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Bowne Announces 1Q Results: Diversification Strategy Working

Press release from the issuing company

Positive Results from Diversification Strategy, Cost Reductions; Transactional Business Affected by Ongoing Capital Markets Weakness NEW YORK, May 8 -- Bowne & Co., Inc. today announced net income for the first quarter ended March 31, 2002 of $3,548,000, or diluted earnings per share of $0.10, versus a loss of $5,291,000, or $0.16 per share for the same period last year. Positive results for the quarter were due to the success of the company's diversification strategy and the impact of significant cost reductions made last year, even though Bowne's transactional financial printing revenues continued to be affected by reduced activity among its capital markets customers. Net income and diluted earnings per share from continuing operations -- excluding the net impact from discontinued operations (the Company's Immersant Internet unit) -- for the quarter ended March 31, 2001 were $4,738,000 and $0.14, respectively. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter of 2002 decreased to $18,905,000 from $23,031,000 in the first quarter of 2001. First quarter 2002 revenues were $239,684,000 compared to $285,199,000 for the same period last year, with the decline due primarily to the reduced capital markets activity affecting transactional financial printing. However, non-transactional (longer-term, contractual) revenues reached an all-time high of 78% of Bowne's total revenues, even though non-transactional business declined 9% for the quarter. "We have achieved positive bottom-line results -- even in a difficult capital markets environment -- due to our diversification strategy and the actions taken in 2001 to reshape our business and reduce expenses by approximately $70 million for the year," said Bowne chairman and chief executive officer Robert M. Johnson. "The benefits of our restructuring and our diversification strategy are reasons for optimism about our future, and even in our Financial Print business, the lower revenues have not prevented us from maintaining our substantial market leadership." Bowne president Carl J. Crosetto said the Company was pleased with the performance of Bowne Business Solutions (BBS), the business process outsourcing unit, as a key component of the diversification strategy. "BBS has become the leader in providing a range of business process outsourcing services to the legal, investment banking and financial services communities," he said. "We are seeing an increase in outsourcing opportunities at new accounts as customers tend to focus upon core competencies and seek to have others handle the non-core functions. These opportunities are occurring even as some existing customers reduce volume to cope with a difficult economic environment. As a result, we have continued to sign significant new business at prominent law firms and investment banks. These are situations where we have replaced our competitors and are handling business for multiple offices of individual clients throughout the United States and Europe." Johnson said that results for Bowne Global Solutions (BGS), the company's globalization/ localization unit, were lower in the first quarter due to the seasonal slowdown normally experienced by the industry, completion of one of the world's largest localization efforts for Microsoft Visual Studio .NET., and a reduction in new product releases in the technology sector. "As it relates to our non-Microsoft business, we continue to build both depth with existing clients and breadth by adding new clients in the globalization market," he added. "We continue to be optimistic about BGS' prospects for the year and in the longer term, and are committed to further enhancing its market leadership position and operating performance." "We will continue our efforts throughout the year to build upon the strategic realignments of our business made in 2001, especially in our recently created Bowne Enterprise Solutions (BES)," Johnson said in summing up the quarter. "This unit, yet another key part of our diversification strategy, provides digital printing and electronic delivery of personalized communications, enabling clients in financial services, healthcare and other industries to strengthen their customer relationships and increase market leadership. We believe there are significant opportunities for BES to capitalize on this emerging industry, known as 'customer relationship management.' Thus, our realignment of all of our businesses should allow us to focus on new opportunities and build momentum, even if the capital markets remain soft." The Company stated that it continues to focus on cash flow and managing receivables. Average days outstanding improved 1 day to 74 days in 2002 from 75 days in March 2001. Net debt is up from March 2001 by approximately $30 million, with 2002 including approximately $60 million for the 2001 acquisitions of DMS and Mendez. Cash used in operations reflects normal seasonality. Financial printing work-in-process inventories increased 12% to $28,700,000 in 2002 from March 31, 2001, which reflects a marginally stronger pipeline in the current year. The Company stated that it is in the process of renewing its revolving credit facility with a consortium of seven banks. This process should be completed in the next two to three weeks. This facility is in addition to the $75 million private debt placement completed in February with several other institutional investors. 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. For the year 2002, the company expects improved results over 2001, while results for the second quarter will be in line with the comparable 2001 period. The results of its financial print business will continue to be affected by the anticipated continued softness in the capital markets, both domestically and internationally. Although several circumstances, including volatile market conditions, have limited the company's visibility into future financial results, Bowne estimates the second 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 $0.04 and $0.18 per diluted share to the company's quarter and full-year financial results, respectfully.