SECURITIES AND EXCHANGE COMMISSION

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 September 30, 1999

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.

(212) 924-5500

NOT APPLICABLE

     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.

[X]  Yes       [ ]  No

      The number of shares outstanding of each of the issuer’s classes of common stock was 36,910,900 shares of common stock, par value $.01, outstanding as at November 9, 1999.

FINANCIAL STATEMENTS

BOWNE & CO., INC. AND SUBSIDIARIES

      See Notes to Condensed Consolidated Financial Statements.

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BOWNE & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

      See Notes to Condensed Consolidated Financial Statements.

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BOWNE & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

See Notes to Condensed Consolidated Financial Statements.

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BOWNE & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Condensed Consolidated Financial Statements.

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BOWNE & CO., INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      Note 1. The financial information as of September 30, 1999 and for the three and nine month periods ended September 30, 1999 and 1998 has been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the consolidated financial position, results of operations and of cash flows for each period presented have been made on a consistent basis. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the Company’s annual report and consolidated financial statements. Operating results for the three and nine months ended September 30, 1999 may not be indicative of the results that may be expected for the full year.

      Note 2. Inventories of $48,899 at September 30, 1999 include raw materials of $13,368 and work-in-process of $35,531. At December 31, 1998, inventories of $30,593 included raw materials of $6,977 and work-in-process of $23,616.

      Note 3. The Company had a two-for-one stock split in the form of a 100% stock dividend to shareholders of record at the close of business on August 14, 1998. The shares were distributed on August 26, 1998. In addition, effective in the third quarter 1998, the split-adjusted quarterly dividend rate was raised from $.045 to $.055 per share.

      Net income per share is calculated for basic earnings per share based on the weighted-average number of shares outstanding after giving effect to the 1998 stock split, and for diluted earnings per share after adjustment for the assumed conversion of all potentially dilutive securities. The following weighted-average shares outstanding reflect the aforementioned stock split:

      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 September 30, 1999, the fair value of marketable securities exceeded cost by $6,850. Most of this unrealized gain came as a result of the Company’s investment in EDGAR On-Line. At December 31, 1998, this investment was carried at cost and classified in other assets. Upon consummation of EDGAR On-Line’s IPO in June, 1999, these assets were reclassified as marketable securities. At December 31, 1998, the fair value of marketable securities exceeded cost by $197. The net unrealized gains, after deferred taxes, were $3,562 and $102 at September 30, 1999 and December 31, 1998, respectively.

      The foreign currency translation adjustment was $3,526 and $3,823 at September 30, 1999 and December 31, 1998, respectively.

      Note 5. During the first quarter of 1999, the Company acquired KAPA International, a Korean-based company, for approximately $1 million, to enhance the Company’s global solutions services.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In addition, the Company recorded approximately $3 million as goodwill in connection with the purchase of the remaining 20% of Quadravision Communications Ltd., a provider of Internet Consulting and Development solutions.

      Note 6. At September 30, 1999, the Company had borrowings of $110 million under its $300 million unsecured five year revolving credit agreement, with a blended interest rate of approximately 5.7%. At December 31, 1998, the Company had borrowings of $68 million under this agreement.

      Note 7. Segment Information

      The Company continues to focus its business on “Empowering Your Information,” a term used to define the managing, repurposing and distribution of a client’s information. The Company manages and repurposes information for distribution by digital, Internet or paper media. It manages documents on the clients’ site or at its own facilities.

      The Company’s operations are classified into four reportable business segments: Financial Printing, Outsourcing, Localization and Internet Consulting and Development. The services of each segment are marketed throughout the world. The major services provided by each segment are as follows:

	Financial Printing —	transactional financial, corporate reporting, mutual fund, commercial and digital printing.

	Outsourcing —	document management solutions primarily for the legal and financial communities.

	Localization —	translation and reengineering of software products.

	Internet Consulting and Development —	integrated personalization solutions primarily for the financial sector.

      Information regarding the operations of each business segment is set forth below. Performance is evaluated based on several factors, of which the primary financial measure is business segment income before interest, taxes, depreciation and amortization of intangible assets (“EBITDA”). The Company also uses income before interest, taxes, and amortization expenses (“EBITA”) as a measure of performance; therefore, this information is also presented. The Company manages income taxes on a global basis. Segment performance is evaluated exclusive of the disposal of business units, other expenses, and other income.

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BOWNE & CO., INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

Cautionary Statement Concerning Forward-Looking Statements

      The Company desires to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the “1995 Act”). The 1995 Act provides a “safe harbor” for forward-looking statements to encourage companies to provide information without fear of litigation so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected.

      Set forth below is a summary of factors the Company believes important to its business and that could cause actual results to differ from the Company’s expectations. The Company is publishing these factors pursuant to the 1995 Act. Such factors should not be construed as exhaustive or as an admission regarding the adequacy of disclosure made by the Company prior to the effective date of the 1995 Act. Readers should understand that many factors govern whether any forward-looking statements can or will be achieved. Any one of those results could cause actual results to differ materially from those projected. The words “believe,” “expect,” “anticipate,” “intend,” “aim,” “will” and similar words identify forward-looking statements. The Company cautions readers that the following important factors, among others, could affect the Company’s actual results and could cause the Company’s actual results to differ materially from those expressed either orally or in writing in any forward-looking statements made by or on behalf of the Company.

	—	Loss or retirement of key executives, employees or technical personnel.
	—	The effect of changes within the Company’s organization or in the compensation and benefit plans and the ability of the Company to attract and retain experienced and qualified management and sales personnel.
	—	Natural events and acts of God such as earthquakes, fires or floods.
	—	The Company’s ability and the ability of third parties with whom the Company has relationships to become Year 2000 compliant.
	—	The ability of the Company to integrate the operations of acquisitions into its operations.
	—	General economic or market conditions affecting the demand for transactional financial printing or other solution offerings.

Liquidity and Capital Resources

      The Company’s financial position and liquidity continues to be strong. On September 30, 1999, the Company had a working capital ratio of 2.09 to 1 and working capital of $180,259, compared to a ratio of 1.70 to 1 and working capital of $113,564 at December 31, 1998.

Cash Flows

      The Company had net cash provided by operating activities of $450 and $29,290 for the nine months ended September 30, 1999 and 1998, respectively. This difference reflects reduced net income and larger increases in certain working capital (primarily accounts receivable and inventory), partially offset by larger non-cash charges for depreciation and amortization.

      Net cash used in investing activities was $41,504 and $159,645 for the nine months ended September 30, 1999 and 1998, respectively. The decrease was primarily the result of 1998 acquisitions, mainly the purchase of Donnelley Enterprise Solutions Incorporated (DESI) in July 1998.

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      Net cash provided by financing activities was $37,404 and $122,064 for the nine months ended September 30, 1999 and 1998, respectively. This decrease was primarily a result of the lower net borrowings in the current year.

Foreign Exchange

      The Company derives a portion of its revenues from various foreign sources. To date, the Company has not experienced significant gains or losses as a result of fluctuations in the exchange rates of the related foreign currencies. However, as the Company expands its global presence, fluctuations may become significant. To date, the Company has not used foreign currency hedging instruments to reduce its exposure to foreign exchange fluctuations.

Prospective Accounting Pronouncements

      Statement of Financial Accounting Standards No. 133 (“SFAS 133”), “Accounting for Derivative Instruments and Hedging Activities,” was issued in June 1998. SFAS 133 standardizes the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, by requiring recognition of those instruments as assets and liabilities and to measure them at fair value.

      In June, 1999, the FASB issued Statement of Financial Accounting Standards No. 137, “Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective date of SFAS No. 133,” which amends SFAS No. 133 to be effective for all fiscal years beginning after June 15, 2000. The adoption of this pronouncement is not expected to have a material effect on the Company’s consolidated financial statements.

Impact of the Euro Conversion

      On January 1, 1999, 11 of the 15 member countries of the European Union established fixed conversion rates between their existing sovereign currencies (“legacy currencies”) and a single currency called the euro. The legacy currencies are scheduled to remain legal tender as denominations of the euro during the transition period from January 1, 1999 to January 1, 2002. Beginning January 1, 2002, euro-denominated bills and coins will be introduced and by July 1, 2002, legacy currencies will no longer be legal tender.

      The Company has initiated an internal analysis regarding the business and systems issues related to the euro conversion and is in the process of developing a plan to ensure that all necessary modifications are made on a timely basis. As the first step to accommodate the introduction of the euro, the Company’s operations in markets that are adopting the euro expect to be able to accept payments and pay suppliers in euros and have the ability to indicate the euro equivalent of pricing on invoices. During the transition period, the Company will be monitoring customer and competitor reaction to the euro and will update the plan as needed.

      The Company believes that the conversion to the euro will not have a significant impact on the strategy for the Company’s European operations. The euro is not expected to have a significant competitive impact. The estimated costs to convert all affected systems to the euro will not be finalized until the Company has finalized its plan. It is not likely that the costs of conversion will have a material adverse effect on the Company’s results of operations, financial position or cash flow.

Year 2000 Readiness Disclosure

      Computer systems which have defined the applicable year with two digits rather than four may produce erroneous results or fail to operate when handling dates near the end of 1999 and into 2000. This Year 2000 problem may arise within the Company’s administrative, production, communications and distribution operations.

      The Company initiated a project in 1997 to evaluate the potential impact of the Year 2000 computer problems on its business. The project included an analysis of all of the Company’s computer systems and suppliers and the development of a plan to make any changes required to essential systems and deploy any necessary software by 1999.

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      The Company has continued its program to minimize the impact of the Year 2000 problem by addressing internal computer systems and other intelligent equipment deployed globally across all of its business units. With the aid of third party service providers, the Company has inventoried all components critical to the continued operation of all of its facilities and support functions.

      The on-going changes, replacement or retirement of non-compliant inventoried items is being monitored and has progressed on schedule in accordance with a structured program designed to achieve full Year 2000 compliance in 1999. As the Company enters the closing stages of its Year 2000 compliance program, it continues to test its mission critical production and operational systems to ensure that they remain compliant.

      The Company is sensitive to the Year 2000 well-being of its key suppliers. The Company has instituted a program to manage the business risks posed by the potential inability of our key suppliers and service providers to properly respond to their own Year 2000 issues by contacting them to inquire as to their Year 2000 compliance. Although there can be no certainty that any major business partner will function without disruption, the Company has been developing contingency plans for each of these critical business partner risks and will continue to monitor the status of their Year 2000 programs. This business continuity focus has been designed to mitigate serious disruptions to its operations beyond the end of 1999 and operate independent of our external providers’ Year 2000 compliance.

      The Company’s estimate of the total cost related to our Year 2000 program is approximately $8.4 million, of which $6.6 million has been incurred from inception through September 30, 1999. Of the total estimated costs, approximately $2.4 million will be capitalized. Spending for the Year 2000 program is being funded through operating cash flows and borrowings. These costs do not include normal system upgrades and replacements.

Results of Operations

      Historically, the Company primarily provided financial printing and other related services. Revenues related to the transactional financial printing services are affected by cyclical conditions of the capital markets. Over the past few years the Company has expanded its service offerings.

      The Company decided to focus its business on empowering information to become the global market leader in this field by combining superior customer service with appropriate new technologies to manage, repurpose and distribute a client’s information anywhere in the world. The Company’s goal is to become the empowerer of its clients’ information to global companies. The Company is investing in building its resources outside the United States to enable it to provide worldwide information empowerment solutions to its global clients. While the Company is growing and integrating these services outside the United States, these operations are anticipated to operate at a loss. We expect to continue to invest outside the United States as the Company grows its information solution offerings and positions itself to take advantage of the impact of the European Monetary Union in the financial services industry.

      Management evaluates the performances of its operating segments separately to monitor the different factors affecting financial results. “EBITDA” and “EBITA” are measured because management believes that such information is useful in evaluating the results of certain segments relative to other entities which operate within these industries and to its affiliated segments. EBITDA and EBITA are alternatives to and not a replacement measure of operating performance as determined in accordance with generally accepted accounting principles.

      Consistent with its focus on expanding various service offerings to clients and empowering information, the Company made a number of acquisitions in 1998 in the Outsourcing, Localization and Internet Consulting and Development business segments. As anticipated, these acquisitions, along with the resources allocated to integrate these services, had an impact on the results of operations during both the first nine months of 1999 and 1998. Management plans to continue to invest in all business segments. Historically, the Company primarily provided financial printing services which have experienced fluctuations related to market trends.

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      The decline in the first nine months of 1999 from the same period in 1998 in EBITDA and EBITA in the Financial Printing segment is primarily due to increased sales of the lower margin classes of service within this segment and an increase in selling and administrative expenses, partially offset by reduced purchased in-process research and development costs.

      Positive EBITDA from the Company’s Outsourcing segment was achieved in 1999 primarily as the result of the acquisition of DESI in July 1998. This acquisition not only produced an increase in revenue from 1998, but also allowed the Outsourcing segment to better leverage certain selling and administrative expenses through its integration with the Company’s previous outsourcing business. Outsourcing achieved a profit on an EBITA basis; however, the improvement was less than the EBITDA improvement due to the increased depreciation expense on equipment associated with clients being supported as a result of the DESI acquisition.

      The EBITDA loss from the Localization segment was substantially reduced mainly due to staffing reductions and the streamlining of certain processes. The EBITDA loss relating to the Company’s Internet Consulting and Development segment continued to increase, as a result of reduced revenues and certain integration costs.

  Quarter Ended September 30, 1999 Compared to Quarter Ended September 30, 1998

      Net sales increased $14,930, or approximately 7%, to $240,350. The increase was attributable to growth in outsourcing and financial printing. There was a $1,627 increase in gross margin, but the gross margin percentage decreased two percentage points to 40%. This decrease was primarily attributable to a greater percentage of sales from the lower margin segments and a greater proportion of sales from the lower margin products within the Financial Printing segment.

      Selling and administrative expenses increased by $3,596, or 5%, to $69,757. This increase was due to the selling costs related to the increase in sales and the administrative costs related to increased staff (primarily in the Financial Printing segment). As a percentage of sales, these expenses remained constant at 29%.

      Depreciation and amortization increased $636, or 5%, primarily due to the expansion of facilities and the acquisition of equipment, including computer systems.

      There was no purchased in-process research and development costs during this quarter, which results in a decrease of $6,000 from 1998.

      Interest expense decreased $1,210 primarily as a result of lower average borrowings under the revolving credit agreement in the current year’s quarter.

      Other expense increased by $1,687 primarily due to various non-operating transactions, higher losses on foreign currency than were realized in the prior year, and decreased interest income.

      The effective overall tax rate for the quarter decreased from 83% to 51% because of last year’s purchased in-process research and development, which was not deductible for tax purposes. The income tax rate on pre-tax income before amortization expense and purchased in-process research and development remained 42% each quarter.

      As a result of the foregoing, net income was $5,644 as compared to $1,452 for the same period last year.

  Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30, 1998

      Net sales increased $92,473, or approximately 14%, to $731,506. The increase was primarily attributable to acquisitions made in 1998. There was a $4,665 increase in gross margin, but the gross margin percentage decreased five percentage points to 41%. This decrease was primarily attributable to a greater percentage of sales from the lower margin segments and a greater proportion of sales from the lower margin products within the Financial Printing segment.

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      Selling and administrative expenses increased by $18,301, or 9%, to $213,427. This increase was due to the administrative costs related to the new businesses and larger staffs and higher selling costs resulting from the increase in sales. As a percentage of total sales, these expenses were 31% in 1998 and 29% in 1999.

      Depreciation and amortization increased $9,765, or 34%, primarily due to new businesses, the expansion of facilities, and the acquisition of equipment, including computer systems.

      There was no purchased in-process research and development costs during 1999, which results in a decrease of $7,200 from 1998.

      Interest expense increased by $1,633 primarily from borrowings under the revolving credit agreement to finance the acquisitions that occurred during 1998.

      Other income decreased by $434 due primarily to decreased interest income.

      The effective overall tax rate for the first nine months remained constant at 48%. The income tax rate on pre-tax income before amortization expense and purchased in-process research and development decreased from 40% to 39%.

      As a result of the foregoing, net income was $20,550 as compared to $29,857 for the same period last year.

Quantitative and Qualitative Disclosure about Market Risk

      The Company’s market risk is principally associated with market interest rate fluctuations related to its debt obligations. Any such market risk is not considered significant by the Company.

      To date, the Company has not experienced significant gains or losses as a result of fluctuations in the exchange rates of the related foreign currencies. The Company continues to address the risks posed by exchange rate fluctuations.

PART II

OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

      (a)  Exhibit 27 — Financial Data Schedule

      (b)  The Company did not file any reports on Form 8-K for the quarter ended September 30, 1999.

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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.
	/s/ ROBERT M. JOHNSON
	Robert M. Johnson
	(Chairman of the Board (and Director)
	and Chief Executive Officer)

Date: November 12, 1999

	/s/ DENISE K. FLETCHER
	Denise K. Fletcher
	(Senior Vice President, Chief Financial Officer)

Date: November 12, 1999

	/s/ C. CODY COLQUITT
	C. Cody Colquitt
	(Vice President and Controller)
	(Principal Accounting Officer)

Date: November 12, 1999

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