By Steven Schnoll August 10, 2004 -- Bowne & Co, Inc. (NYSE: BNE) delivered strong second quarter results against a backdrop of renewed life to the capital markets. The company reported second quarter net income of $10.7 million or $0.29 per diluted share compared to net income of $122,000 with no earnings per share earnings in the same period in 2003. The Q2 revenues were up 4% to $319.1 million from $307.7 million in the same 2003 quarter. Topics of this summary: Company Performance Overview Guidance Raine’s Radar Q & A Company Performance Bowne services several market segments. Bowne Financial Print, reported a 6% increase in revenue from $183.4 million to $194.5 million and experienced a surge in quarterly profits from 2003 to 2004 of 38%. The company noted that much of this gain can be attributed to the rebounding IPO market, plus the resurgence of M&A activity. The digital print group, Enterprise Solutions, a subsection within Financial Print, saw an astounding 80% increase year to year in revenue for the first six months of 2004. Bowne Business Solutions, the document outsourcing business, showed a solid increase of 4.5% or $2.9 million in Q2 revenue. The profit in this segment surged 35% with a margin improvement of 7.1% from prior year. This group added 13 new deals in the quarter with a total contract value of $38 million. This in conjunction with nine existing accounts renewing their contracts for $57 million which represents an impressive contribution to the bottom-line. The one negative in the quarter was the Bowne Global Solutions group. This market segment showed declining revenues of 4.5% from Q2 2003, $60.03 million to $57.4 million The company reported the results were impacted by delays in client projects that should be realized in the balance of 2004. Guidance Bowne is raising its full year guidance expectations due in part to its positive results in Financial Print from $0.56 to $0.91 to $0.63 to $0.97.It is anticipating full year revenue to fall between $1.1 billion to $1.2 billion. Raine’s Radar Bowne’s dependence on the winds of Wall Street was clearly evident this quarter. This global financial print leader delivered impressive results and this was done on auto pilot without a full time CEO. As Wall Street continues to rebound it seems that Bowne is posed to capably service all the needs of the re-energized capital market. However, can a company put all its eggs in one basket? When the fortunes of Wall Street went South so did Bowne. Hopefully a new CEO will develop a more stabilizing business model. It is interesting to note that its digital print group is growing at a high double digit pace. It seems that many high-end financial marketing people realize the power of digital and Bowne is ready and able to service the demand. With a new dynamic CEO in place, maybe Bowne’s position could accelerate even further? Could this segment be one of the stabilizing directions? Q&A There was no severance package for the retiring former CEO that would impact the company financials. It is anticipated that accounts receivables will increase in Q3 because of the strong Q2 sales, which will impact cash flow. Cash flow from operations should be around $80 million for 2004 Work in Progress up 30% year to year, up 19% in Q2 The decline in revenue for BGS is due mostly to delayed activity that should be realized in Q3 & Q4 Financial Printing remains strong though Q2 is generally the strongest yearly quarter. Bowne anticipates $80-95 million profit Revenue is recognized in the Q2 quarter when 90% to 95% of a job is delivered even though invoice may not be sent till later. Profit mix is different on every IPO project. The upcoming Google IPO should stimulate other tech IPO’s that should benefit the company. BGS pricing very competitive. Key to improved profits in this area is providing high value services like multiple language projects. The company may use some of its excess free cash flow to buy back shares. This will not change the strategic initiatives underway The former CEO retired due to personal reasons. The search process hopes to have someone in place by year end.