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Bowne Reports 2001 Results in Line With Recent Outlook: $24 Million Loss

Press release from the issuing company

NEW YORK, Feb. 14 -- Bowne & Co. today announced operating results for the year ended December 31, 2001, in line with our recent business outlook. Revenues for the year were $1,054,631,000, an 11% decrease from last year's revenues of $1,179,338,000. Net loss for 2001 of $24,078,000 compared to net income of $7,008,000 for 2000. Loss per share of $0.73 compared to earnings of $0.20 for the year ended December 31, 2000. Excluding the impact of certain charges, (see attached page 9 schedule), net income and diluted earnings per share from continuing operations for the year ended December 31, 2001 were $8,670,000 and $0.25 respectively, compared to $38,555,000 and $1.09 for the year ended December 31, 2000. Robert M. Johnson, chairman and chief executive officer of Bowne stated, "While we obviously are not pleased with our 2001 results, we note they are primarily driven by the one class of service over which we have the least control -- transactional financial printing, which is dependent upon capital market activity. While our market share leadership has not suffered, 2001 demonstrated it is difficult to quickly react to a 40% decline in transactional print revenue, especially in a market that had been growing at 20% a year for four consecutive years. We have taken this opportunity to consolidate our operations in our most efficient manufacturing and typesetting facilities and since the fall of 2000, we have reduced our annual operating costs by $70 million including the additional 10% staff reduction in the fourth quarter of 2001.'' Mr. Johnson continued, "Conversely, our other business segments continued their year-over-year top and bottom line growth and we continued to grow our non-transactional financial print services. Our two business-process outsourcing segments, Bowne Business Solutions and Bowne Global Solutions, emerged as the market leaders in their respective markets and both are looking to continue that leadership position in 2002. Because of their solid prospects and the savings and efficiencies supporting our transactional business, we anticipate substantial improvement in the bottom line performance of our existing businesses, even if the transactional markets show only modest improvement over 2001 levels. More importantly, we are convinced that the capital investments we have made and the systems and processes that we have put in place will permit us to support significant growth in the transactional markets without corresponding increases in costs.'' "We believe there are tremendous opportunities emerging because of new technologies in digital printing and other e-communication solutions that better enable one-to-one marketing and customer relationship management tools. Accordingly, we are launching a new business-process outsourcing unit, Bowne Enterprise Solutions, initially targeting the asset management community, which builds upon our core competencies and further extends them to the convergence of database and digital print technologies. We are excited by the growth prospects for this group, and believe Bowne's technological advantage, deep client relationships and reputation for confidentiality and superior customer service makes us uniquely qualified to capitalize on those opportunities. Because this business model is driven by longer-term partnership contracts, we look to it to further our strategy of reducing our dependence upon markets with unpredictable cycles.'' Mr. Johnson concluded, "The Mendez acquisition is already succeeding in diversifying and strengthening the BGS customer base and adding to the top and bottom line improvement for that business. The BGS and Mendez team has substantially completed the integration of the two companies and BGS is now the worldwide leader in the globalization services industry in terms of scale, capabilities and financial performance. We believe this is important in further developing localization outsourcing solutions for the significant portion of this market that has historically performed this non-core function internally because of the absence of a financially strong, global alternative.'' For the year, net loss from continuing operations of $7,715,000, which includes certain one-time charges of $23,607,000, compared to earnings of $37,270,000 which included restructuring charges of $2,106,000 for the year 2000. Earnings before interest, taxes, depreciation and amortization (EBITDA) of $50,106,000 decreased from $122,336,000 in 2000. For the fourth quarter, revenues of $231,482,000 compared to $272,428,000 for the comparable 2000 period. Net loss for the quarter was $8,680,000, compared to a loss of $15,501,000 for the quarter ended December 31, 2000, resulting in loss per share of $0.26 compared to a $0.47 loss per share for the fourth quarter of 2000. Excluding the impact of restructuring and asset impairment charges of $12,721,000, net income from continuing operations and earnings per share for the quarter ended December 31, 2001 were $260,000 and $0.01 respectively. EBITDA for the fourth quarter of $1,107,000 compared to $17,497,000 for the fourth quarter 2000. The $12.7 million restructuring and asset impairment charges in the fourth quarter includes approximately $6.4 million of severance expense from our reduction in force announced October 22, 2001 and integration charges related to the Mendez acquisition. In addition, a $6.3 million asset impairment charge resulted from various write-downs including an asset held for investment. For the year, total restructuring and asset impairment charges of $20.9 million was comprised primarily of the following: the printing segment has incurred $6.6 million primarily as a result of its reduction in force, globalization has incurred $5.9 million as a result of severance, integration and office closings, and outsourcing has incurred $5.4 million related to its workforce reductions, equipment write-downs, and asset impairments. The company stated that it continues to focus on cash flow and managing receivables. Year-to-date average days outstanding improved to 75 days in 2001 from 77 days in 2000. Cash provided by operations totaled $71,568,000, an increase of approximately $14,900,000 from 2001, demonstrating that even in down markets, our operations can generate significant cash. Net debt is up from last year by approximately $30 million, with 2001 including approximately $60 million for the acquisitions of DMS and Mendez. Financial printing work-in-process inventories of $13,211,000 in 2001 decreased from the 2000 level of $19,749,000. The $38 million of debt classified as a current liability on the company's balance sheet is primarily borrowings under the company's five-year revolving credit facility, due July 2002. As was announced February 6, the company completed a $75 million private placement with several institutional investors. The notes have an average life of 7.2 years. The proceeds were used to pay down a portion of the company's existing revolving credit facility subsequent to year-end therefore the company reclassified this amount classified to long-term debt on the balance sheet. It is expected that a renewal of the revolving credit facility will be completed in the next few months. 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 year 2002, the company expects improved results over 2001, while results for the first quarter will be slightly below the comparable 2001 period. The results of its financial print business however, will continue to be affected by the anticipated continued softness in the capital markets, both domestically and internationally. The company expects both Bowne Business Solutions and Bowne Global Solutions to continue their steady growth. However, the first quarter has historically been a seasonally slow quarter for the globalization business. Although several circumstances, including volatile market conditions, have limited the company's visibility into future financial results, Bowne estimates the first quarter and full-year 2002 results to be in the following ranges. This guidance incorporates the new accounting rules of goodwill amortization, which, if effective in 2001, would have added $0.18 per diluted share to the company's full-year financial results.