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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended July 31, 1995
OR
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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COMMISSION FILE NUMBER 1-5842
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BOWNE & CO., INC.
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of
incorporation or organization)
345 HUDSON STREET
NEW YORK, NEW YORK
(Address of principal executive offices)
13-2618477
(IRS Employer Identification Number)
10014
(Zip code)
(212) 924-5500
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No
The number of shares outstanding of each of the issuer's classes of common
stock was 17,390,666 shares of common stock, par value $.01, outstanding as at
September 8, 1995.
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<PAGE> 2
FINANCIAL STATEMENTS
BOWNE & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31,
1995 OCTOBER 31,
(UNAUDITED) 1994
----------- -----------
<S> <C> <C>
(000'S OMITTED)
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 31,850 $ 38,464
Trade accounts receivable, less allowance for doubtful accounts of $7,430,000 and
$6,592,000........................................................................ 102,452 90,440
Inventories........................................................................ 28,344 20,176
Prepaid expenses and sundry receivables............................................ 5,701 8,670
-------- --------
Total current assets................................................... 168,347 157,750
Marketable securities.................................................................. 15,164 10,198
Real estate, equipment and leasehold improvements, less depreciation and amortization
of $91,676,000 and $79,785,000....................................................... 101,142 101,522
Excess cost of subsidiaries over net assets at date of acquisition..................... 14,300 14,788
Other assets........................................................................... 7,395 7,323
-------- --------
Totals............................................................. $306,348 $291,581
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt................................ $ 2,974 $ 3,061
Accounts payable................................................................... 11,607 13,398
Accrued liabilities................................................................ 33,648 34,794
Income taxes payable............................................................... 5,290
-------- --------
Total current liabilities.............................................. 53,519 51,253
Long-term debt -- net of current portion............................................... 2,834 3,178
Deferred employee compensation and benefits............................................ 15,977 14,355
-------- --------
Total liabilities...................................................... 72,330 68,786
-------- --------
Stockholders' equity:
Common stock, par value $.01, issued 19,043,837 shares in 1995 and 19,032,387
shares in 1994.................................................................... 190 190
Additional paid-in capital......................................................... 24,077 23,944
Retained earnings.................................................................. 228,022 218,001
Unrealized gains on marketable securities.......................................... 1,271
Foreign currency translation adjustment............................................ (1,420) (1,221)
Treasury stock, 1,653,421 shares in 1995 and 1,653,209 shares in 1994, at cost..... (18,122) (18,119)
-------- --------
Total stockholders' equity............................................. 234,018 222,795
-------- --------
Totals............................................................. $306,348 $291,581
======== ========
</TABLE>
1
<PAGE> 3
BOWNE & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JULY 31,
(UNAUDITED)
-----------------------
(000'S OMITTED)
1995 1994
-------- -------
<S> <C> <C>
Revenues:
Net sales............................................................................. $103,110 $95,591
Other................................................................................. 1,032 460
-------- -------
104,142 96,051
-------- -------
Expenses:
Cost of sales......................................................................... 61,348 58,283
Selling and administrative............................................................ 26,276 23,178
Depreciation and amortization......................................................... 4,293 3,847
Interest.............................................................................. 194 226
-------- -------
92,111 85,534
-------- -------
Income before income taxes................................................................ 12,031 10,517
-------- -------
Income taxes:
State and local....................................................................... 872 1,146
Federal............................................................................... 4,064 3,312
Foreign............................................................................... 113 37
-------- -------
5,049 4,495
-------- -------
Net income................................................................................ $ 6,982 $ 6,022
======== =======
Net income per share...................................................................... $.40 $.35
======== =======
Dividends per share....................................................................... $.09 $.075
======== =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
JULY 31,
(UNAUDITED)
-----------------------
(000'S OMITTED)
1995 1994
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<S> <C> <C>
Revenues:
Net sales............................................................................. $282,383 $296,853
Other................................................................................. 2,577 3,703
-------- --------
284,960 300,556
-------- --------
Expenses:
Cost of sales......................................................................... 170,507 166,681
Selling and administrative............................................................ 74,306 73,328
Depreciation and amortization......................................................... 13,525 11,565
Interest.............................................................................. 706 905
-------- --------
259,044 252,479
-------- --------
Income before income taxes................................................................ 25,916 48,077
-------- --------
Income taxes:
State and local....................................................................... 1,972 4,479
Federal............................................................................... 9,162 14,603
Foreign............................................................................... 67 1,444
-------- --------
11,201 20,526
-------- --------
Net income................................................................................ $ 14,715 $ 27,551
======== ========
Net income per share...................................................................... $.85 $1.59
======== ========
Dividends per share....................................................................... $.27 $.225
======== ========
</TABLE>
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<PAGE> 4
BOWNE & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31, 1995
(UNAUDITED)
-----------------
<S> <C>
(000'S OMITTED)
Retained earnings at beginning of period............................................... $218,001
Net income............................................................................. 14,715
Dividends.............................................................................. (4,694)
--------
Retained earnings at end of period..................................................... $228,022
========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31,
(UNAUDITED)
---------------------------
<S> <C> <C>
(000'S OMITTED)
1995 1994
Cash flows from operating activities: ---- ----
Net income....................................................................... $ 14,715 $ 27,551
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................ 13,525 11,565
Provision for deferred employee compensation................................. 1,147 1,338
Changes in other current assets and liabilities, net of non-cash
transactions................................................................. (16,313) (21,001)
-------- --------
Net cash provided by operating activities........................................ 13,074 19,453
-------- --------
Cash flows from investing activities:
Purchase of securities or other investments...................................... (6,828) (2,455)
Proceeds from the sale of securities and other investments....................... 4,176 10,768
Purchase of real estate, equipment and leasehold improvements.................... (12,058) (20,265)
-------- --------
Net cash used in investing activities............................................ (14,710) (11,952)
-------- --------
Cash flows from financing activities:
Payment of debt.................................................................. (406) (7,246)
Proceeds from stock options exercised............................................ 133 1,031
Payment of dividends............................................................. (4,694) (3,904)
Purchase of treasury stock....................................................... (3) (65)
-------- --------
Net cash used in financing activities............................................ (4,970) (10,184)
-------- --------
Effect of exchange rate on cash...................................................... (8) 51
-------- --------
Decrease in cash and cash equivalents................................................ $ (6,614) $ (2,632)
======== ========
</TABLE>
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BOWNE & CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. The financial information included herein as at July 31, 1995 and
for the three and nine months ended July 31, 1995 and 1994 is unaudited and, in
the opinion of the Company, reflects all adjustments (which include only normal
recurring accruals) necessary for a fair presentation of the financial position
as of those dates and the results of operations for those periods. The
information in the Condensed Consolidated Balance Sheet as at October 31, 1994
was derived from the Company's audited annual report for 1994.
NOTE 2. Inventories of $28,344,000 in 1995 include raw materials of
$5,335,000 and work in process of $23,009,000. At October 31, 1994, inventories
of $20,176,000 included raw materials of $4,613,000 and work in process of
$15,563,000.
NOTE 3. Net income per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the period. The
weighted average number of shares was 17,389,569 (three months) and 17,385,313
(nine months) in 1995, and 17,377,017 (three months) and 17,345,257 (nine
months) in 1994.
NOTE 4. Effective November 1, 1994, the Company adopted FASB Statement No.
115 ("Accounting for Certain Investments in Debt and Equity Securities"). The
Company classifies its investment in marketable securities as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported as a separate
component of stockholders' equity. At July 31, 1995, the fair value of
marketable securities exceeded cost by $2,230,000. The unrealized gains, net of
deferred taxes, were $1,271,000. In accordance with the provisions of FASB
Statement No. 115, prior year information was not restated.
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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
July 31, 1995, the Company had a working capital ratio of 3.15 to 1 and working
capital of $114,828,000.
Cash generated from operations, available working capital and borrowings
have been used to finance acquisitions, capital expenditures, 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 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, 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 of labor, facilities and
equipment constitute a major portion of the cost of goods sold. These costs do
not normally increase or decrease proportionally with changes in sales.
QUARTER ENDED JULY 31, 1995 COMPARED TO QUARTER ENDED JULY 31, 1994
Sales increased by $7,519,000, or 8%. The increase was primarily
attributable to higher levels of demand for transactional printing services.
Such printing traditionally generates higher gross margins. The overall increase
in sales, combined with a 2% rise in the gross margin percentage, contributed to
a $4,454,000 increase in gross margin.
Other revenue increased $572,000 due to higher levels of miscellaneous
revenue.
Selling and administrative expenses increased $3,098,000 to $26,276,000.
This increase was due in part to the variable costs associated with sales and
general increases in the cost of labor and facilities.
Depreciation and amortization increased $446,000, or 12%, primarily due to
the refurbishment and expansion of facilities as well as the acquisition of
equipment.
Interest expense remained relatively constant.
The effective overall income tax rate decreased slightly from 43% to 42%
due to an increase in the proportion of earnings in jurisdictions with lower tax
rates.
As a result of the foregoing, income before income taxes was $12,031,000,
an increase of 14%, and net income increased 16% to $6,982,000.
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NINE MONTHS ENDED JULY 31, 1995 COMPARED TO NINE MONTHS ENDED JULY 31, 1994
Sales declined 5%, or $14,470,000, as a result of the lower levels of
demand for transactional financial printing services which was partially offset
by increased sales of lower margin services. The overall decline in sales,
combined with a 4% decline in the gross margin percentage, contributed to a
decrease in gross margin of $18,296,000.
Other revenue, consisting primarily of investment income, decreased
$1,126,000 due to lower levels of realized capital gains from the sale of
securities during the current year.
Selling and administrative expenses increased $978,000 to $74,306,000 due
to general increases in the cost of labor and facilities, which were partially
offset by decreases in expenses related to sales and profitability.
Depreciation and amortization increased $1,960,000, or 17%, primarily due
to the expansion of facilities and the acquisition of equipment.
Interest expense decreased $199,000 due to the payment of senior notes in
1994.
The effective overall income tax rate remained at 43%.
As a result of the foregoing, income before income taxes was $25,916,000, a
decrease of 46%, and net income decreased 47% to $14,715,000.
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PART II
ITEM 1. LEGAL PROCEEDINGS
Litigation between the Company and Ambase Corporation, described in the
notes to the Company's 1994 Annual Report, has been resolved without any adverse
effect on the Company.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS 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.
<TABLE>
<S> <C>
Date: September 12, 1995 RICHARD H. KOONTZ
-----------------------------------------------
RICHARD H. KOONTZ
(PRESIDENT AND PRINCIPAL EXECUTIVE OFFICER)
Date: September 12, 1995 JAMES P. O'NEIL
-----------------------------------------------
JAMES P. O'NEIL
(VICE PRESIDENT, FINANCE AND PRINCIPAL
FINANCIAL OFFICER)
</TABLE>
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EXHIBIT INDEX
Exhibit No. Description Page No.
---------- ----------- -------
EX-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Financial Condition at July 31, 1995
(Unaudited) and the Condensed Consolidated Statement of Income for the Nine
Months Ended July 31, 1995 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> JUL-31-1995
<CASH> 31,850
<SECURITIES> 0
<RECEIVABLES> 109,882
<ALLOWANCES> 7,430
<INVENTORY> 28,344
<CURRENT-ASSETS> 168,347
<PP&E> 192,818
<DEPRECIATION> 91,676
<TOTAL-ASSETS> 306,348
<CURRENT-LIABILITIES> 53,519
<BONDS> 2,834
<COMMON> 190
0
0
<OTHER-SE> 233,828
<TOTAL-LIABILITY-AND-EQUITY> 306,348
<SALES> 282,383
<TOTAL-REVENUES> 284,960
<CGS> 170,507
<TOTAL-COSTS> 170,507
<OTHER-EXPENSES> 86,079
<LOSS-PROVISION> 1,752
<INTEREST-EXPENSE> 706
<INCOME-PRETAX> 25,916
<INCOME-TAX> 11,201
<INCOME-CONTINUING> 14,715
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,715
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
</TABLE>
