<PAGE> 1
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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, 1997
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 17,987,446 shares of common stock, par value $.01, outstanding as at
March 13, 1997.
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FINANCIAL STATEMENTS
BOWNE & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31,
1997 OCTOBER 31,
(UNAUDITED) 1996
------------ -----------
(000'S OMITTED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 44,529 $ 31,879
Marketable securities................................................................. 4,909 4,618
Trade accounts receivable, less allowance for doubtful accounts of $10,657,000 and
$8,763,000........................................................................... 167,667 156,817
Inventories........................................................................... 40,577 33,509
Prepaid expenses and other current assets............................................. 11,996 8,080
------------ -----------
Total current assets...................................................... 269,678 234,903
Property, plant and equipment, less depreciation and amortization of $118,294,000 and
$110,804,000............................................................................ 132,811 128,583
Excess cost of subsidiaries over net assets at date of acquisition........................ 21,850 13,867
Other assets.............................................................................. 7,218 8,469
------------ -----------
Totals................................................................ $431,557 $ 385,822
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt................................... $ 3,301 $ 2,753
Accounts payable...................................................................... 21,829 21,317
Accrued liabilities................................................................... 74,165 63,471
------------ -----------
Total current liabilities................................................. 99,295 87,541
Long-term debt -- net of current portion.................................................. 2,762 2,495
Deferred employee compensation and benefits............................................... 15,639 15,052
------------ -----------
Total liabilities......................................................... 117,696 105,088
------------ -----------
Stockholders' equity:
Common stock, par value $.01, issued 19,394,455 shares in 1997 and 19,365,605 shares
in 1996.............................................................................. 194 194
Additional paid-in capital............................................................ 31,671 28,090
Retained earnings..................................................................... 298,124 271,195
Unrealized gains on marketable securities............................................. 954 747
Foreign currency translation adjustment............................................... (1,076) (882)
Treasury stock, at cost, 1,427,417 shares in 1997 and 1,677,184 in 1996............... (16,006) (18,610)
------------ -----------
Total stockholders' equity................................................ 313,861 280,734
------------ -----------
Totals................................................................ $431,557 $ 385,822
============ ==========
</TABLE>
1
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BOWNE & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JANUARY 31,
(UNAUDITED)
-----------------------
(000'S OMITTED)
1997 1996*
-------- -------
<S> <C> <C>
Net sales................................................................................. $138,760 $90,728
Expenses:
Cost of sales......................................................................... 77,041 55,797
Selling and administrative............................................................ 40,763 24,483
Depreciation and amortization......................................................... 6,880 4,864
Interest.............................................................................. 169 194
-------- -------
124,853 85,338
-------- -------
Operating income.......................................................................... 13,907 5,390
Gain on sale of subsidiary................................................................ 35,273 --
Other income.............................................................................. 460 922
-------- -------
Income before income taxes................................................................ 49,640 6,312
-------- -------
Income taxes:
State and local....................................................................... 6,305 616
Federal............................................................................... 14,649 2,307
Foreign............................................................................... 141 (204)
-------- -------
21,095 2,719
-------- -------
Net income................................................................................ $ 28,545 $ 3,593
======== =======
Net income per share...................................................................... $1.61 $.21
======== =======
Dividends per share....................................................................... $.09 $.09
======== =======
</TABLE>
* Certain amounts have been reclassified to conform to the current year
presentation.
CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JANUARY 31, 1997
(UNAUDITED)
-----------------
(000'S OMITTED)
<S> <C>
Retained earnings at beginning of period..................................................... $ 271,195
Net income................................................................................... 28,545
Dividends.................................................................................... (1,616)
--------
Retained earnings at end of period........................................................... $ 298,124
==================
</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)
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income......................................................................... $28,545 $ 3,593
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................. 6,880 4,864
Provision for deferred employee compensation................................... 680 395
Gain on sale of subsidiary..................................................... (35,273) --
Changes in other current assets and liabilities, net of non-cash
transactions................................................................... (10,050) (7,393)
------- -------
Net cash (used in) provided by operating activities................................ (9,218) 1,459
------- -------
Cash flows from investing activities:
Proceeds from sale of subsidiary................................................... 36,679 --
Acquisition of businesses, net of cash acquired.................................... (3,369) --
Purchase of marketable securities or other investments............................. (420) (1,661)
Proceeds from the sale of marketable securities and other investments.............. 402 1,032
Purchase of real estate, equipment and leasehold improvements...................... (9,167) (9,236)
------- -------
Net cash provided by (used in) investing activities................................ 24,125 (9,865)
------- -------
Cash flows from financing activities:
Proceeds from borrowings........................................................... 555 1,026
Payment of debt.................................................................... (1,342) (63)
Proceeds from stock options exercised.............................................. 444 2,123
Purchase of treasury stock......................................................... (297) --
Payment of dividends............................................................... (1,616) (1,578)
------- -------
Net cash (used in) provided by financing activities................................ (2,256) 1,508
------- -------
Effect of exchange rate on cash........................................................ (1) 28
------- -------
Increase (decrease) in cash and cash equivalents....................................... $12,650 $(6,870)
======= =======
</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, 1997
and for the three months ended January 31, 1997 and 1996 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, 1996
was derived from the Company's audited annual report for 1996.
NOTE 2. Inventories of $40,577,000 in 1997 include raw materials of
$6,128,000 and work in process of $34,449,000. At October 31, 1996, inventories
of $33,509,000 included raw materials of $5,583,000 and work in process of
$27,926,000.
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, 1997
and 1996 were 17,773,208 and 17,483,271 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, 1997, the fair value of
marketable securities exceeded cost by $1,646,000. At October 31, 1996, the fair
value of marketable securities exceeded cost by $1,311,000. The net unrealized
gains, after deferred taxes, were $954,000 and $747,000 at January 31, 1997 and
October 31, 1996, respectively.
NOTE 5. On January 6, 1997, the Company sold its 90% interest in Baseline
Financial Services, Inc. The Company recorded a pre-tax gain of $35,273,000 and
an after-tax gain of $20,005,000, or $1.13 per share. The sale will not have a
significant effect on reported sales or earnings from normal operations in the
future.
During the quarter, the Company acquired 80% of IDOC, Inc., by issuing
Bowne Common Stock from treasury shares, and 100% of the financial printing
business of Williams Lea Group, Ltd. of the United Kingdom. Revenues and results
of operations from these acquisitions will not have a significant effect on
reported earnings for 1997.
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, 1997, the Company had a working capital ratio of 2.72 to 1 and
working capital of $170,383,000.
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 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, outside
services, raw materials and other supplies. Due to price competition, the
Company may not always fully recover all of its increased costs.
RESULTS OF OPERATIONS
The Company primarily provides printing and other related services to
produce the varied documentation required by major financial transactions,
corporate periodic reports, restructuring plans for bankrupt companies,
communication to shareholders and mutual fund participants, and commercial
printing. The sales value of each project is dependent, among other things, upon
the size, complexity and type of document printed or service performed, the time
allowed for completion and the level of changes required, and may be further
impacted by the level of competition.
Some of the Company's sources of revenues are affected by cyclical
conditions in the capital markets.
For certain sources of revenue, 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. The costs for
facilities, labor and equipment constitute a major portion of the costs of goods
sold.
QUARTER ENDED JANUARY 31, 1997 COMPARED TO QUARTER ENDED JANUARY 31, 1996
Sales increased 53% to $138,760,000. The increase was primarily
attributable to the continued increase in sales of transactional and
non-transactional printing to corporate, mutual funds and specialized commercial
printing clients and to a lesser extent due to acquisitions of IDOC, Inc. and
the financial printing operations of Williams Lea Group, Ltd. The gross margin
percentage increased by 6%, which is mainly attributable to higher levels of
utilization associated with printing businesses and slightly offset by the
margins associated with newer acquisitions. The overall increase in sales,
combined with the increase in margins, contributed to a $26,788,000 growth in
gross margin.
Selling and administrative expenses increased $16,280,000 to $40,763,000.
This increase was due in part to the variable costs associated with the higher
level of sales and increases related to inflation.
Depreciation and amortization increased $2,016,000, or 41%, primarily due
to the expansion of facilities and the acquisition of equipment.
Interest expense remained relatively constant.
Other revenue decreased $462,000 due to lower investment income.
The effective overall tax rate decreased slightly from 43% to 42%.
Consequently, income before income taxes increased $43,328,000, of which
$35,273,000 resulted from the sale of Baseline Financial Services, Inc.
As a result of the foregoing, net income, after deducting the net gain of
$20,005,000 from the sale of Baseline, was $8,540,000, an increase of 138%
compared with $3,593,000 from the prior year.
5
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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: March 17, 1997 ROBERT M. JOHNSON
-----------------------------------------------
ROBERT M. JOHNSON
CHAIRMAN OF THE BOARD (AND DIRECTOR)
AND CHIEF EXECUTIVE OFFICER
Date: March 17, 1997 DENISE K. FLETCHER
-----------------------------------------------
DENISE K. FLETCHER
VICE PRESIDENT, CHIEF
FINANCIAL OFFICER
</TABLE>
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> 44,529
<SECURITIES> 4,909
<RECEIVABLES> 178,324
<ALLOWANCES> 10,657
<INVENTORY> 40,577
<CURRENT-ASSETS> 269,678
<PP&E> 251,105
<DEPRECIATION> 118,294
<TOTAL-ASSETS> 431,557
<CURRENT-LIABILITIES> 99,295
<BONDS> 2,762
0
0
<COMMON> 194
<OTHER-SE> 313,667
<TOTAL-LIABILITY-AND-EQUITY> 313,861
<SALES> 138,760
<TOTAL-REVENUES> 174,493
<CGS> 77,041
<TOTAL-COSTS> 77,041
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,095
<INTEREST-EXPENSE> 169
<INCOME-PRETAX> 49,640
<INCOME-TAX> 21,095
<INCOME-CONTINUING> 28,545
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,545
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61
</TABLE>
