------ ------------ ------------
NET INCOME................ $ 31,240,000 $ 35,319,000 $ 28,268,000 $ 14,325,000 $ 8,416,000
============ ============ ============ ============ ============
Balance Sheet Data
Current assets............ $157,750,000 $152,504,000 $131,313,000 $113,176,000 $ 92,685,000
Current liabilities....... 51,253,000 64,719,000 42,723,000 38,729,000 26,611,000
Working capital........... 106,497,000 87,785,000 88,590,000 74,447,000 66,074,000
Working capital ratio..... 3.08 to 1 2.36 to 1 3.07 to 1 2.92 to 1 3.48 to 1
Net plant and equipment... 101,522,000 88,840,000 74,480,000 68,968,000 71,640,000
Total assets.............. 291,581,000 283,624,000 244,367,000 225,666,000 204,414,000
Long-term indebtedness.... 3,178,000 8,836,000 22,346,000 30,807,000 34,248,000
Stockholders' equity...... 222,795,000 196,683,000 166,503,000 144,448,000 132,309,000
Per Share
Net income................ $ 1.80 $ 2.05 $1.65 $ .84 $ .49
Book value................ 12.82 11.37 9.71 8.46 7.80
Dividends................. .315 .30 .26 .25 .25
</TABLE>
6
<PAGE> 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company has a strong financial position, with excellent liquidity. On
October 31, 1994, the Company had a working capital ratio of 3.08 to 1 and
working capital of $106,497,000.
Cash generated from operations, available working capital and borrowings
have been used to finance acquisitions, capital expenditures, payment of debt,
purchase of treasury stock and payment of dividends. It is expected that such
funds and the Company's borrowing capacity will be sufficient to finance the
Company's growth, future capital expenditures, acquisition of treasury stock,
payment of dividends and possible acquisitions.
INFLATION
The Company has experienced the effects of inflation through increases in
the costs of employee compensation and related fringe benefits, facilities,
outside services, raw materials and other supplies. Due to price competition,
the Company does not always fully recover all of its increased costs.
RESULTS OF OPERATIONS
The Company provides printing services to produce the varied documentation
required by major financial transactions, corporate periodic reports,
restructuring plans for bankrupt companies, communication to shareholders and
basic commercial printing. The sales value of each project is dependent, among
other things, upon the size, complexity and type of document printed, the time
allowed for completion and the level of changes required, and may be further
impacted by the level of competition.
The Company's corporate printing business is seasonal to the extent that
the greatest number of proxy statements and annual reports are required to be
printed during the Company's second fiscal quarter ending April 30. In addition,
the Company's business is generally affected by cyclical conditions in the
capital markets.
The general necessity for rapid document processing after delivery of copy
by its customers requires that the Company maintain physical plant and customer
service staff sufficient to meet maximum work loads. Consequently, the Company
does not always operate at full capacity. The costs for facilities, labor and
equipment constitute a major portion of the costs of goods sold. These costs do
not normally increase or decrease proportionally with changes in sales.
1994 COMPARED WITH 1993
Sales increased 14% to $380,653,000. This increase was primarily
attributable to increased sales of non-transactional printing to corporate,
mutual funds and specialized commercial printing clients. Such non-transactional
printing traditionally generates lower gross margins than transactional
printing. Although intensive for the first six months, demand for transactional
printing declined in the second half of 1994 and represented a lower proportion
of total sales this year. In addition, the Company also experienced increases in
production costs during 1994 as a result of the expansion of facilities and
increases in the work force as well as general cost increases. Consequently, the
gross margin percentage decreased from 48% to 42% and the gross margin decreased
1%, or $1,484,000.
Other revenues increased $899,000 to $5,233,000 principally as a result of
capital gains related to the sale of securities.
Selling and administrative expenses increased $3,130,000, or 3%, to
$93,452,000 principally as a result of increases in sales compensation and other
expenses related to increases in sales as well as general increases in the costs
of facilities and labor.
7
<PAGE> 9
Depreciation and amortization expenses increased $2,299,000, or 18%,
primarily as a result of expansion of facilities and the acquisition of
equipment.
Interest expense decreased $1,206,000 due to the reduction of the Company's
debt.
The effective overall income tax rate increased from 40% to 42% as a result
of a higher effective tax rate on foreign earnings, a reduction in the amount of
available credits and certain other adjustments.
As a result of the foregoing, income before income taxes decreased
$4,808,000, or 8%, to $54,203,000 and net income decreased $4,079,000, or 12%,
to $31,240,000.
1993 COMPARED WITH 1992
Sales increased 18%, to $333,255,000, due to even higher levels of debt and
equity offerings than a year earlier and increased levels of activity in mutual
funds and merger and acquisition work. The overall increase in sales, combined
with a relatively constant gross margin percentage, contributed to a $23,722,000
increase in gross margin.
Other revenues increased $521,000 to $4,334,000 principally as a result of
capital gains related to the sale of surplus property.
Selling and administrative expenses increased $12,434,000, or 16%, to
$90,322,000 principally as a result of increases in sales and incentive
compensation and other expenses related to higher sales and profitability, and
increases in the number of employees and the costs of facilities and labor.
Depreciation and amortization expenses increased $381,000, or 3%, primarily
as a result of expansion of facilities.
Interest expense decreased $545,000 due to the reduction of the Company's
debt.
The effective overall income tax rate remained relatively constant as the
new higher tax rate contained in the Omnibus Budget Reconciliation Act of 1993
was partially offset by the increased proportion of income earned in state and
foreign jurisdictions with lower tax rates.
As a result of the foregoing, income before income taxes increased
$11,973,000, or 25%, to $59,011,000 and net income increased $7,051,000, or 25%,
to $35,319,000.
8
<PAGE> 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Bowne & Co., Inc.
We have audited the accompanying consolidated balance sheets of Bowne &
Co., Inc. and Subsidiaries as of October 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended October 31, 1994. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Bowne & Co., Inc. and Subsidiaries at October 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended October 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
New York, New York
December 9, 1994
9
<PAGE> 11
BOWNE & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1994 AND 1993
ASSETS
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................ $ 38,464,000 $ 33,067,000
Trade accounts receivable, less allowance for doubtful accounts
of $6,592,000 (1994) and $6,550,000 (1993)...................... 90,440,000 92,857,000
Inventories...................................................... 20,176,000 21,729,000
Prepaid expenses and other current assets........................ 8,670,000 4,851,000
------------ ------------
Total current assets.............................. 157,750,000 152,504,000
------------ ------------
Marketable securities................................................. 10,198,000 17,393,000
------------ ------------
Real estate, equipment and leasehold improvements:
Land and buildings............................................... 55,775,000 50,949,000
Machinery and plant equipment.................................... 94,111,000 79,059,000
Leasehold improvements........................................... 13,908,000 12,623,000
Furniture, fixtures and vehicles................................. 17,513,000 14,547,000
------------ ------------
181,307,000 157,178,000
Less depreciation and amortization to date....................... 79,785,000 68,338,000
------------ ------------
101,522,000 88,840,000
------------ ------------
Other assets:
Excess of cost of subsidiaries over net assets at date of
acquisition..................................................... 14,788,000 15,784,000
Deferred income taxes............................................ 2,450,000 4,338,000
Other............................................................ 4,873,000 4,765,000
------------ ------------
22,111,000 24,887,000
------------ ------------
TOTALS................................................................ $291,581,000 $283,624,000
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
10
<PAGE> 12
BOWNE & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1994 AND 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Current liabilities:
Notes payable and current portion of long-term debt................ $ 3,061,000 $ 5,434,000
Accounts payable................................................... 13,398,000 14,134,000
Employees' compensation............................................ 24,950,000 28,203,000
Accrued expenses................................................... 9,844,000 11,834,000
Income taxes payable............................................... 5,114,000
------------ ------------
Total current liabilities.................................. 51,253,000 64,719,000
Other liabilities:
Long-term debt -- net of current portion........................... 3,178,000 8,836,000
Deferred employee compensation and benefits........................ 14,355,000 13,386,000
------------ ------------
Total liabilities.......................................... 68,786,000 86,941,000
------------ ------------
Stockholders' equity:
Preferred stock:
Authorized 1,000,000 shares, par value $.01
Issuable in series -- none issued
Common stock:
Authorized 60,000,000 shares, par value $.01
Issued 19,032,387 shares (1994) and 18,948,442 shares (1993).... 190,000 189,000
Additional paid-in capital......................................... 23,944,000 22,903,000
Retained earnings.................................................. 218,001,000 192,229,000
Foreign currency translation adjustment............................ (1,221,000) (584,000)
Treasury stock, at cost, 1,653,209 shares (1994)
and 1,650,331 shares (1993)..................................... (18,119,000) (18,054,000)
------------ ------------
Total stockholders' equity................................. 222,795,000 196,683,000
------------ ------------
TOTALS............................................................... $291,581,000 $283,624,000
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
11
<PAGE> 13
BOWNE & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Net sales................................ $380,653,000 $333,255,000 $282,201,000
Other.................................... 5,233,000 4,334,000 3,813,000
------------ ------------ ------------
Totals........................... 385,886,000 337,589,000 286,014,000
------------ ------------ ------------
Expenses:
Cost of sales............................ 221,943,000 173,061,000 145,729,000
Selling and administrative............... 93,452,000 90,322,000 77,888,000
Depreciation and amortization............ 15,158,000 12,859,000 12,478,000
Interest................................. 1,130,000 2,336,000 2,881,000
------------ ------------ ------------
Totals........................... 331,683,000 278,578,000 238,976,000
------------ ------------ ------------
Income before income taxes................. 54,203,000 59,011,000 47,038,000
Income taxes............................... 22,963,000 23,692,000 18,770,000
------------ ------------ ------------
NET INCOME................................. $ 31,240,000 $ 35,319,000 $ 28,268,000
============ ============ ============
NET INCOME PER SHARE....................... $1.80 $2.05 $1.65
===== ===== =====
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
12
<PAGE> 14
BOWNE & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................. $ 31,240,000 $ 35,319,000 $ 28,268,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization........... 15,158,000 12,859,000 12,478,000
Provision for doubtful accounts......... 2,071,000 3,003,000 2,686,000
Loss (gain) on sale of securities and
other investments..................... (3,228,000) (788,000) 175,000
Provision for deferred employee
compensation. 1,328,000 591,000 1,113,000
Deferred income taxes................... 1,370,000 (621,000) (719,000)
Other................................... (1,050,000) (1,064,000) (194,000)
Increase (decrease) from changes in:
Accounts receivable................... (3,000) (39,669,000) 5,360,000
Inventories........................... 1,513,000 (6,151,000) (1,616,000)
Prepaid expenses and other current
assets............................. (2,894,000) (1,088,000) (620,000)
Trade payables........................ (646,000) 6,933,000 704,000
Employees' compensation............... (3,570,000) 4,813,000 5,179,000
Accrued expenses and taxes............ (6,940,000) 6,393,000 (982,000)
------------ ------------ ------------
Net cash provided by operating activities.... 34,349,000 20,530,000 51,832,000
------------ ------------ ------------
Cash flows from investing activities:
Purchase of marketable securities and other
investments............................. (2,972,000) (13,203,000) (16,514,000)
Proceeds from sale of marketable securities
and other investments................... 13,617,000 13,907,000 16,640,000
Purchase of real estate, equipment and
leasehold improvements.................. (27,197,000) (22,616,000) (17,377,000)
------------ ------------ ------------
Net cash used in investing activities........ (16,552,000) (21,912,000) (17,251,000)
------------ ------------ ------------
Cash flows from financing activities:
Payment of debt............................ (7,958,000) (13,871,000) (9,120,000)
Proceeds from stock options exercised...... 1,042,000 1,607,000 648,000
Payment of dividends....................... (5,468,000) (5,169,000) (4,494,000)
Purchase of treasury stock................. (65,000) (381,000) (131,000)
------------ ------------ ------------
Net cash used in financing activities........ (12,449,000) (17,814,000) (13,097,000)
------------ ------------ ------------
Effect of exchange rate changes on cash...... 49,000 207,000 (274,000)
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents........................... 5,397,000 (18,989,000) 21,210,000
Cash and cash equivalents -- beginning of the
year....................................... 33,067,000 52,056,000 30,846,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS -- END OF THE
YEAR....................................... $ 38,464,000 $ 33,067,000 $ 52,056,000
============ ============ ============
Supplemental cash flow disclosure:
Income taxes paid.......................... $ 28,961,000 $ 20,464,000 $ 20,740,000
============ ============ ============
Interest paid.............................. $ 1,267,000 $ 2,400,000 $ 3,608,000
============ ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
13
<PAGE> 15
BOWNE & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY
COMMON PAID-IN RETAINED TRANSLATION TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
-------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance November 1, 1991..... $187,000 $20,650,000 $138,305,000 $ 2,848,000 $(17,542,000) $144,448,000
Net income.............. 28,268,000 28,268,000
Foreign currency
translation
adjustment............ (2,236,000) (2,236,000)
Cash dividends ($.26 per
share)................ (4,494,000) (4,494,000)
Acquisition of treasury
stock................. (131,000) (131,000)
Exercise of stock
options............... 1,000 647,000 648,000
-------- ----------- ------------ ----------- ------------ ------------
Balance October 31, 1992..... 188,000 21,297,000 162,079,000 612,000 (17,673,000) 166,503,000
Net income.............. 35,319,000 35,319,000
Foreign currency
translation
adjustment............ (1,196,000) (1,196,000)
Cash dividends ($.30 per
share)................ (5,169,000) (5,169,000)
Acquisition of treasury
stock................. (381,000) (381,000)
Exercise of stock
options 1,000 1,606,000 1,607,000
-------- ----------- ------------ ----------- ------------ ------------
Balance October 31, 1993..... 189,000 22,903,000 192,229,000 (584,000) (18,054,000) 196,683,000
Net income.............. 31,240,000 31,240,000
Foreign currency
translation
adjustment............ (637,000) (637,000)
Cash dividends ($.315
per share)............ (5,468,000) (5,468,000)
Acquisition of treasury
stock................. (65,000) (65,000)
Exercise of stock
options............... 1,000 1,041,000 1,042,000
-------- ----------- ------------ ----------- ------------ ------------
Balance October 31, 1994..... $190,000 $23,944,000 $218,001,000 $(1,221,000) $(18,119,000) $222,795,000
======== =========== ============ =========== ============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
14
<PAGE> 16
BOWNE & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF ACCOUNTING POLICIES
A summary of the Company's significant accounting policies followed in the
preparation of the accompanying financial statements is set forth below:
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All of the significant intercompany accounts and
transactions are eliminated in consolidation.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
by using purchase cost (first-in, first-out method) for materials and standard
costs, which approximate actual costs, for work in process.
Real estate, equipment and leasehold improvements
Real estate, equipment and leasehold improvements are carried at cost.
Maintenance and repairs are expensed as incurred.
Depreciation for financial statement purposes, which is provided on the
straight-line method, was $13,786,000 (1994), $11,373,000 (1993) and $10,914,000
(1992). Depreciation is calculated for tax purposes using accelerated methods.
Estimated lives used in the calculation of depreciation for financial
statement purposes are:
<TABLE>
<S> <C>
Buildings....................................................... 20-40 years
Machinery and plant equipment................................... 3-12 1/2 years
Furniture and fixtures.......................................... 5-12 1/2 years
Vehicles........................................................ 3-5 years
Leasehold improvements.......................................... Shorter of useful life
or term of lease
</TABLE>
Excess of cost of subsidiaries over net assets at date of acquisition
Cost in excess of net assets ("goodwill") of acquired businesses is being
amortized using the straight-line method over forty years. Accumulated
amortization was $4,140,000 (1994) and $3,445,000 (1993).
Intangible assets
Trademarks, tradenames and other intangible assets of acquired businesses,
included in other assets, are amortized on the straight-line method over five
years. Accumulated amortization was $4,646,000 (1994) and $5,169,000 (1993).
Income taxes
Effective November 1, 1993, the Company prospectively adopted Statement of
Financial Accounting Standards (FAS) No. 109 "Accounting for Income Taxes."
There was no material cumulative effect of this accounting change at the time of
adoption.
United States income tax has not been provided on the unremitted earnings
of the Canadian subsidiary since it is the intention of the Company to reinvest
these earnings in the growth of the Canadian business. Applicable Canadian
income taxes have been provided. The cumulative amount of unremitted earnings on
which the Company has not recognized United States income tax was $22,856,000 at
October 31, 1994.
15
<PAGE> 17
BOWNE & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Although it is not practicable to determine the deferred tax liability on the
unremitted earnings, credits for Canadian income taxes paid will be available to
significantly reduce any U.S. tax liability if Canadian earnings are remitted.
Net income per share
Net income per share is calculated by dividing net income by the weighted
average number of common shares outstanding during the year. Shares which are
issuable upon the exercise of stock options under the Company's Stock Option
Plans have not entered into the computation because their inclusion would not be
significant. The weighted average number of shares outstanding was 17,353,645
(1994), 17,231,847 (1993) and 17,117,010 (1992).
NOTE 2 -- CASH AND CASH EQUIVALENTS
The Company's policy is to invest cash in excess of operating requirements
in income producing investments. Cash equivalents of $28,558,000 (1994) and
$22,127,000 (1993) are carried at cost, which approximates market, and include
certificates of deposit and money market accounts, substantially all of which
have maturities of three months or less.
NOTE 3 -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------
1994 1993
----------- -----------
<S> <C> <C>
Raw materials............................................. $ 4,613,000 $ 4,293,000
Work in process........................................... 15,563,000 17,436,000
----------- -----------
$20,176,000 $21,729,000
=========== ===========
</TABLE>
NOTE 4 -- MARKETABLE SECURITIES
Marketable securities, consisting of equity securities, notes and bonds,
are carried at the lower of cost or market. These securities are held primarily
for their interest or dividend yields. At October 31, 1994 and 1993, net
unrealized gains were $956,000 and $4,600,000, respectively.
NOTE 5 -- EMPLOYEE BENEFIT PLANS
Pension plans
The Company sponsors a defined benefit pension plan which covers
substantially all of its United States employees not covered by union
agreements. Benefits are based upon salary and years of service under the
projected unit benefit method. The Company's policy is to fund each year's
pension expense to the maximum allowable level. The Company has an unfunded
supplemental retirement program for certain management employees. Employees
covered by union agreements are included in separate multi-employer pension
plans to which the Company makes contributions. Plan benefit and net asset data
for these multi-employer pension plans are not available. Also, certain
non-union Canadian employees are covered by defined contribution retirement
plans.
16
<PAGE> 18
BOWNE & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pension costs are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Service cost........................................ $ 3,008,000 $ 2,220,000 $ 2,246,000
Interest cost....................................... 2,132,000 1,958,000 1,783,000
Actual loss (return) on plan assets................. 472,000 (5,530,000) (2,720,000)
Net amortization and deferrals...................... (4,068,000) 2,550,000 (169,000)
----------- ----------- -----------
Net periodic pension cost of defined benefit
plans............................................. 1,544,000 1,198,000 1,140,000
Union plans......................................... 570,000 620,000 815,000
Defined contribution plans.......................... 378,000 179,000 189,000
----------- ----------- -----------
Total pension cost.................................. $ 2,492,000 $ 1,997,000 $ 2,144,000
=========== =========== ===========
</TABLE>
The status of the Company's funded defined benefit pension plan is as
follows:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------
1994 1993
----------- -----------
<S> <C> <C>
Fair value of plan assets......................................... $31,639,000 $33,753,000
----------- -----------
Actuarial value of benefit obligations:
Vested.......................................................... 17,486,000 14,604,000
Non-vested...................................................... 1,272,000 975,000
----------- -----------
Accumulated benefit obligation.................................... 18,758,000 15,579,000
Effect of projected future salary increases....................... 8,192,000 7,715,000
----------- -----------
Projected benefit obligation...................................... 26,950,000 23,294,000
----------- -----------
Plan assets in excess of projected benefit obligation............. 4,689,000 10,459,000
Unrecognized net gain............................................. (4,176,000) (9,001,000)
Unrecognized net transition asset amortized over twenty-two
years........................................................... (4,673,000) (4,980,000)
----------- -----------
Accrued pension cost.............................................. $ 4,160,000 $ 3,522,000
=========== ===========
</TABLE>
At October 31, 1994, the projected benefit obligation under the unfunded
supplemental retirement program amounted to $4,444,000 for retired employees and
$1,728,000 for active employees, which amounts have been fully accrued. The plan
contains covenants which prohibit retired participants from engaging in
competition with the Company.
The discount rate used to calculate the projected benefit obligations was
7.25% in 1994 and 7.5% in 1993. The rate used to project future salary increases
was 5.0% for 1994 and 5.5% for 1993. The long-term rate of return on plan assets
was 9.0% (1994, 1993 and 1992). The assets of the funded plan consist primarily
of equity and fixed income securities.
Profit sharing plan
Certain subsidiaries are participating companies in a qualified profit
sharing plan covering substantially all employees of those subsidiaries who are
not covered by union agreements. Amounts charged to income for the Profit
Sharing Plan were $6,211,000 (1994), $6,960,000 (1993) and $5,925,000 (1992).
Stock purchase plan
Under the Employees' Stock Purchase Plan, participating subsidiaries match
50% of amounts contributed by employees. All contributions are invested in the
common stock of the Company. The plan acquired 78,899
17
<PAGE> 19
BOWNE & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares (1994), 69,409 shares (1993) and 81,839 shares (1992) of the Company's
common stock on the open market. At October 31, 1994, the Stock Purchase Plan
held 466,427 shares of the Company's common stock. Charges to income amounted to
$472,000 (1994), $385,000 (1993) and $414,000 (1992).
NOTE 6 -- STOCK OPTION PLANS
The Company has two stock option plans, a 1981 Plan and a 1992 Plan. The
1981 Plan, which provided for the granting of 1,400,000 shares of the Company's
common stock, expired December 15, 1991 except as to options then outstanding.
The Company's 1992 Stock Option Plan provides for the granting of Incentive
Stock Options and Non-Qualified Options to purchase 850,000 shares of the
Company's common stock to officers and key employees at a price not less than
the fair market value on the date the option is granted.
Options become exercisable as determined at the date of grant by a
committee of the Board of Directors. Options expire ten years after the date of
grant unless an earlier expiration date is set at the time of grant.
Details of stock options are as follows:
<TABLE>
<CAPTION>
NUMBER OPTION
OF SHARES PRICE
--------- -------------
<S> <C> <C>
1992
Granted........................................................ 241,126 $11.13--17.19
Exercised...................................................... 86,644 6.25--13.88
Cancelled...................................................... 5,600 13.88--17.88
Outstanding, end of year....................................... 1,073,592 6.25--17.88
Exercisable, end of year....................................... 361,341 6.25--17.88
1993
Granted........................................................ 109,000 $14.88
Exercised...................................................... 163,704 6.25--17.88
Cancelled...................................................... 80,875 8.50--17.88
Outstanding, end of year....................................... 938,013 6.25--17.88
Exercisable, end of year....................................... 241,212 6.25--17.88
1994
Granted........................................................ 215,200 $19.06
Exercised...................................................... 83,945 6.25--17.88
Cancelled...................................................... 56,150 6.25--19.06
Outstanding, end of year....................................... 1,013,118 8.12--19.06
Exercisable, end of year....................................... 225,592 8.12--17.88
</TABLE>
At October 31, 1994, options to purchase 386,500 shares were available for
grant under the 1992 Plan.
18
<PAGE> 20
BOWNE & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- INCOME TAXES
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Current:
U.S. Federal...................................... $16,091,000 $17,929,000 $15,125,000
Canadian.......................................... 1,025,000 1,086,000 280,000
State and local................................... 4,477,000 5,298,000 4,084,000
----------- ----------- -----------
21,593,000 24,313,000 19,489,000
----------- ----------- -----------
Deferred:
U.S. Federal...................................... 633,000 (173,000) (472,000)
Canadian.......................................... 712,000 (110,000) (155,000)
State and local................................... 25,000 (338,000) (92,000)
----------- ----------- -----------
1,370,000 (621,000) (719,000)
----------- ----------- -----------
$22,963,000 $23,692,000 $18,770,000
=========== =========== ===========
</TABLE>
The provision for income taxes differed from the U.S. Federal statutory
rate for the following reasons:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Statutory tax rate................................................. 35.0% 34.8% 34.0%
Increase (reduction) in tax resulting from:
State and local taxes............................................ 5.4 5.5 5.6
Foreign taxes.................................................... .2 (.4) --
Non-deductible items............................................. 1.5 1.2 0.8
Other............................................................ .3 (1.0) (.5)
----- ----- -----
Effective income tax rate.......................................... 42.4% 40.1% 39.9%
===== ===== =====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of October 31, 1994
calculated under FAS 109 are as follows:
<TABLE>
<S> <C>
Current deferred tax asset included in prepaid expenses and other current
assets:
Bad debt allowance....................................................... $ 1,375,000
===========
Non-current deferred tax assets (liability):
Deferred compensation and benefits....................................... $ 6,805,000
Depreciation............................................................. (4,527,000)
Other.................................................................... 172,000
-----------
Total net non-current asset................................................... $ 2,450,000
===========
</TABLE>
19
<PAGE> 21
BOWNE & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For 1993 and 1992, the deferred tax provisions, computed in accordance with
Accounting Principles Board Opinion No. 11, represent the effects of timing
differences between financial and income tax reporting. The significant
components giving rise to the timing differences for 1993 and 1992 were:
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Depreciation......................................................... $ 295,000 $(252,000)
Deferred compensation................................................ (409,000) (344,000)
Sundry............................................................... (507,000) (123,000)
--------- ---------
$(621,000) $(719,000)
========= =========
</TABLE>
Canadian income before income taxes, excluding any allocation of general
corporate expenses, was $4,728,000 (1994), $3,519,000 (1993) and $1,031,000
(1992).
NOTE 8 -- NOTES PAYABLE AND LONG-TERM DEBT
Notes payable
The Company's Canadian subsidiary has agreements with Canadian banks which
provide the funds to meet short-term working capital requirements. Borrowings
under the agreements bear interest at prime plus .25% and are due on demand. At
the end of 1994 the amount outstanding on these agreements was $2,556,000. The
weighted average interest rate for 1994 was 6.0%. The carrying value of amounts
outstanding at the end of 1994 approximates fair values due to their short-term
nature. There were no amounts outstanding at the end of 1993.
Long-term debt
The Company's senior notes, which bore interest at 8.45%, were paid during
1994.
The Company's other long-term debt of $3,683,000 consists primarily of a
capital lease obligation, a mortgage and debt related to the Canadian subsidiary
bearing interest from 8.5% to 11.4%. The debt is secured by land, buildings,
machinery and equipment with a net book value of $3,804,000. The lease requires
aggregate payments of $4,653,000 through 2002 with annual payments of $524,000
through 1996, $581,000 in 1997 and $660,000 in 1998 and 1999. Of the aggregate
payments, $1,777,000 represents executory and interest costs and $2,876,000
represents the present value of the capital lease obligation.
Aggregate annual installments of both the notes payable and long-term debt
due for the next five years are $3,061,000, $348,000, $335,000, $459,000 and
$502,000 respectively.
NOTE 9 -- DEFERRED EMPLOYEE COMPENSATION AND BENEFITS
Deferred employee compensation and benefits consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------------
1994 1993
----------- -----------
<S> <C> <C>
Pension costs..................................................... $ 4,854,000 $ 4,273,000
Supplemental retirement........................................... 5,603,000 5,238,000
Deferred sales compensation....................................... 3,898,000 3,875,000
----------- -----------
$14,355,000 $13,386,000
=========== ===========
</TABLE>
20
<PAGE> 22
BOWNE & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- OTHER REVENUE
The components of other revenue are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Interest income........................................ $ 790,000 $1,038,000 $1,333,000
Dividends.............................................. 836,000 1,083,000 1,003,000
Capital gains (losses)................................. 3,119,000 1,160,000 (505,000)
Other.................................................. 488,000 1,053,000 1,982,000
---------- ---------- ----------
$5,233,000 $4,334,000 $3,813,000
========== ========== ==========
</TABLE>
NOTE 11 -- LEASE COMMITMENTS
The Company's subsidiaries occupy premises and utilize equipment under
leases which are classified as operating leases and expire at various dates to
2002. Many of the leases provide for payment of certain expenses and contain
renewal and purchase options.
Rent expense relating to premises and equipment amounted to $7,034,000
(1994), $6,728,000 (1993) and $6,393,000 (1992). The minimum annual rental
commitments under non-cancelable leases as at October 31, 1994 are summarized as
follows:
<TABLE>
<S> <C>
1995.......................... $ 6,096,000
1996.......................... 5,445,000
1997.......................... 4,742,000
1998.......................... 4,595,000
1999.......................... 3,731,000
2000--2002.................... 5,284,000
-----------
Total.................... $29,893,000
===========
</TABLE>
NOTE 12 -- SEGMENT AND GEOGRAPHIC DATA
The Company is engaged in one line of business -- financial, corporate,
legal and commercial printing. Information about the business of the Company by
geographic area is presented in the table below. Sales or transfers between
geographic areas and United States export sales were not material. General
corporate expenses are included under the Company's domestic operations.
<TABLE>
<CAPTION>
DOMESTIC CANADIAN TOTAL
------------ ----------- ------------
<S> <C> <C> <C>
1994
Net sales.................................... $324,349,000 $56,304,000 $380,653,000
Net income................................... 28,249,000 2,991,000 31,240,000
Identifiable assets.......................... 256,890,000 34,691,000 291,581,000
1993
Net sales.................................... $289,902,000 $43,353,000 $333,255,000
Net income................................... 32,776,000 2,543,000 35,319,000
Identifiable assets.......................... 251,157,000 32,467,000 283,624,000
1992
Net sales.................................... $245,746,000 $36,455,000 $282,201,000
Net income................................... 27,361,000 907,000 28,268,000
Identifiable assets.......................... 220,004,000 24,363,000 244,367,000
</TABLE>
21
<PAGE> 23
BOWNE & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- LEGAL PROCEEDINGS
In January 1992, the Company commenced a legal action in the U.S. District
Court for the Southern District of New York against Ambase Corporation to
recover approximately $1.7 million owed to the Company for printing services
rendered in 1991. In a response filed in March 1992, Ambase denied any
obligations to pay the amounts owed to the Company and in a counterclaim against
the Company asserted that as a result of the failure by the Company to complete
the printing of certain proxy materials on time, Ambase was damaged in an amount
in excess of $23 million. The Company believes this counterclaim is without
merit and is pursuing its action for payment and is defending against the
counterclaim vigorously. Accordingly, no provision has been made in the
Company's financial statements with respect to the counterclaim against the
Company. In the opinion of the Company's management, the ultimate resolution of
these claims will not have a material adverse effect on the Company's financial
position.
NOTE 14 -- SELECTED QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1994 QUARTER QUARTER QUARTER QUARTER FULL YEAR
- -------------------------------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................... $82,075,000 $119,187,000 $95,591,000 $ 83,800,000 $380,653,000
Gross margin.................... 36,819,000 56,045,000 37,308,000 28,538,000 158,710,000
Income before income taxes...... 11,318,000 26,242,000 10,517,000 6,126,000 54,203,000
Income taxes.................... 4,659,000 11,372,000 4,495,000 2,437,000 22,963,000
Net income...................... 6,659,000 14,870,000 6,022,000 3,689,000 31,240,000
=========== ============ =========== ============ ============
Net income per share............ $.38 $.86 $.35 $.21 $1.80
=========== ============ =========== ============ ============
Weighted average shares
outstanding................... 17,302,712 17,356,042 17,377,017 17,378,808 17,353,645
=========== ============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1993 QUARTER QUARTER QUARTER QUARTER FULL YEAR
- -------------------------------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales....................... $61,026,000 $ 89,649,000 $82,476,000 $100,104,000 $333,255,000
Gross margin.................... 28,278,000 46,900,000 37,101,000 47,915,000 160,194,000
Income before income taxes...... 6,585,000 18,787,000 12,681,000 20,958,000 59,011,000
Income taxes.................... 2,718,000 7,192,000 5,388,000 8,394,000 23,692,000
Net income...................... 3,867,000 11,595,000 7,293,000 12,564,000 35,319,000
=========== ============ =========== ============ ============
Net income per share............ $.23 $.67 $.42 $.73 $2.05
=========== ============ =========== ============ ============
Weighted average shares
outstanding................... 17,160,588 17,205,163 17,274,115 17,287,523 17,231,847
=========== ============ =========== ============ ============
</TABLE>
22
<PAGE> 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Inapplicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Regarding the directors of the Registrant, reference is made to the
information set forth under the caption "Election of Directors" in the Company's
definitive Proxy Statement anticipated to be dated February 3, 1995, which
information is incorporated by reference herein.
The principal executive officers of the Company and their recent business
experience are as follows.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OFFICER
NAME DURING PAST FIVE YEARS AGE SINCE
- ------------------------- --------------------------------------------- --- -------
<S> <C> <C> <C>
Richard H. Koontz........ Chairman of the Board of Directors, President 54 1973
and Chief Executive Officer; until 1992,
President and Chief Executive Officer
James P. O'Neil.......... Vice President, Finance 50 1984
Brendan Keating.......... Vice President; until 1991, Vice President, 40 1991
Operations of Bowne of New York City, Inc.
(a subsidiary)
Allen D. Marold.......... Vice President, Human Resources and 54 1983
Administration
Thomas J. Vos............ Vice President, Marketing 47 1986
John Penhollow........... Vice President, Technical Services; until 60 1994
September 1994, Director of Edgar Services of
the Company; prior to February 1993,
Director of the Office of Edgar Management,
Securities and Exchange Commission
Douglas F. Bauer......... Corporate Secretary and Counsel 52 1986
Thomas P. Meola.......... Controller 52 1987
</TABLE>
There are no family relationships between any of the executive officers,
and there are no arrangements or understandings between any of the executive
officers and any other person pursuant to which any of such officers was
selected. The executive officers are normally elected by the Board of Directors
at its first meeting following the Annual Meeting of Stockholders for a one-year
term or until their respective successors are duly elected and qualify.
To the best of the Company's knowledge, none of the directors and officers
of the Company failed to file on a timely basis any report on Forms 3, 4 and 5
which was required pursuant to Section 16(a) of the Securities Exchange Act of
1934 with respect to the Company's most recent fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information set forth under the caption "Executive
Compensation" appearing in the Company's definitive Proxy Statement anticipated
to be dated February 3, 1995, which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Reference is made to the information contained under the captions
"Principal Stockholders of the Company" and "Executive Compensation" in the
Company's definitive Proxy Statement anticipated to be dated February 3, 1995,
which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Inapplicable.
23
<PAGE> 25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) DOCUMENTS FILED AS PART OF THIS REPORT:
(1) Financial Statements:
<TABLE>
<CAPTION>
PAGE NUMBER
IN THIS REPORT
----------------
<S> <C>
Report of Independent Auditors.................................. 9
Consolidated Balance Sheets as of October 31, 1994 and 1993..... 10-11
Consolidated Statements of Income -- Years Ended October 31,
1994, 1993 and 1992........................................... 12
Consolidated Statements of Cash Flows -- Years Ended October 31,
1994, 1993 and 1992........................................... 13
Consolidated Statements of Stockholders' Equity -- Years Ended
October 31, 1994, 1993 and 1992............................... 14
Notes to Consolidated Financial Statements...................... 15-22
</TABLE>
(2) Financial Statement Schedule -- Years Ended October 31, 1994, 1993
and 1992:
<TABLE>
<S> <C>
Schedule II -- Valuation and Qualifying Accounts................ S-1
</TABLE>
All other schedules are omitted because they are not applicable.
(3) Exhibits:
<TABLE>
<C> <S>
3.1 -- Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to
the Company's annual report on Form 10-K for the year ended October 31,
1984)
3.2 -- Amendment to the Certificate of Incorporation filed May 11, 1988
(incorporated by reference to Exhibit 3.2 to the Company's annual
report on Form 10-K for the year ended October 31, 1988)
3.3 -- Amendment to the Certificate of Incorporation filed March 23, 1989
(incorporated by reference to Exhibit 3.3 to the Company's annual
report on Form 10-K for the year ended October 31, 1989)
3.4 -- Amendment to the Certificate of Incorporation filed March 28, 1990
(incorporated by reference to page 7 of the Company's definitive Proxy
Statement dated January 29, 1990)
3.5 -- By-Laws (incorporated by reference to Exhibit 4.5 to the Company's
registration statement on Form S-8 relating to the Company's Employees'
Stock Purchase Plan filed July 12, 1990)
3.6 -- Amendment to the By-Laws adopted September 24, 1992 (incorporated by
reference to Exhibit 3.6 to the Company's annual report on Form 10-K
for the year ended October 31, 1992)
10.1 -- Amended and Restated 1981 Stock Option Plan (incorporated by reference to
the Company's definitive Proxy Statement dated January 30, 1985)
10.2 -- Amendment to 1981 Stock Option Plan (incorporated by reference to the
Company's Post-Effective Amendment No. 1 on Form S-8 relating to the
Company's Stock Option Plan dated April 16, 1987)
10.3 -- Amendment to 1981 Stock Option Plan (incorporated by reference to the
Company's Post-Effective Amendment No. 2 on Form S-8 relating to the
Company's Stock Option Plan dated October 19, 1988)
10.4 -- 1992 Stock Option Plan (incorporated by reference to Exhibit A to the
Company's definitive Proxy Statement dated February 10, 1992)
</TABLE>
24
<PAGE> 26
<TABLE>
<S> <C>
10.5 -- Form of Supplemental Retirement Agreement for selected key employees
(incorporated by reference to Exhibit 10.2 to the Company's annual
report on Form 10-K for the year ended October 31, 1984) (such
agreements having been entered into in the years 1979-1980)
10.6 -- Form of Supplemental Retirement Agreement for selected key employees with
change of control provisions (incorporated by reference to Exhibit 10.3
to the Company's annual report on Form 10-K for the year ended October
31, 1984) (such agreements having been entered into in 1984)
10.7 -- Form of Supplemental Retirement Agreement for selected key employees,
being the most current version of the agreements in Exhibits 10.5 and
10.6 above (incorporated by reference to Exhibit 10.4 to the Company's
annual report on Form 10-K for the year ended October 31, 1986) (such
agreements having been entered into since 1985 without material
revisions)
10.8 -- Retirement Plan for non-management members of the Board of Directors
(incorporated by reference to the description under the caption
"Meetings, Attendance and Fees" on page 4 of the Company's definitive
Proxy Statement dated January 30, 1989)
21 -- Subsidiaries of the Company
23 -- Consent of Independent Auditors
27 -- Financial Data Schedule, which is submitted electronically to the
Securities and Exchange Commission for information only and not filed.
</TABLE>
(B) No reports on Form 8-K were filed by the Company during the quarter ended
October 31, 1994.
25
<PAGE> 27
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
BOWNE & CO., INC.
Dated: January 24, 1995 By RICHARD H. KOONTZ
---------------------------
RICHARD H. KOONTZ
Chairman of the Board and
President
(Principal Executive Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
<C> <S> <C>
RICHARD H. KOONTZ Chairman of the Board of January 24, 1995
- -------------------------------------- Directors, President, Chief
(RICHARD H. KOONTZ) Executive Officer and Director
(Principal Executive Officer)
JAMES P. O'NEIL Vice President, Finance January 24, 1995
- -------------------------------------- (Principal Financial and
(JAMES P. O'NEIL) Accounting Officer)
* Director January 24, 1995
- --------------------------------------
(ROBERT M. CONWAY)
* Director January 24, 1995
- --------------------------------------
(JOHN R. HAIRE)
* Director January 24, 1995
- --------------------------------------
(EDWARD H. MEYER)
* Director January 24, 1995
- --------------------------------------
(H. MARSHALL SCHWARZ)
* Director January 24, 1995
- --------------------------------------
(WENDELL M. SMITH)
* Director January 24, 1995
- --------------------------------------
(THOMAS O. STANLEY)
* Director January 24, 1995
- --------------------------------------
(BEVERLEY B. WADSWORTH)
* Director January 24, 1995
- --------------------------------------
(RICHARD R. WEST)
*By JAMES P. O'NEIL Attorney-in-Fact
- --------------------------------------
(JAMES P. O'NEIL)
</TABLE>
26
<PAGE> 28
BOWNE & CO. INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED OCTOBER 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
=================================================================================================
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS
BEGINNING CHARGED TO BALANCE AT
OF COSTS AND DEDUCTIONS END OF
DESCRIPTION PERIOD EXPENSES (a) PERIOD
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
1994 $6,550,000 $2,071,000 $2,029,000 $6,592,000
=========== ========== ========== ==========
1993 $4,412,000 $3,003,000 $ 865,000 $6,550,000
========== ========== ========== ==========
1992 $4,080,000 $2,686,000 $2,354,000 $4,412,000
========== ========== ========== ==========
</TABLE>
- ---------------
(a) Uncollectible accounts written off, net of recoveries.
S-1
<PAGE> 29
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------ -----------------------------------------------------------------
21 Subsidiaries of the Company
23 Consent of Independent Auditors
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not filed.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Listed below are the significant subsidiaries of the Company and their
jurisdictions of organization. All of such subsidiaries are wholly-owned by the
Company except as indicated in the notes. Other subsidiaries of the Company have
been omitted because, considered in the aggregate, they would not constitute a
significant subsidiary.
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF SUBSIDIARY ORGANIZATION
- ------------------ ---------------
<S> <C>
Bowne of Atlanta, Inc. Georgia
Bowne of Boston, Inc. Massachusetts
Bowne of Chicago, Inc. Delaware
Bowne of Cleveland, Inc. Ohio
Bowne of Dallas, Inc. Delaware
Bowne of Los Angeles, Inc. California
Bowne of New York City, Inc. New York
Bowne of Phoenix, Inc. Arizona
Bowne of Canada, Ltd. Ontario
Bowne de Montreal, Inc.(1) Canada
Baseline Financial Services, Inc.(2) New York
Bowne Business Communications, Inc. New York
Bowne Information Services, Inc. New Jersey
Bowne International, Inc. Delaware
</TABLE>
- ---------------
(1) 100% owned by Bowne of Canada, Ltd.
(2) 90% owned by the Company.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 2-96887, 33-48831 and 33-35810) pertaining to the Stock Option
Plans and Employees' Stock Purchase Plan of Bowne & Co., Inc. and in the related
Prospectuses of our report dated December 9, 1994 on the consolidated financial
statements and schedule of Bowne & Co., Inc. and Subsidiaries included in this
Annual Report (Form 10-K) for the year ended October 31, 1994.
ERNST & YOUNG LLP
New York, New York
January 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ANNUAL REPORT ON FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<CASH> 38,464
<SECURITIES> 0
<RECEIVABLES> 97,032
<ALLOWANCES> 6,592
<INVENTORY> 20,176
<CURRENT-ASSETS> 157,750
<PP&E> 181,307
<DEPRECIATION> 79,785
<TOTAL-ASSETS> 291,581
<CURRENT-LIABILITIES> 51,253
<BONDS> 0
<COMMON> 190
0
0
<OTHER-SE> 222,605
<TOTAL-LIABILITY-AND-EQUITY> 291,581
<SALES> 380,653
<TOTAL-REVENUES> 385,886
<CGS> 221,943
<TOTAL-COSTS> 221,943
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,071
<INTEREST-EXPENSE> 1,130
<INCOME-PRETAX> 54,203
<INCOME-TAX> 22,963
<INCOME-CONTINUING> 31,240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,240
<EPS-PRIMARY> 1.80
<EPS-DILUTED> 1.80
</TABLE>
