By Trevor Shackelford May 5, 2005 -- Bowne & Co., Inc. (NYSE: BNE) announced first quarter 2005 net earnings of $3.9 million dollars, or $0.11 per diluted share, compared to $3.0 million, or $0.08 per diluted share, during the same period last year. The company reported revenue of $226.9 million in the first quarter, down 3% from $232.7 million from a year ago. The company cited a decline in capital market activity for the decrease in sales and noted that they have won 50% of the major M&A transactions which should fill the 2005 pipeline for financial print. Topics of this Summary Quarter Highlights Segment Performance Guidance Raine Radar Q & A Quarter Highlights Cost of revenues was up approximately 3.75% from last year. Selling and administrative costs were down 10% from last year. The differential allowed Bowne to increase EPS, despite lower sales. Bowne plans to grow its digital print business, as part of Bowne Global Solutions (BGS), focusing on investment management, pharmaceutical, and healthcare verticals. The BGS Microsoft localization project is in its early stages and expected to continue throughout 2005. BGS selected as primary Asian-Language localization firm by Macromedia. Segment Performance Bowne Financial Print This segment reported revenue of $159.9 million, down 6% from last year. This drop was made up of a 22% drop in transactional revenue, due primarily to slow capital market activity, and a 5% gain in non-transactional revenue, which includes mutual fund and compliance programs. Profit as a percentage of sales was 12.9% for the quarter, down from 14.5% a year ago. Bowne Global Solutions BGS saw first quarter revenue of $58.9 million, up approximately 8% from the same period last year. Profit from the segment was $2.3 million up from $2.0 million last year. The segment earned 3.9% as a percentage of sales, up 20 basis points from the same period last year. Guidance The company has made no change to the guidance it provided during the Q4 2004 earnings call. Bowne expects to finish 2005 with revenues of $900 million - $1.0 billion, and diluted earnings per share of $0.50 - $1.00. Raine Radar Despite the disappointing sales of financial print during the first quarter, reduced SG&A costs and restructuring charges has allowed Bowne to actually increase its EPS in the first quarter over last year. If they can keep costs low and increase sales in the coming quarters, Bowne should be able to meet the low end of its earnings estimates. Also, the gains that Bowne Global Solutions experienced partially offset the decreases in financial print, which has always been the focus. The company again made it very clear that BGS was not considered core, but if they can maintain a pipeline of customers in this segment after the Microsoft business closes, Bowne may want to consider holding onto BGS. The first quarter is an example of a period where financial print was slow, and although small, BGS did take some of the edge off. Q & A The effects of foreign exchange offset much of the gains of $1.6 million cost cutting measures put into place during the Q4. Those benefits should continue going forward. The average M&A deal takes 4 – 6 months to close from when it was announced. Gross margins decreased because of the drop-off in transactional financial print during the first quarter. Bowne reiterated that BGS is not core business and has no synergies with financial print. Trevor Shackelford is an Associate at Raine Media, Inc. and can be reached at [email protected]