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Bowne Reports Q2 Results: Revenue Steady, Earnings Down

Press release from the issuing company

NEW YORK, July 27 -- Bowne & Co., Inc. today announced 2005 second quarter earnings from continuing operations of $7.8 million -- or $0.21 per diluted share -- compared to earnings of $9.7 million, or $0.25 per diluted share, for the second quarter of 2004. Revenue was $205 million in the 2005 second quarter, compared to $204 million in the comparable quarter of 2004. Financial Print revenue for the second quarter of 2005 increased $3.1 million quarter-over-quarter, the result of increased compliance reporting and mutual fund revenue. The 2005 and 2004 results from continuing operations exclude Bowne Global Solutions (BGS), which is to be sold to Lionbridge Technologies, and the 2004 results exclude Bowne Business Solutions (BBS). BGS and BBS are each reported as discontinued operations as described further below. For the six months ended June 30, 2005, income from continuing operations was $12.0 million, versus $12.9 million for the same period last year. Diluted earnings per share from continuing operations was $0.34 for the six month period in both 2005 and 2004. Revenue for the six months ended June 30, 2005 was $373.2 million, down 2% from $382.3 million reported in 2004, the result of a 16% decline in transactional financial print, which was offset by a 7% increase in non-transactional revenue. Excluding restructuring, integration and asset impairment charges and the gain on the sale of a building, pro forma diluted earnings per share from continuing operations was $0.24 and $0.25 in the second quarter of 2005 and 2004, respectively, and $0.39 and $0.41 for 2005 and 2004 year-to-date, respectively. (See Pro Forma Supplemental Income Information attached hereto for a reconciliation of these non-GAAP financial measures to our Condensed Consolidated Statements of Operations.) "The second quarter was an important time for us in terms of our strategic direction as a company," said Bowne Chairman and Chief Executive Officer Philip E. Kucera. "With the pending sale of Bowne Global Solutions, we will sharpen our focus on growing our financial print and digital print businesses, which are core to our strategy." David J. Shea, Bowne President and Chief Operating Officer, added, "We're pleased that our non-transactional business continues to perform well. However, in light of the continuing decline in overall transactional filings, we are cautious about the remainder of the year." Bowne Financial Print: For the second quarter, Financial Print reported revenue of $197.6 million, compared to $194.5 million for the same period last year. Offsetting a transactional revenue decrease of 10%, non-transactional revenue, which includes mutual fund and compliance revenue, increased 8% over 2004. Segment profit for the quarter, as a percentage of revenue, was 14.7%, compared to 16.1% for the same period in 2004. Litigation Solutions: Litigation Solutions' second quarter and year-to- date revenue decreased $2.1 and $2.6 million, respectively, from last year; however, segment profit increased $0.3 million as compared to the first quarter of 2005 and $0.5 million year-over-year. Discontinued Operations: The 2005 and 2004 results from continuing operations exclude Bowne Global Solutions (BGS), which the Company has agreed to sell, and is reported as a discontinued operation (see press release dated June 27, 2005). In addition, the 2004 results from continuing operations exclude Bowne Business Solutions, which is also reported as a discontinued operation. Including the discontinued operations, net income for the 2005 second quarter and year-to-date was $4.0 million and $7.9 million, or $0.11 and $0.23 per diluted share, respectively, compared to $11.2 million and $14.2 million, or $0.29 and $0.37, in the respective 2004 periods. The results of discontinued operations in 2005 include numerous expenses specifically related to the sale of BGS, including certain transaction costs and tax expenses. (See attached Condensed Consolidated Statements of Operations on page 5 for further detail.) Segment profit for BGS for the three and six-month periods ended June 30, 2005 was $5.8 million and $8.1 million, respectively, compared to $3.4 million and $5.4 million for the three and six-month periods ended June 30, 2004. Bank of America Securities completed the Overnight Share Repurchase program on May 24, 2005, and after giving effect to the final settlement and a price adjustment in the form of additional shares, the Company had effected the purchase of a total of 2,696,161 shares at an average price of $14.85. To date, the Company has not made any purchases under its previously announced $35 million open market purchase program. Days sales outstanding increased to 66 days at June 30, 2005 from 64 days at June 30, 2004. Net cash used in operations for the period ended June 30, 2005 was $41.3 million versus net cash used in operations of $17.6 million in 2004. Net debt at June 30, 2005 was $47.8 million compared to net debt of $143.6 million in June 2004. Financial Print work-in-process inventory was $29.0 million at June 30, 2005, compared to $20.8 million at June 30, 2004 and $16.8 million at December 31, 2004. Corporate spending decreased $0.6 million from 2004. Business Outlook The Company notes that forward-looking statements of future performance contained in the foregoing and in the following statements and certain statements made elsewhere in this release are based upon current expectations and are subject to factors that could cause actual results to differ materially from those suggested here, including demand for and acceptance of the Company's services, new technological developments, competition and general economic or market conditions, particularly in the domestic and international capital markets and regulatory approval of sale of the Company's globalization business. The 2005 outlook has been recast to include only results from continuing operations. In addition, the Financial Print and Litigation Solutions businesses have lowered and narrowed their revenue and segment profit projections and the range of corporate spending has been narrowed.