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Bowne Reports Q3 Loss on Charges: Revenue Increases 15%

Thursday, November 09, 2006

Press release from the issuing company

NEW YORK, NY, Nov 08, 2006 -- Bowne & Co., Inc., a leader in financial, marketing and business communications services, today announced improved results from continuing operations over 2005. For the quarter, revenue increased 15.0% to $175.1 million from $152.3 million and diluted earnings per share from continuing operations improved to $0.01 from a loss of $0.04 in the third quarter of 2005. For the nine months ended September 30, 2006, revenue was $641.2 million, up 26.0% from $509.9 million reported in 2005. Income from continuing operations was $11.9 million, as compared to $7.0 million for the same period last year, a 71.0% increase, with resulting diluted earnings per share of $0.37 as compared to $0.20 in 2005, a 85.0% increase. Pro forma diluted earnings per share from continuing operations for the third quarter was $0.05, as compared to a loss of $0.01 in the third quarter of 2005. Year-to-date pro forma diluted earnings per share from continuing operations more than doubled to $0.60 as compared to $0.29 in 2005. "Our sharpened focus on our core businesses is paying off, as demonstrated by our strongest third quarter in six years," said Bowne Chairman and Chief Executive Officer Philip E. Kucera. "We've accelerated the integration of Marketing & Business Communications and we continue to be optimistic about its future performance." "This was another strong quarter for Bowne," added David J. Shea, Bowne President and Chief Operating Officer. "We're particularly pleased with Financial Print's gains in transactional market share despite a decline in market activity in the third quarter. We believe the strategic decisions we've made in 2006 position us well for 2007 in all of the markets we serve." Bowne Financial Print: Financial Print third quarter revenue increased to $148.0 million as compared to $143.2 million for the same period last year. Transactional revenue increased 9.0% primarily due to an increase in the Company's market share. Segment profit for the quarter of $15.3 million increased $3.0 million, or 24.8% compared to the same period in 2005. On a year-to-date basis, segment profit of $77.2 million increased $12.4 million, or 19.1%, and as a percentage of revenue was 14.2% compared to 13.5% for 2005. Marketing & Business Communications (MBC): The 2006 results include the January 2006 acquisition of the Marketing and Business Communications division of Vestcom International. MBC reported revenue of $27.1 million and $96.7 million for the third quarter and year-to-date, respectively. Due to the seasonality of the business, the second and third quarters generally represent the lowest level of business activity during the year. Segment profit for the quarter was a loss of $2.3 million and $2.6 million year-to-date, and includes certain non-recurring costs associated with the integration of operations. These results compare to losses of $2.7 million and $5.6 million in the comparable 2005 periods. The Company is adjusting its guidance for MBC's segment profit as discussed below. Discontinued Operations: During the quarter the Company completed the sale of DecisionQuest. The 2006 third quarter loss of $12.1 million from discontinued operations includes the $5.1 million loss, net of tax, from the sale, and a $4.9 million charge, net of tax, for the costs associated with exiting the leased facilities of DecisionQuest and Bowne Business Solutions. The year-to-date loss, net of tax, of $15.9 million includes the aforementioned items, a $6.0 million gain, net of tax, on the sale of CaseSoft (a joint venture investment held by DecisionQuest which was sold in May 2006), and a $10.0 million goodwill impairment charge, net of tax, recorded in the second quarter related to DecisionQuest. Balance Sheet and Cash Flow: For the nine months ended September 30, 2006, cash and marketable securities declined $98.9 million. This decline includes the funding of $53.3 million in stock repurchases, $33.0 million for acquisitions and $22.1 million in capital expenditures (including $6.5 million related to the MBC segment, $3.3 million related to the relocation of our London print facility and $2.9 million for the 55 Water Street facility). Accounts receivable increased $27.3 million since year-end due to the increased revenue levels (including the MBC segment) and normal cyclical trends. Days sales outstanding increased to 76 days in September 2006 from 74 days in September 2005. Financial Print work-in-process inventory was $20.9 million at both September 30, 2006 and September 30, 2005. Share Repurchase Program: From the inception of the Company's share repurchase program in December 2004 through September 30, 2006, Bowne has spent approximately $131.0 million, repurchasing 8.9 million shares at an average price per share of $14.66. In 2006 through September 30, the Company spent $53.3 million repurchasing 3.7 million shares at an average price per share of $14.37, of which 1.3 million shares were purchased in the third quarter. As of October 31, 2006, approximately $61.0 million of its authorization remained for share repurchases. Business Outlook: Consistent with the Company's policy of adjusting annual guidance unless when it believes the actual results will be materially outside the range provided, Bowne is adjusting downward MBC's expected 2006 full-year segment profit range. Previously, Bowne had forecast a range of $2 million to $9 million which it is now adjusting to a range of a loss of $1 million to a $1 million profit. The change is primarily the result of incremental operating costs related to the accelerated integration of MBC, in our efforts to achieve ongoing synergies and operating efficiencies earlier. The Company expects the results of the Financial Print segment and the Company's overall operating performance will be in the range of the full-year guidance previously provided.




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