BOWNE & CO INC
10-Q, 1996-03-15
COMMERCIAL PRINTING
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<PAGE>   1
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               ------------------
 
                                   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 JANUARY 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
                                     ----------------   ----------------

                            ------------------------
 
                         COMMISSION FILE NUMBER 1-5842
 
                            ------------------------
 
                               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 17,603,359 shares of common stock, par value $.01, outstanding as at
March 6, 1996.
 
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   2
 
FINANCIAL STATEMENTS
 
                       BOWNE & CO., INC. AND SUBSIDIARIES
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                                         JANUARY 31,
                                                                                             1996       OCTOBER 31,
                                                                                         (UNAUDITED)        1995
                                                                                         ------------   -----------
<S>                                                                                      <C>            <C>
                                                                                               (000'S OMITTED)
                                                       ASSETS
Current assets:
    Cash and cash equivalents...........................................................   $ 29,720       $ 36,590
    Trade accounts receivable, less allowance for doubtful accounts of $5,773,000 and
     $6,269,000.........................................................................     98,232        114,532
    Inventories.........................................................................     33,068         27,028
    Prepaid expenses and sundry receivables.............................................      8,340          6,184
                                                                                         ------------   ------------
                Total current assets....................................................    169,360        184,334
Marketable securities...................................................................     17,673         16,015
Real estate, equipment and leasehold improvements, less depreciation and amortization of
  $99,255,000 and $94,996,000...........................................................    109,357        105,130
Excess cost of subsidiaries over net assets at date of acquisition......................     14,013         14,223
Other assets............................................................................      5,509          5,968
                                                                                         ------------   ------------
                    Totals..............................................................   $315,912       $325,670
                                                                                         ============   ============
                                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Notes payable and current portion of long-term debt.................................   $  4,034       $  3,075
    Accounts payable....................................................................     16,195         16,961
    Accrued liabilities.................................................................     32,912         47,264
                                                                                         ------------   ------------
                Total current liabilities...............................................     53,141         67,300
Long-term debt -- net of current portion................................................      2,763          2,830
Deferred employee compensation and benefits.............................................     14,326         14,031
                                                                                         ------------   ------------
                Total liabilities.......................................................     70,230         84,161
                                                                                         ------------   ------------
Stockholders' equity:
    Common stock, par value $.01, issued 19,218,105 shares in 1996 and 19,067,429 shares
     in 1995............................................................................        192            191
    Additional paid-in capital..........................................................     26,392         24,270
    Retained earnings...................................................................    237,042        235,027
    Unrealized gains on marketable securities...........................................      1,892          1,307
    Foreign currency translation adjustment.............................................     (1,643)        (1,093)
    Treasury stock, at cost, 1,657,196 shares in 1996 and 1995..........................    (18,193)       (18,193)
                                                                                         ------------   ------------
                Total stockholders' equity..............................................    245,682        241,509
                                                                                         ------------   ------------
                    Totals..............................................................   $315,912       $325,670
                                                                                         ============   ============
</TABLE>
 
                                        1
<PAGE>   3
 
                       BOWNE & CO., INC. AND SUBSIDIARIES
 
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                                                                   THREE MONTHS
                                                                                                      ENDED
                                                                                                   JANUARY 31,
                                                                                                   (UNAUDITED)
                                                                                              ----------------------
                                                                                                 (000'S OMITTED)
                                                                                               1996           1995
                                                                                              -------        -------
<S>                                                                                           <C>            <C>
Revenues:
    Net sales..............................................................................   $90,728        $76,813
    Other..................................................................................       922            964
                                                                                              -------        -------
                                                                                               91,650         77,777
                                                                                              -------        -------
Expenses:
    Cost of sales..........................................................................    55,797         47,927
    Selling and administrative.............................................................    24,483         21,509
    Depreciation and amortization..........................................................     4,864          4,478
    Interest...............................................................................       194            213
                                                                                              -------        -------
                                                                                               85,338         74,127
                                                                                              -------        -------
Income before income taxes.................................................................     6,312          3,650
                                                                                              -------        -------
Income taxes:
    State and local........................................................................       616            264
    Federal................................................................................     2,307          1,067
    Foreign................................................................................      (204)           292
                                                                                              -------        -------
                                                                                                2,719          1,623
                                                                                              -------        -------
Net income.................................................................................   $ 3,593        $ 2,027
                                                                                              =======        =======
Net income per share.......................................................................      $.21           $.12
                                                                                              =======        =======
Dividends per share........................................................................      $.09           $.09
                                                                                              =======        =======
</TABLE>
 
             CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
 
<TABLE>
<CAPTION>
                                                                                                   THREE MONTHS
                                                                                                       ENDED
                                                                                                 JANUARY 31, 1996
                                                                                                    (UNAUDITED)
                                                                                                 -----------------
                                                                                                  (000'S OMITTED)
<S>                                                                                              <C>
Retained earnings at beginning of period.....................................................         $235,027
Net income...................................................................................            3,593
Dividends....................................................................................           (1,578)
                                                                                                      --------
Retained earnings at end of period...........................................................         $237,042
                                                                                                 ==================
</TABLE>
 
                                        2
<PAGE>   4
 
                       BOWNE & CO., INC. AND SUBSIDIARIES
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                              THREE MONTHS ENDED
                                                                                                  JANUARY 31,
                                                                                                  (UNAUDITED)
                                                                                           -------------------------

                                                                                                (000'S OMITTED)
                                                                                            1996                1995
<S>                                                                                        <C>               <C>
Cash flows from operating activities:
    Net income.........................................................................    $ 3,593           $ 2,027
    Adjustments to reconcile net income to net cash provided by operating activities:
        Depreciation and amortization..................................................      4,864             4,478
        Provision for deferred employee compensation...................................        395               385
        Changes in other current assets and liabilities, net of non-cash
        transactions...................................................................     (7,393)           (9,740)
                                                                                           -------           -------
    Net cash provided by (used in) operating activities................................      1,459            (2,850)
                                                                                           -------           -------
Cash flows from investing activities:
    Purchase of marketable securities or other investments.............................     (1,661)           (3,014)
    Proceeds from the sale of marketable securities and other investments..............      1,032               961
    Purchase of real estate, equipment and leasehold improvements......................     (9,236)           (3,425)
                                                                                           -------           -------
    Net cash used in investing activities..............................................     (9,865)           (5,478)
                                                                                           -------           -------
Cash flows from financing activities:
    Proceeds from borrowings...........................................................      1,026               415
    Payment of debt....................................................................        (63)             (217)
    Proceeds from stock options exercised..............................................      2,123                 7
    Payment of dividends...............................................................     (1,578)           (1,564)
                                                                                           -------           -------
    Net cash provided by (used in) financing activities................................      1,508            (1,359)
                                                                                           -------           -------
Effect of exchange rate on cash........................................................         28                64
                                                                                           -------           -------
Decrease in cash and cash equivalents..................................................    $(6,870)          $(9,623)
                                                                                           =======           =======
</TABLE>
 
                                        3
<PAGE>   5
 
                       BOWNE & CO., INC. AND SUBSIDIARIES
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
     NOTE 1.  The financial information included herein as at January 31, 1996
and for the three months ended January 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 $33,068,000 in 1996 include raw materials of
$6,408,000 and work in process of $26,660,000. 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 for the three months ended January 31, 1996
and 1995 were 17,483,271 and 17,379,358 respectively.
 
     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 January 31, 1996, the fair value of
marketable securities exceeded cost by $3,379,000. At October 31, 1995, the fair
value of marketable securities exceeded cost by $2,333,000. The net unrealized
gains, after deferred taxes, were $1,892,000 and $1,307,000 at January 31, 1996
and October 31, 1995, respectively.
 
                                        4
<PAGE>   6
 
          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
January 31, 1996, the Company had a working capital ratio of 3.19 to 1 and
working capital of $116,219,000.
 
     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 JANUARY 31, 1996 COMPARED TO QUARTER ENDED JANUARY 31, 1995
 
     Sales increased by $13,915,000 or 18%. The increase was primarily
attributable to higher levels of demand for non-transactional printing services.
The overall increase in sales, combined with a relatively flat gross margin
percentage, contributed to a $6,045,000 growth in gross margin.
 
     Other revenue decreased $42,000 due to slightly lower investment income.
 
     Selling and administrative expenses increased $2,974,000 to $24,483,000.
This increase was due in part to the variable costs associated with sales and
increases related to inflation.
 
     Depreciation and amortization increased $386,000, or 9%, primarily due to
the expansion of facilities and the acquisition of equipment.
 
     Interest expense remained relatively constant.
 
     The effective overall tax rate decreased slightly from 44% to 43%.
 
     As a result of the foregoing, income before income taxes was $6,312,000 and
net income increased 77% to $3,593,000.
 
                                        5
<PAGE>   7
 
                                   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.
 

Date:  March 12, 1996                        ROBERT M. JOHNSON
       --------------         -----------------------------------------------
                                             ROBERT M. JOHNSON
                                  (VICE CHAIRMAN OF THE BOARD, PRESIDENT
                                       AND CHIEF EXECUTIVE OFFICER)



Date:  March 12, 1996                         JAMES P. O'NEIL
       --------------         -----------------------------------------------
                                              JAMES P. O'NEIL
                               (EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING
                                                  OFFICER
                               (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER))
 

                                        6
<PAGE>   8
                                EXHIBIT INDEX



Exhibit
  No.                            Description
- -------                          -----------

   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 January 31, 1996
(Unaudited) and the Condensed Consolidated Statement of Income for the Three
Months Ended January 31, 1996 (Unaudited) and is qualified in it entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          OCT-31-1996
<PERIOD-START>                             NOV-01-1995
<PERIOD-END>                               JAN-31-1996
<CASH>                                          29,720
<SECURITIES>                                         0
<RECEIVABLES>                                  104,005
<ALLOWANCES>                                     5,773
<INVENTORY>                                     33,068
<CURRENT-ASSETS>                               169,360
<PP&E>                                         208,612
<DEPRECIATION>                                  99,255
<TOTAL-ASSETS>                                 315,912
<CURRENT-LIABILITIES>                           53,141
<BONDS>                                          2,763
                                0
                                          0
<COMMON>                                           192
<OTHER-SE>                                     245,490
<TOTAL-LIABILITY-AND-EQUITY>                   315,912
<SALES>                                         90,728
<TOTAL-REVENUES>                                91,650
<CGS>                                           55,797
<TOTAL-COSTS>                                   55,797
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                 (223)
<INTEREST-EXPENSE>                                 194
<INCOME-PRETAX>                                  6,312
<INCOME-TAX>                                     2,719
<INCOME-CONTINUING>                              3,593
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     3,593
<EPS-PRIMARY>                                      .21
<EPS-DILUTED>                                      .21
        

</TABLE>


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