<PAGE> 1
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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, 1996
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 17,632,071 shares of common stock, par value $.01, outstanding as at
September 6, 1996.
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<PAGE> 2
FINANCIAL STATEMENTS
BOWNE & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31,
1996 OCTOBER 31,
(UNAUDITED) 1995
------------ ------------
<S> <C> <C>
(000'S OMITTED)
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 16,608 $ 36,590
Trade accounts receivable, less allowance for doubtful accounts of $9,036,000 and
$6,269,000......................................................................... 143,713 114,532
Inventories......................................................................... 41,317 27,028
Prepaid expenses and sundry receivables............................................. 9,204 6,184
-------- --------
Total current assets.................................................... 210,842 184,334
Marketable securities................................................................... 4,152 16,015
Real estate, equipment and leasehold improvements, less depreciation and amortization of
$107,184,000 and $94,996,000.......................................................... 122,767 105,130
Excess cost of subsidiaries over net assets at date of acquisition...................... 13,747 14,223
Other assets............................................................................ 7,319 5,968
-------- --------
Totals.............................................................. $358,827 $325,670
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt................................. $ 919 $ 3,075
Accounts payable.................................................................... 19,194 16,961
Accrued liabilities................................................................. 53,865 47,264
-------- --------
Total current liabilities............................................... 73,978 67,300
Long-term debt -- net of current portion................................................ 2,609 2,830
Deferred employee compensation and benefits............................................. 15,202 14,031
-------- --------
Total liabilities....................................................... 91,789 84,161
-------- --------
Stockholders' equity:
Common stock, par value $.01, issued 19,307,205 shares in 1996 and 19,067,429 shares
in 1995............................................................................ 193 191
Additional paid-in capital.......................................................... 27,189 24,270
Retained earnings................................................................... 259,548 235,027
Unrealized gains on marketable securities........................................... 397 1,307
Foreign currency translation adjustment............................................. (1,679) (1,093)
Treasury stock, 1,677,184 shares in 1996 and 1,657,196 shares in 1995, at cost...... (18,610) (18,193)
-------- --------
Total stockholders' equity.............................................. 267,038 241,509
-------- --------
Totals.............................................................. $358,827 $325,670
======== ========
</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)
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Net sales............................................................................ $134,153 $103,110
Other................................................................................ 2,375 1,032
-------- --------
136,528 104,142
-------- --------
Expenses:
Cost of sales........................................................................ 72,346 61,348
Selling and administrative........................................................... 36,336 26,276
Depreciation and amortization........................................................ 5,398 4,293
Interest............................................................................. 163 194
-------- --------
114,243 92,111
-------- --------
Income before income taxes............................................................... 22,285 12,031
-------- --------
Income taxes:
State and local...................................................................... 1,427 872
Federal.............................................................................. 7,376 4,064
Foreign.............................................................................. 320 113
-------- --------
9,123 5,049
-------- --------
Net income............................................................................... $ 13,162 $ 6,982
======== ========
Net income per share..................................................................... $.75 $.40
======== ========
Dividends per share...................................................................... $.09 $.09
======== ========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
JULY 31,
(UNAUDITED)
------------------------
(000'S OMITTED)
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Net sales............................................................................ $361,277 $282,383
Other................................................................................ 4,815 2,577
-------- --------
366,092 284,960
-------- --------
Expenses:
Cost of sales........................................................................ 201,844 170,507
Selling and administrative........................................................... 97,473 74,306
Depreciation and amortization........................................................ 15,200 13,525
Interest............................................................................. 602 706
-------- --------
315,119 259,044
-------- --------
Income before income taxes............................................................... 50,973 25,916
-------- --------
Income taxes:
State and local...................................................................... 4,110 1,972
Federal.............................................................................. 16,736 9,162
Foreign.............................................................................. 858 67
-------- --------
21,704 11,201
-------- --------
Net income............................................................................... $ 29,269 $ 14,715
======== ========
Net income per share..................................................................... $1.67 $.85
======== ========
Dividends per share...................................................................... $.27 $.27
======== ========
</TABLE>
2
<PAGE> 4
BOWNE & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
JULY 31, 1996
(UNAUDITED)
----------------
<S> <C>
(000'S OMITTED)
Retained earnings at beginning of period........................................ $235,027
Net income...................................................................... 29,269
Dividends....................................................................... (4,748)
--------
Retained earnings at end of period.............................................. $259,548
========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31,
(UNAUDITED)
---------------------------
<S> <C> <C>
(000'S OMITTED)
1996 1995
---- ----
Cash flows from operating activities:
Net income....................................................................... $ 29,269 $ 14,715
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................ 15,200 13,525
Provision for deferred employee compensation................................. 1,271 1,147
Changes in other current assets and liabilities, net of non-cash
transactions............................................................... (41,722) (16,313)
-------- --------
Net cash provided by operating activities........................................ 4,018 13,074
-------- --------
Cash flows from investing activities:
Purchase of securities or other investments...................................... (3,017) (6,828)
Proceeds from the sale of securities and other investments....................... 16,210 4,176
Purchase of real estate, equipment and leasehold improvements.................... (32,662) (12,058)
-------- --------
Net cash used in investing activities............................................ (19,469) (14,710)
-------- --------
Cash flows from financing activities:
Payment of debt.................................................................. (2,323) (406)
Proceeds from stock options exercised............................................ 2,921 133
Payment of dividends............................................................. (4,748) (4,694)
Purchase of treasury stock....................................................... (417) (3)
-------- --------
Net cash used in financing activities................................................ (4,567) (4,970)
-------- --------
Effect of exchange rate on cash...................................................... 36 (8)
-------- --------
Decrease in cash and cash equivalents................................................ $(19,982) $ (6,614)
======== ========
</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, 1996 and
for the three and nine months ended July 31, 1996 and 1995 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, 1995
was derived from the Company's audited annual report for 1995.
NOTE 2. Inventories of $41,317,000 in 1996 include raw materials of
$6,444,000 and work in process of $34,873,000. At October 31, 1995, inventories
of $27,028,000 included raw materials of $6,288,000 and work in process of
$20,740,000.
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 17,625,439 (three months) and 17,575,904
(nine months) in 1996, and 17,389,569 (three months) and 17,385,313 (nine
months) in 1995.
NOTE 4. 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, 1996, the fair value of
marketable securities exceeded cost by $710,000. At October 31, 1995, the fair
value of marketable securities exceeded cost by $2,333,000. The net unrealized
gains, after deferred taxes, were $397,000 and $1,307,000 at July 31, 1996 and
October 31, 1995, respectively.
4
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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, 1996, the Company had a working capital ratio of 2.85 to 1 and working
capital of $136,864,000.
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, 1996 COMPARED TO QUARTER ENDED JULY 31, 1995
Sales increased by $31,043,000, or 30%, to $134,153,000. The increase was
primarily attributable to higher levels of demand for transactional printing
services and continued growth in non-transactional printing services. The
overall increase in sales, combined with an increase in the gross margin
percentage from 41% to 46%, contributed to a $20,045,000 growth in gross margin.
Other revenue increased $1,343,000 due to capital gains from the sale of
securities.
Selling and administrative expenses increased $10,060,000 to $36,336,000.
This increase was due in part to the variable costs associated with sales and
profitability.
Depreciation and amortization increased $1,105,000, or 26%, primarily due
to the expansion of facilities and the acquisition of equipment.
Interest expense remained relatively unchanged.
The effective overall tax rate decreased slightly from 42% to 41% as a
result of a greater proportion of earnings in states having lower income tax
rates.
As a result of the foregoing, income before income taxes was $22,285,000
and net income increased 89% to $13,162,000.
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NINE MONTHS ENDED JULY 31, 1996 COMPARED TO NINE MONTHS ENDED JULY 31, 1995
Sales increased 28%, or $78,894,000, to $361,277,000 as a result of higher
levels of demand for transactional financial printing services which were
supported by an increase in higher margin services. The overall increase in
sales, combined with an increase in the gross margin percentage from 40% to 44%,
contributed to an increase in gross margin of $47,557,000.
Other revenue, consisting primarily of investment income, increased
$2,238,000 due to higher levels of realized capital gains from the sale of
securities.
Selling and administrative expenses increased $23,167,000 to $97,473,000,
due to increases in expenses related to sales and profitability.
Depreciation and amortization increased $1,675,000, or 12%, primarily due
to expansion of facilities and the acquisition of equipment.
Interest expense remained relatively unchanged.
The effective overall income tax rate remained constant at 43%.
As a result of the foregoing, income before income taxes was $50,973,000,
an increase of 97%, and net income increased 99% to $29,269,000.
6
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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, 1996 JAMES P. O'NEIL
-----------------------------------------------
JAMES P. O'NEIL
PRESIDENT AND CHIEF OPERATING OFFICER
Date: September 12, 1996 DENISE K. FLETCHER
-----------------------------------------------
DENISE K. FLETCHER
VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL
OFFICER
(PRINCIPAL FINANCIAL OFFICER)
</TABLE>
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<PAGE> 9
EXHIBIT INDEX
Exhibit
No. Description
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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, 1996
(Unaudited) and the Condensed Consolidated Statement of Income for the Nine
Months Ended July 31, 1996 (Unaudited) and is qualified in it entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 16,608
<SECURITIES> 0
<RECEIVABLES> 152,749
<ALLOWANCES> 9,036
<INVENTORY> 41,317
<CURRENT-ASSETS> 210,842
<PP&E> 229,951
<DEPRECIATION> 107,184
<TOTAL-ASSETS> 358,827
<CURRENT-LIABILITIES> 73,978
<BONDS> 2,609
0
0
<COMMON> 193
<OTHER-SE> 266,845
<TOTAL-LIABILITY-AND-EQUITY> 358,827
<SALES> 361,277
<TOTAL-REVENUES> 366,092
<CGS> 201,844
<TOTAL-COSTS> 201,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,141
<INTEREST-EXPENSE> 602
<INCOME-PRETAX> 50,973
<INCOME-TAX> 21,704
<INCOME-CONTINUING> 29,269
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,269
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 1.67
</TABLE>
