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Bowne Reports 3Q Loss; Says Capital Markets Have Virtually Vanished

Press release from the issuing company

NEW YORK, Nov. 6 -- Bowne & Co., Inc. today announced operating results for the period ended September 30, 2001. Net sales for the quarter and the year-to-date of $227,480,000 and $775,548,000 compared to $263,395,000 and $842,912,000 for the comparable 2000 periods. Non-transactional revenues grew 9% to $160 million or 70% of total revenue, while transactional (i.e. capital market activity) revenues declined 42% to $67 million. On a year-to-date basis, non-transactional revenues grew 13% to $572 million or 74% of total revenue. The Company had a net loss from continuing operations for the quarter of $3,703,000, which included a one-time charge of $800,000 for purchased in-process research and development related to the acquisition of Mendez, S.A., compared to net earnings from continuing operations of $9,696,000 for the comparable 2000 period. Loss per share from continuing operations was $0.11 compared to diluted earnings per share of $0.28 for the same period last year. Excluding the impact of one-time charges, adjusted net income (loss) and diluted earnings (loss) per share from continuing operations for the three and nine months ended September 30, 2001 were a loss of $2,903,000 and earnings of $8,265,000 and $(0.09) and $0.24, respectively. Earnings before interest, taxes, depreciation and amortization (EBITDA), including certain one-time charges, for the three months ended September 30, 2001 was $10,026,000 compared to $31,984,000 for the comparable 2000 period. Robert M. Johnson, chairman and chief executive officer of Bowne stated, "There is no question that this is the most difficult environment that Bowne's transactional business has experienced in recent history. While we were experiencing the expected combination of the normal seasonal slowdown on top of the sluggishness in the capital markets, we were on target with our projections through August. However, instead of the activity pickup that our pipeline indicated would begin in September, the capital markets virtually vanished following September 11, causing us to revise our guidance for Q3 and the remainder of the year. The results we are reporting today are in line with our revised projections.'' Mr. Johnson continued, "This fundamental change in the capital markets also reinforced our decision to further reduce our financial printing workforce by approximately 10% in the fourth quarter, so that we better align our resources with market demand. We continue to aggressively work to leverage Bowne's core competencies and align operations to focus more closely on opportunities closely related to our core, in particular, in investment company services, digital on-demand printing and our outsourcing businesses, Bowne Global Solutions and Bowne Business Solutions. The actions we have taken over the years to diversify our revenue, thus sustaining our financial strength, are evident by the continued growth of our non-transactional business. Bowne is well positioned to continue to move forward through this challenging environment.'' Regarding Bowne's outsourcing businesses, Carl J. Crosetto, president of Bowne, added, "Bowne Business Solutions (BBS), our document and information management outsourcing solution that supports the legal and investment banking vertical markets among others, was also somewhat impacted by the slowdown in these markets. BBS realized a 20% revenue increase over the comparable quarter in 2000, but experienced a slight dip in revenue from the prior quarter. However, EBITDA as a percent of sales increased slightly over the prior quarter and comparable 2000 quarter -- the result of our commitment to driving to a more cost efficient model.'' Mr. Johnson concluded, "Finally, we are encouraged by the continuing trend of improvement shown by Bowne Global Solutions (BGS) during the quarter, even in the midst of an operating environment complicated by the integration with Mendez, which we acquired in August. Approximately one month of the Mendez operating results are included with BGS during Q3 and those results do not include any of the benefits of the integration. We are pleased with the value that the Mendez acquisition is already adding to BGS and are on target to complete the integration by year-end. We currently expect full-time equivalents reductions, as a result of office combinations and the elimination of redundancies, of approximately 20% of the combined workforce. There is no question BGS has emerged as the world-wide leader in the globalization services industry in terms of scale, capabilities and financial performance.'' The company stated that it continues to focus on cash flow and managing receivables. Year-to-date average days outstanding improved to 79 days in 2001 from 83 days in 2000. Cash provided by operations totaled $8,058,000 and is slightly unfavorable to the prior year. Financial printing work-in-process inventories of $18,300,000 in 2001 decreased from the 2000 level of $27,688,000. The debt resulting from the five-year revolving credit facility is due July 2002 and is therefore now classified as a current liability. The company has started the process of replacing its debt facility with a long-term arrangement. Business Outlook The following statements are based upon current expectations. These statements, and certain statements above, are forward-looking and actual results may differ materially. Current trends in the global economy, particularly in the domestic and international capital markets, make it difficult at present to project activity. For the fourth quarter of 2001, the company expects its overall results to be similar to the third quarter results. The results of its financial print business will continue to be impacted by the anticipated continued downturn in the capital markets, both domestically and internationally. As previously mentioned, we have announced a further reduction in force, which will result in a one-time charge in the fourth quarter. We expect both Bowne Business Solutions and Bowne Global Solutions to be impacted in this weaker economy, but their results should continue to meet our expectations. Although several circumstances, including volatile market conditions, have limited the company's visibility into future financial results, Bowne estimates the 2001 results to be in the following ranges. * Revenues: approximately $1.0 billion * Diluted earnings per share, from continuing operations, and excluding one-time items, in the range of $0.18 to $0.25 * Capital expenditures: $38 million to $42 million