Bowne & Co. Reports Q4: Loss Widens to $18 million in Difficult Climate
Press release from the issuing company
NEW YORK, Feb. 19 -- Bowne & Co., Inc., a global leader in delivering high-value document management solutions, today reported a net loss for the fourth quarter ended December 31, 2002 of $18,903,000 -- or $ .56 per share -- versus a loss of $8,682,000 -- or $ .26 per share -- for the same period last year.
The fourth quarter 2002 results include charges of $15,773,000, due primarily to integration costs associated with the September 2002 acquisition of Berlitz GlobalNet by the company's Global Solutions unit, and to previously announced cost reductions -- including a workforce reduction and selected office closings -- which took place during the quarter.
Excluding the charges above and other one-time items, the company would have reported a net loss for the quarter of $6,218,000 -- or $ .19 per share -- versus income of $1,684,000 -- or $ .05 per share -- for 2001. (Also see "Pro Forma Income Information" table.) Revenue for the fourth quarter of 2002 increased 2% to $236,219,000 versus $231,482,000 for the same period a year earlier.
For the year ended December 31, 2002, net income from continuing operations was $355,000 -- or diluted earnings per share of $ .01 -- versus a net loss from continuing operations of $7,715,000, or $ .23 per share for 2001. Net income for 2002 included one-time, pre-tax gains on the sale of certain printing assets ($15,369,000) and the sale of a building ($4,889,000). Revenue for 2002 was $1.003 billion, down 5% from $1.055 billion reported for 2001. EBITDA, including the one-time gains on asset sales and the charges previously mentioned, was $59,306,000 versus $50,106,000 for the prior year.
"Bowne's fourth quarter operating results were affected primarily by ongoing weakness in the capital markets and the technology sector, creating a negative impact on Bowne's Financial Print, Business Solutions and Global Solutions business units," said Chairman and CEO Robert M. Johnson.
"These results were expected, given the very difficult and highly unpredictable business climate. We continue to manage through this environment with a focus upon leveraging our technology investments to reduce costs, improve productivity and -- combined with certain outsourcing initiatives -- to change our operating model to a more variable cost basis. As we pursue these key strategies to enhance our 2003 performance, we will continue to maintain a close watch on global business conditions, which we believe will remain difficult and challenging over the next several quarters, to ensure our resources are in line with the needs of our clients.
"We also completed two strategic acquisitions during the last four months of the year that extend our market leadership and achieve broader and deeper penetration in the business process outsourcing markets served by Bowne Business Solutions and Bowne Global Solutions," he said. "These opportunistic acquisitions are consistent with our strategy of further diversifying our revenue and profit opportunities outside of the those influenced by capital market activity."
Johnson and Bowne President Carl J. Crosetto reported these developments in Bowne's business segments:
Financial Print -- Crosetto said that Financial Print reported a 9% drop in revenues in the fourth quarter of 2002 compared to the same period a year earlier. The financial printing industry saw a significant decline in mergers and acquisitions, as well as initial public offerings, during 2002. At the same time, however, Bowne continued to expand its market leadership. The company managed documents for close to half of the significant merger and acquisition deals during the fourth quarter, and more than 40% of these transactions for all of 2002, well beyond the market share of its two nearest competitors. Bowne also managed documents for 45% of significant IPOs in 2002 -- including 12 of the top 25 transactions -- and extended its market leadership in this area by 14 percentage points over 2001.
Last month, Bowne announced the appointment of Reed R. Smith, a Bowne and financial printing industry veteran, as the new President of Financial Print and a Senior Vice President of the parent company.
Capitalizing on business opportunities from the sweeping changes in U.S. securities regulations, Bowne also announced last month the launch of its Web-based, self-filing service, BowneFile16(TM) (http://www.bownefile16.com), that sets a new industry standard for corporate insiders, directors, 10% beneficial owners and their representatives to transmit compliance documents directly and more rapidly to the Securities and Exchange Commission.
"The other organization included in the Financial Print business segment, Bowne Enterprise Solutions, continued to focus on emerging opportunities to customize and personalize marketing and client communications from financial services companies to their prospects and customers," Crosetto said. "This unit has added a number of new clients for whom new products were being pilot tested and introduced during the fourth quarter of 2002 and in the first quarter of 2003."
Outsourcing -- Fourth quarter revenue for this segment -- consisting of Bowne Business Solutions (BBS) -- was down slightly from the same period in 2001, although "the business shows consistent performance as our clients recognize the value proposition we offer in outsourcing," Crosetto said. Already the leader in providing outsourced services to law firms and investment banks, BBS extended the range of services offered with its December 2002 acquisition of DecisionQuest, a major provider of litigation resources, from trial research to strategic communications and strategic marketing. "As a result," he noted, "BBS now provides services to almost 90% of the top 200 global law firms and has tremendous opportunities to extend its reach throughout the legal community. Furthermore, the transaction has launched a new business model for the delivery of litigation resources by creating one of the largest and most comprehensive providers of services spanning what we call the 'Litigation Lifecycle(TM).'"
Globalization -- Fourth quarter 2002 revenue for Bowne Global Solutions (BGS) rose approximately 52% over the same period of 2001 due to the GlobalNet acquisition. In December, Bowne appointed James E. Fagan, Jr., a top global strategist and sales management expert, as President and CEO of this unit. "BGS' new leadership is undertaking a number of initiatives to capitalize on GlobalNet, now that it has given us a complete globalization offering, and solidifies our top position in the industry," Johnson said. "There are many opportunities to extend our services to new industries and further penetrate existing customers. We intend to capture those opportunities."
Johnson said Bowne also continues to focus on cash flow and managing receivables. Average days outstanding improved 5 days to 70 days in 2002. Net debt is down from September 2002 by approximately $8 million. Cash provided by operations increased approximately $2,353,000 from 2001 to $74,788,000, indicating that Bowne's operations continue to generate significant cash even during market declines. Financial printing work-in-process inventories decreased 7% to $12,300,000 in 2002 from December 31, 2001.
Current uncertainties in the global economies, particularly in the domestic and international capital markets, compounded by world events in general, do not provide enough visibility for Bowne to realistically present a business outlook and future financial results for the first quarter of 2003 at this time. However, the company is providing the following outlook for all of 2003:
Full Year 2003
Revenues $1.1 billion
EBITDA $75 to $95 million
Depreciation and Amortization Approx. $47 million
Interest expense Approx. $11 million
Diluted earnings per share $ .30 to $ .60
Capital expenditures Approx. $30 million
Not included in the outlook above are anticipated restructuring and integration charges ranging from $10 million to $15 million related to the company's cost containment initiatives and integration of the Berlitz GlobalNet acquisition.
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