Bowne & Co. Reports 19% Drop in Revenue
Tuesday, May 12, 2009
Press release from the issuing companyNEW YORK, NY -- Bowne & Co., Inc., a global leader in shareholder and marketing communications services, today announced first quarter operating results. The Company also announced today that it has implemented additional initiatives to achieve approximately $20 million in annualized cost savings through a further reduction in its work force representing 8% of total headcount. The benefits of these initiatives will be realized in 2009 and beyond.
Revenue was $169.1 million in the first quarter of 2009 compared to $208.8 million in 2008, a decline of $39.7 million, or 19.0%. Operating loss was ($2.4) million in the first quarter of 2009 compared to operating income of $2.9 million last year. Loss from continuing operations was ($1.9) million or ($0.07) per diluted share, compared to income of $1.3 million, or $0.05 per diluted share in the first quarter of 2008. Net loss was ($2.0) million compared to income of $0.7 million for the same period last year. Total diluted loss per share, including discontinued operations, was ($0.07) per share in the 2009 first quarter compared to diluted earnings of $0.03 per share for the comparable period in the prior year.
In the first quarter of 2009, the Company generated gross profit of $59.0 million, with a 34.9% gross margin contribution, compared to $70.6 million and a 33.8% gross margin contribution in the prior year period. Segment profit was $12.9 million in the first quarter of 2009 compared to $12.6 million in the first quarter of 2008. Segment profit margin in the first quarter of 2009 was 7.7%, compared to 6.1% in the first quarter of 2008. The increase in operating margins in 2009 is a direct result of the Company's cost savings measures, which have resulted in a more efficient operating model.
Pro forma income from continuing operations totaled $2.1 million in the first quarter of 2009 compared to $3.0 million in the first quarter last year, resulting in diluted earnings per share of $0.08 in the first quarter of 2009 compared to $0.11 last year. (See page 8, Pro Forma Supplemental Income Information for a reconciliation of these non-GAAP financial measures to our Condensed Consolidated Statements of Operations.)
"We are very pleased with our improvements in operating margins and segment profit," said David J. Shea, Chairman and Chief Executive Officer. "Our efforts to reduce costs and improve the efficiency and flexibility of our operations are having a positive impact on operating results despite the continued recessionary environment."
Additional comments on the operating results in the first quarter of 2009 are provided below.
Capital markets services revenue was $25.6 million in the first quarter, which is $24.7 million, or 49%, lower than the comparable 2008 period, and represents the lowest quarterly level since the mid-1990s. This decrease is directly related to the overall decline in IPO and M&A activity. There were only two priced IPOs during the first quarter of 2009 compared to 26 in the same period last year, and M&A activity declined 22% as compared to the first quarter of 2008. Included in the capital market services revenue is VDR revenue, which was $2.9 million in the first quarter of 2009 compared to $3.0 million last year.
Shareholder reporting services revenue, which includes compliance reporting, investment management services and translations services revenue, decreased 11%, or $11.3 million, to $94.2 million during the quarter ended March 31, 2009, compared to $105.5 million in the comparable quarter of 2008. Compliance reporting revenue decreased by approximately $8.1 million as overall 10-K filings in the industry declined by 16%, or 1,400 fewer filings, while our compliance market share improved slightly. Investment management services revenue decreased by $2.6 million, primarily the result of pricing pressure, non-recurring work completed in 2008, and the timing of certain jobs in 2009 compared to 2008.
Marketing communications services revenue decreased $1.7 million, or 4%, to $41.8 million during the first quarter of 2009, compared to $43.5 million in the same period last year. The decline is primarily due to the loss of certain accounts during 2008 in connection with the transition of acquired businesses, and lower activity levels and volumes from existing clients as companies reduced their marketing spending in the current economic downturn. This decline is partially offset by the addition of revenue from the acquisition of the Rapid Solutions Group digital business, which was acquired in April 2008.
Segment Profit: Segment profit increased by $0.3 million or 2.4% despite the significant decrease in revenue during the quarter, and segment profit margin improved to 7.7% from 6.1% in the prior year's first quarter. This improvement in segment profit and margin is the direct result of the Company's cost reduction initiatives that resulted in a more efficient operating model. Also contributing to this improvement are the results from the Company's recent acquisitions, as the Company realizes the benefit of the integration and consolidation of the acquired businesses into Bowne's existing operations.
Cost Reduction Initiatives: Bowne continues to be proactive in reducing its fixed costs and consolidating operations, which have positioned the Company to respond to changing economic conditions and to compete more effectively.
During the first quarter of 2009, the Company reduced its work force, which resulted in annualized cost reductions of $13 million. Last week, the Company implemented a further reduction in its work force of approximately 250 positions, which resulted in additional annualized cost reductions estimated at $20 million. These work force reductions included a broad range of enterprise-wide functions and are a continuation of the cost savings initiatives implemented during the past few years.
Balance Sheet and Cash Flow: During the quarter ended March 31, 2009, cash and marketable securities decreased $1.1 million from December 31, 2008. Net cash used in operating activities was $20.6 million for the quarter ended March 31, 2009, compared to $33.5 million for the quarter ended March 31, 2008.
Average days sales outstanding was 72 days for the quarter ended March 31, 2009 compared to 67 days for the quarter ended March 31, 2008. Work-in-process inventory was $25.9 million at March 31, 2009 compared to $28.2 million at March 31, 2008.
As previously announced, on March 31, 2009, the Company amended its $150.0 million credit facility and extended its maturity to May 2011. The amended facility was restructured as an asset-based loan consisting of term loans of $27.0 million and a revolving credit facility of $123.0 million. The amended facility provides the Company with flexibility to manage through the current recessionary environment and positions it to capture revenue opportunities quickly when the markets return.
As of March 31, 2009 the Company had $79.4 million outstanding under its $123 million revolving credit facility, $27.0 million of term loans outstanding, and $8.3 million outstanding under the Company's Convertible Subordinated Debentures. The Company was in compliance with its debt covenants as of March 31, 2009, and expects to remain in compliance throughout the remainder of 2009.
Business Outlook: Given the volatility in the capital markets and the nature of its business, the Company is not adjusting its annual guidance at this time. This is consistent with the Company's policy of not adjusting annual guidance unless it believes the actual results will be materially outside the range provided. The Company expects overall operating performance will be in the range of the full-year guidance previously provided in March.
Forward-Looking Statements: The Company notes that forward-looking statements of future performance made in this release are based upon current expectations and are subject to factors that could cause actual results to differ materially from those suggested here, including demand for and acceptance of the Company's services, new technological developments, competition and general economic or market conditions, particularly in the domestic and international capital markets.
Bowne & Co., Inc. will hold its earnings conference call to review its 2009 first quarter results on Tuesday, May 12, 2009, at 11 a.m. Eastern Time. To join the Webcast, log on to http://www.bowne.com. To access the call via telephone, please dial (877) 407-0778 (domestic) or (201) 689-8565 (international), conference ID # 322246.
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