By Trevor Shackelford March 29, 2006 -- Bowne & Co., Inc., (NYSE: BNE) recently announced their fourth quarter and fiscal 2005 results. Revenue for the fourth quarter was $ 163.1 million, 5.8% higher than the $154.1 million reported for the same period in 2004. The company reported a loss from continuing operations of $10.3 million, or $0.31 per share, compared to a net loss of $11.6 million, or $0.32 per share, for the fourth quarter of 2004. The loss includes a $5.1 million after-tax loss on the sale of its stock in Lionbridge Technologies. For the full fiscal year 2005, the company reported net loss from continuing operations of $0.4 million, or $0.01 per share, compared to net loss of $3.0 million, or $0.08 per share reported for the fiscal 2004. Revenue for full fiscal 2005 year was $694.1 million, 3.4% higher than the $671.4 million reported in 2004. Contents of this Summary * Quarter Highlights * Segment Performance * Guidance * Raine Radar * Q & A Quarter Highlights • The company identified certain current and deferred income tax liabilities that were overstated which will result in an increase in stockholder’s equity of between $7 and $10 million. • Pro-forma earnings per diluted share from continuing operations for the fiscal year 2005 was $0.37, compared to $0.19 reported for the same period in 2004. For the fourth quarter, pro forma net loss was $0.01, compared to a net loss of $0.12 reported for the same period in 2004. • Interest expense was down $1.1 million for the quarter, and $5.3 million for the full fiscal year. • Over the past 16 months, the company repurchased approximately 5.6 million shares, or approximately 16% of the 35.8 million shares outstanding. • On December 15, 2005, the board authorized an additional $75 million for share repurchases. • At the end of fourth quarter, cash and marketable securities was $187.5 million, compared to $71.9 million reported at the same period last year. • DSO increased 5 days at December 31, 2005 from 65 days a year ago. • At the end of fourth quarter, financial print work-in-progress was $20.9 million, compared to 36% increase over the $15.4 million reported year ago. Segment Performance Financial Print Segment Bowne reported Q4 revenues for the segment of $146.7 million, up $13.6 million, or 10.2% over the same period last year. For the fourth quarter, segment profit was $14.0 million, a 46% increase over the fourth quarter of 2004. On a full-year basis, segment revenue increased 4.4% to $625.1 million in 2005, compared to $598.8 million for 2004. This increase was driven by increases in compliance reporting and mutual fund revenues. As compared to 2004, transactional revenue decreased $22.5 million, but reached its highest level for the year in the fourth quarter. Segment profit for the full year decreased $1.7 million, compared to the prior year. Marketing & Business Communications Segment This business segment is being reported separately for the first time. Bowne’s own Enterprise Solutions group reported revenue of $41.8 million for the year, a $3.2 million increase over 2004. The segment reported a loss of $7.9 million compared to $3.6 million over 2004. These results do not include the acquisition of the Marketing and Business Communications division of Vestcom International, which was completed in January 2006. Litigation Solutions Segment Revenues were down $6.7 million for the year and $4.6 million for the quarter compared to the prior year, primarily due to the completion of a large project in the fourth quarter of 2004. Segment profit decreased $1.6 million for the year and $2.0 million for the quarter. Guidance For 2006, Bowne is expecting to post diluted earnings per share from continuing operations of between $0.29 and $0.67 off of between $755 and $840 million dollars in revenue. Much of the jump in revenue will come from the acquisition of Vestcom’s Marketing and Business Communications division. The company is expecting to incur $25 to $29 million in CAPEX, with $3 million related to the relocation of its New York office. Raine Radar The print service providers who have posted solid results this quarter have been the ones who have been aggressively pursuing the business model that works for them. They are slashing costs to improve profits and spending the majority of their focus on the area that drives the most profit for their company. They take equipment offline during slow periods to retool them, they reinvest to replace equipment that isn’t profitable, and they train their sales force in new approaches. Many are also in an acquisition mode, adding companies which augment or complement their primary lines of business. Bowne, and others who have not been as successful, seem to be taking half measures at cutting costs and are unwilling to seriously invest in the equipment and infrastructure in the segments where they actually make money. Interestingly enough, many of these lagging companies also seem to be focused on new areas of business outside of what they know, and it is almost always 1-to-1 or highly personalized marketing. Certainly there is money to be made in VDP, but perhaps with so many suppliers rushing to jump into the fray without much of a plan, perhaps the demand for complex variability has been overestimated. Other players in the field, such as Standard Register, have not seen the growth in that business they were expecting and in some cases have seen a decline. Q & A 1. On the compliance side, the company said that it saw some special client issues in proxies, which helped drive revenue growth. Bowne believes that this strength in compliance related business will continue during 2006. 2. Changes to Bowne’s sales structure and approach in its mutual fund business have resulted in an increase in market share. The company is continuing to focus on its profitability of that business. 3. The company said that its integration plan involves combining back office facilities as well as consolidating some of its printing and manufacturing facilities, and it expects to complete these activities within the next six months. 4. Bowne says it has done its due diligence on the Lionbridge. While waiting may have resulted in a better price, there was a balance to strike between holding a non-control stake of another entity and deciding to liquefy that investment. 5. The company said it is in the process of evaluating a share repurchase option versus a dividend pay-out. 6. Bowne believes the Vestcom acquisition will build the company’s personalization business and is targeting margins of at least 10%. 7. The company intends to buy back approximately 555,000 shares in fiscal 2006. 8. Bowne currently has approximately $140 million in cash and overnight investments. 9. The share count at the end of February 28, 2006 was 31.8 million, not including approximately 1.2 million options and deferred shares.