<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM NOVEMBER 1, 1996 TO DECEMBER 31, 1996
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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)
BOWNE & CO., INC.'S FORMER FISCAL YEAR ENDED ON OCTOBER 31.
THE DECISION WAS MADE ON OCTOBER 30, 1997 TO CHANGE IT TO DECEMBER 31.
(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 17,958,041 shares of common stock, par value $.01, outstanding as at
December 31, 1996.
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<PAGE> 2
FINANCIAL STATEMENTS
BOWNE & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31,
1996 1996
------------- -----------
(000'S OMITTED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 24,097 $ 31,879
Marketable securities................................................................ 4,488 4,618
Trade accounts receivable, less allowance for doubtful accounts of $9,702 and
$8,763.............................................................................. 162,934 156,817
Inventories.......................................................................... 41,917 33,509
Prepaid expenses and other current assets............................................ 12,385 8,080
-------- --------
Total current assets..................................................... 245,821 234,903
Property, plant and equipment, less depreciation and amortization of $116,576 and
$110,804............................................................................... 131,983 128,583
Excess cost of subsidiaries over net assets at date of acquisition....................... 21,847 13,867
Other assets............................................................................. 8,616 8,469
-------- --------
Totals............................................................... $ 408,267 $ 385,822
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt.................................. $ 4,004 $ 2,753
Accounts payable..................................................................... 27,840 21,317
Accrued liabilities.................................................................. 67,122 63,471
-------- --------
Total current liabilities................................................ 98,966 87,541
Long-term debt -- net of current portion................................................. 2,424 2,495
Deferred employee compensation and benefits.............................................. 15,321 15,052
-------- --------
Total liabilities........................................................ 116,711 105,088
-------- --------
Stockholders' equity:
Common stock, par value $.01, issued 19,378,255 shares at December 31, 1996 and
19,365,605 shares at October 31, 1996............................................... 194 194
Additional paid-in capital........................................................... 31,422 28,090
Retained earnings.................................................................... 276,379 271,195
Unrealized gains on marketable securities............................................ 660 747
Foreign currency translation adjustment.............................................. (1,283) (882)
Treasury stock, at cost, 1,420,214 shares at December 31, 1996 and 1,677,184 at
October 31, 1996.................................................................... (15,816) (18,610)
-------- --------
Total stockholders' equity............................................... 291,556 280,734
-------- --------
Totals............................................................... $ 408,267 $ 385,822
======== ========
</TABLE>
See accompanying notes.
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BOWNE & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
TWO MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, JANUARY 31,
1996 1996*
------------- -------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
<CAPTION>
(000'S OMITTED)
<S> <C> <C>
Net sales........................................................................... $90,218 $90,728
Expenses:
Cost of sales................................................................... 49,467 55,797
Selling and administrative...................................................... 26,831 24,483
Depreciation and amortization................................................... 4,716 4,864
Interest........................................................................ 120 194
------- -------
81,134 85,338
------- -------
Operating income.................................................................... 9,084 5,390
Other income........................................................................ 228 922
------- -------
Income before income taxes.......................................................... 9,312 6,312
------- -------
Income taxes:
State and local................................................................. 890 616
Federal......................................................................... 3,475 2,307
Foreign......................................................................... (237) (204)
------- -------
4,128 2,719
------- -------
Net income.......................................................................... $ 5,184 $ 3,593
======= =======
Net income per share................................................................ $ .29 $ .21
======= =======
Dividends per share................................................................. $ -- $ .09
======= =======
</TABLE>
* Certain amounts have been reclassified to conform to the current period
presentation.
See accompanying notes.
2
<PAGE> 4
BOWNE & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWO MONTHS THREE MONTHS
ENDED ENDED
DECEMBER 31, JANUARY 31,
1996 1996
------------- -------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
<CAPTION>
(000'S OMITTED)
<S> <C> <C>
Cash flows from operating activities:
Net income...................................................................... $ 5,184 $ 3,593
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 4,716 4,864
Provision for deferred employee compensation................................ 282 395
Changes in other current assets and liabilities, net of non-cash
transactions................................................................ (8,792) (7,393)
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Net cash provided by operating activities....................................... 1,390 1,459
------------- -------------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired................................. (3,369) --
Purchase of marketable securities or other investments.......................... (231) (1,661)
Proceeds from the sale of marketable securities and other investments........... 300 1,032
Purchase of property, plant, and equipment...................................... (5,630) (9,236)
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Net cash used in investing activities........................................... (8,930) (9,865)
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Cash flows from financing activities:
Proceeds from borrowings........................................................ 894 1,026
Payment of debt................................................................. (1,265) (63)
Proceeds from stock options exercised........................................... 207 2,123
Purchase of treasury stock...................................................... (107) --
Payment of dividends............................................................ -- (1,578)
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Net cash (used in) provided by financing activities............................. (271) 1,508
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Effect of exchange rate changes on cash............................................. 29 28
------------- -------------
Decrease in cash and cash equivalents............................................... $(7,782) $(6,870)
============= =============
</TABLE>
See accompanying notes.
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BOWNE & CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. The financial information included herein at December 31, 1996 and
for the periods ended December 31, 1996 and January 31, 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 that date and the results of operations for those periods,
respectively. The information in the Condensed Consolidated Balance Sheet as of
October 31, 1996 was derived from the Company's 1996 audited financial
statements.
NOTE 2. Inventories of $41,917,000 at December 31, 1996 include raw
materials of $6,068,000 and work in process of $35,849,000. 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 two months ended December 31, 1996 and
three months ended January 31, 1996 were 17,918,242 and 17,483,271,
respectively.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128). FAS 128
is designed to improve the EPS information in financial statements by
simplifying the existing computational guidelines (i.e., APB Opinion No. 15,
"Earnings Per Share"), revising the disclosure requirements and increasing the
comparability of EPS on an international basis. FAS 128 is effective for
financial statements issued for periods ending after December 15, 1997. The
application of FAS 128 does not have a material effect on the periods included
in this report.
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 December 31, 1996, the fair value of
marketable securities exceeded cost by $1,269,000. At October 31, 1996, the fair
value of marketable securities exceeded cost by $1,311,000. The net unrealized
gains, after deferred taxes, were $660,000 and $747,000 at December 31, 1996 and
October 31, 1996, respectively.
NOTE 5. During November 1996, the Company acquired 80% of IDOC, Inc., a
localization company, by issuing 261,438 shares of Bowne Common Stock from
treasury shares, and 100% of the financial printing business of Williams Lea
Group, Ltd. of the United Kingdom for cash. Both acquisitions were accounted for
by the purchase method of accounting. Revenues and results of operations from
these acquisitions were not significant for the period ended December 31, 1996.
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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
December 31, 1996, the Company had a working capital ratio of 2.48 to 1 and
working capital of $146,855,000.
During November 1996, the Company completed the cash purchase of the
financial printing business of Williams Lea Group, Ltd. Cash generated from
operations was used to fund this acquisition. It is expected that the cash
generated from operations, working capital and the Company's available credit
facilities will be sufficient to fund the new businesses during the integration
process, finance future acquisitions, finance capital expenditures, and provide
for the payment of dividends.
FOREIGN EXCHANGE
The Company derived a small portion of its revenues from various foreign
sources. The Company has not experienced significant gains or losses as a result
of fluctuations in the exchange rates of the related foreign currencies. To
date, the Company has not used foreign currency hedging instruments to reduce
its exposure to foreign exchange fluctuations.
CASH FLOWS
The Company had net cash provided by operating activities of $1,390,000 for
the two months ended December 31, 1996 and $1,459,000 for the three months ended
January 31, 1996.
Net cash used in investing activities was $8,930,000 for the two months
ended December 31, 1996 and reflected expenditures related to the expansion of
facilities and funds used for one of the acquisitions. Net cash used in
investing activities was $9,865,000 for the three months ended January 31, 1996
and included a greater level of capital expenditures as compared to the
two-month period.
Net cash provided by (used in) financing activities was ($271,000) for the
two months ended December 31, 1996 and $1,508,000 for the three months ended
January 31, 1996. During the three month period ended January 31, 1996, cash was
provided by proceeds from stock options exercised and borrowings offset by the
January 1996 dividend payment. The net cash used during the two months ended
December 31, 1996, resulted from lower proceeds from stock options exercised and
increased debt repayment. There was no dividend payment during the two month
period.
RESULTS OF OPERATIONS
The Company primarily provides printing and other related services.
Revenues related to the transactional financial printing business are affected
by cyclical conditions of the capital markets.
In late 1996, the Company acquired a localization company and started two
new business units to provide document outsourcing and digital print services.
The revenues associated with these businesses traditionally have lower margins
than those of the print operations when the capital markets are robust, however,
these units are less cyclical in nature and are expected to have steadier
margins. As such, these lines of business did not have a significant impact on
results of operations for the two months ended December 31, 1996.
5
<PAGE> 7
TWO MONTHS ENDED DECEMBER 31, 1996 COMPARED TO THREE MONTHS ENDED JANUARY 31,
1996
On October 30, 1997, the Company elected to change the date of its fiscal
year-end to December 31. The management discussion that follows compares the two
months ended December 31, 1996 to the three months ended January 31, 1996. The
Company did not recast the data for the two month period ended December 31, 1995
because the accounting systems in place at that time required a certain level of
procedural techniques in order for financial data to be prepared for external
reporting purposes. These procedures were implemented on a quarterly basis only.
Consequently, to recast this period would have been impractical and would have
required significant judgmental estimates.
The Company's net sales for the two months ended December 31, 1996 amounted
to $90,218,000 compared to net sales of $90,728,000 for the three months ended
January 31, 1996. The two months ended December 31, 1996 reflected the greater
demand for transactional sales resulting from the continued strength in the
capital markets. In addition, to a lesser extent this period included sales from
the newly acquired companies of IDOC, Inc. and the financial printing operations
of Williams Lea Group, Ltd. The gross margin percentage was 45% for the two
months ended December 31, 1996 compared to 39% for the three months ended
January 31, 1996. The gross profit margin increase was mainly attributable to
higher levels of utilization associated with the printing businesses.
Selling and administrative expenses for the two months ended December 31,
1996 totaled $26,831,000 compared to $24,483,000 for the three months ended
January 31, 1996. The increase was due in part to the variable costs associated
with increased sales and profitability in our printing businesses, and to a
lesser extent, the selling and administrative costs related to the new
businesses.
Depreciation and amortization for the two months ended December 31, 1996
amounted to $4,716,000 compared to $4,864,000 for the three months ended January
31, 1996. Depreciation and amortization for the two months ended December 31,
1996 reflected higher charges resulting from a greater level of fixed assets
compared to the asset level for the prior year period and, to a lesser extent,
charges related to the new businesses.
Interest expense for the two months ended December 31, 1996 was
proportionately comparable to the three months ended January 31, 1996 because
the debt levels remained fairly constant.
Other income for the two months ended December 31, 1996 amounted to
$228,000 compared to $922,000 for the three months ended January 31, 1996. This
decrease resulted from lower investment income.
The effective overall tax rate increased slightly to 44% for the two months
ended December 31, 1996 from 43% for the three months ended January 31, 1996.
As a result of the foregoing, net income was $5,184,000 for the two months
ended December 31, 1996 compared to $3,593,00 for the three months ended January
31, 1996.
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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: December 15, 1997 ROBERT M. JOHNSON
-----------------------------------------------
ROBERT M. JOHNSON
CHAIRMAN OF THE BOARD (AND DIRECTOR)
AND CHIEF EXECUTIVE OFFICER
Date: December 15, 1997 DENISE K. FLETCHER
-----------------------------------------------
DENISE K. FLETCHER
VICE PRESIDENT, CHIEF
FINANCIAL OFFICER
</TABLE>
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<PAGE> 9
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 December 31, 1996
(Unaudited) and the Condensed Consolidated Statement of Income for the Two
Months Ended December 31, 1996 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 24,097
<SECURITIES> 4,488
<RECEIVABLES> 172,636
<ALLOWANCES> 9,702
<INVENTORY> 41,917
<CURRENT-ASSETS> 245,821
<PP&E> 248,559
<DEPRECIATION> 116,576
<TOTAL-ASSETS> 408,267
<CURRENT-LIABILITIES> 98,966
<BONDS> 2,424
0
0
<COMMON> 194
<OTHER-SE> 291,362
<TOTAL-LIABILITY-AND-EQUITY> 408,267
<SALES> 90,218
<TOTAL-REVENUES> 90,218
<CGS> 49,467
<TOTAL-COSTS> 49,467
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 729
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> 9,312
<INCOME-TAX> 4,128
<INCOME-CONTINUING> 5,184
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,184
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
