FORM 10-Q

	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the quarterly period ended March 31, 2001

or

	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the transition period from                to                

Commission File Number 1-5842

BOWNE & CO., INC.

(212) 924-5500

Not Applicable

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

  Yes    No

      The number of shares outstanding of each of the issuer’s classes of common stock was 33,043,085 shares of common stock, par value $.01, outstanding as at May 11, 2001.

FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

See Notes to Condensed Consolidated Financial Statements.

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BOWNE & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

See Notes to Condensed Consolidated Financial Statements.

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BOWNE & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

See Notes to Condensed Consolidated Financial Statements.

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BOWNE & CO., INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Condensed Consolidated Financial Statements.

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BOWNE & CO., INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      Note 1. The financial information as of March 31, 2001 and for the three month periods ended March 31, 2001 and 2000 has been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the consolidated financial position, results of operations and of cash flows for each period presented have been made on a consistent basis. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the Company’s annual report and consolidated financial statements. Operating results for the three months ended March 31, 2001 may not be indicative of the results that may be expected for the full year.

      Note 2. Inventories of $39,281 at March 31, 2001 include raw materials of $9,713 and work-in-process of $29,568. At December 31, 2000, inventories of $32,560 included raw materials of $8,966 and work-in-process of $23,594.

      Note 3. Net income per share is calculated for basic earnings per share based on the weighted-average number of shares outstanding, and for diluted earnings per share after adjustment for the assumed conversion of all potentially dilutive securities.

      Note 4. The Company classifies its investment in marketable securities as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of stockholders’ equity. At March 31, 2001, the fair value of marketable securities exceeded cost by $425. At December 31, 2000, the fair value of marketable securities exceeded cost by $707. The net unrealized gains, after deferred taxes, were $255 and $368 at March 31, 2001 and December 31, 2000 respectively.

      The foreign currency translation adjustment was $10,214 and $7,758 at March 31, 2001 and December 31, 2000 respectively.

      Note 5. During the first quarter of 2001, the Company acquired an entity (neustrategies), a group focused on helping customers with their global web applications. It was acquired for approximately $2 million and became part of the globalization segment.

      Subsequent to the first quarter of 2001, the Company acquired Document Management Services, Inc., an outsourcing company that provides services to the professional services market. It was acquired for approximately $18 million, and became part of the outsourcing segment. This acquisition will be accounted for in the second quarter using the purchase method of accounting.

      Note 6. At March 31, 2001, the Company had borrowings of $120 million under its $300 million unsecured five-year revolving credit agreement, with a weighted average interest rate of approximately 6%. At December 31, 2000, the Company had borrowings of $85 million under this agreement.

      Note 7. The Company’s management performs on-going business reviews and based on quantitative and qualitative measures assesses the need to record impairment losses on long-lived assets when impairment indicators are identified. Management determines fair value based on the market approach which includes analysis of market price multiples of companies engaged in similar businesses. The Company’s Internet

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

consulting and development segment experienced significant and continued declines in its business measures and accordingly management determined that the carrying value of the intangible assets related to this segment were impaired. In the fourth quarter of 2000, the Company recorded $19,200 in pre-tax restructuring and goodwill impairment charges in connection with the Company’s plans to align its cost structure with customer demand, as well as restructuring the Internet consulting and development segment. The charges included an impairment charge of $13,660 related to the goodwill of the Internet consulting and development segment, based on an evaluation of the recoverability of carrying amounts. The restructuring charges also included a reduction in workforce of approximately 100 employees in the Internet consulting and development business, as well as the cost of closing two of Immersant’s offices, including write-downs of property and equipment.

      In the first quarter of 2001, the Internet consulting business experienced further declines in operating revenues, customer project delays and significant additional losses despite its restructuring plan being implemented. In April 2001, management determined that it would no longer invest in this business and announced its decision to exit the operation; accordingly the Company determined that the remaining intangible assets were not recoverable and recorded an impairment charge of $9,314 as of March 31, 2001.

      The balance in accrued restructuring at March 31, 2001, as well as payments made on that accrual during the first quarter are summarized below.

Severance and personnel-related costs include severance and other benefits paid to terminated employees. The amounts include employees who received notice or had otherwise been identified prior to December 31, 2000.

Occupancy costs represent facility exit costs associated with the closing of the Immersant offices.

      Note 8. Segment Information

      The Company continues to focus its business on “Empowering Your Information,” a term used to define the management, repurposing and distribution of a client’s information. The Company manages and repurposes information for distribution by digital, Internet or paper media. It manages documents on the clients’ site or at its own facilities.

      The Company’s operations are classified into four reportable business segments: financial printing, outsourcing, globalization and Internet consulting and development. The services of each segment are marketed throughout the world. The major services provided by each segment are as follows:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Information regarding the operations of each business segment is set forth below. Performance is evaluated based on several factors, of which the primary financial measure is business segment income before interest, income taxes, depreciation and amortization of intangible assets (“EBITDA”). The Company also uses income before interest, income taxes, and amortization expenses (“EBITA”) as a measure of performance; therefore, this information is also presented. The Company manages income taxes on a global basis. Segment performance is evaluated exclusive of the disposal of business units, other expenses, and other income.

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BOWNE & CO., INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

Cautionary Statement Concerning Forward-Looking Statements

      The Company desires to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the “1995 Act”). The 1995 Act provides a “safe harbor” for forward-looking statements to encourage companies to provide information without fear of litigation so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected.

      Set forth below is a summary of factors the Company believes important to its business and that could cause actual results to differ from the Company’s expectations. The Company is publishing these factors pursuant to the 1995 Act. Such factors should not be construed as exhaustive or as an admission regarding the adequacy of disclosure made by the Company prior to the effective date of the 1995 Act. Readers should understand that many factors govern whether any forward-looking statements can or will be achieved. Any one of those results could cause actual results to differ materially from those projected. The words “believe,” “expect,” “anticipate,” “intend,” “aim,” “will” and similar words identify forward-looking statements. The Company cautions readers that the following important factors, among others, could affect the Company’s actual results and could cause the Company’s actual results to differ materially from those expressed either orally or in writing in any forward-looking statements made by or on behalf of the Company.

Liquidity and Capital Resources

      The Company’s financial position and liquidity continue to be strong. At March 31, 2001, the Company had a working capital ratio of 2.07 to 1 and working capital of $173,479, compared to a ratio of 1.74 to 1 and working capital of $133,542 at December 31, 2000. The increase in working capital is attributed primarily to an increase in accounts receivable as a result of larger volumes of activity in the latter part of the quarter, as well as increased long term borrowings.

      It is expected that the cash generated from operations, working capital and the Company’s borrowing capacity will be sufficient to fund its development and integration needs (both foreign and domestic), finance future acquisitions and capital expenditures, provide for the payment of dividends, provide for the stock repurchase program, and meet the debt service requirements. The Company experiences certain seasonal factors with respect to its borrowing needs; the heaviest period for borrowing is normally the second quarter. The Company’s existing borrowing capacity provides for this seasonal increase.

      Capital expenditures for the three months ended March 31, 2001 are $10,905. Capital expenditures for the full year 2001 are anticipated to be between $35 million and $45 million.

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Cash Flows

      The Company’s net cash used in operating activities was $31,628 and $66,956 for the three months ended March 31, 2001, and 2000, respectively. The change reflects a smaller increase in accounts receivable and inventory, compared with 2000, primarily attributed to the large seasonal volume of activity in the later part of the quarter. The decrease in net income of $11,552 from 2000 to 2001 is also a factor, however it is largely offset by the asset impairment charges of $9,314 included in the 2001 results.

      Net cash used in investing activities was $13,834 and $5,506 for the three months ended March 31, 2001 and 2000, respectively. The increase was primarily the result of the timing of capital expenditures which were higher through the first quarter of 2001, as compared with 2000, as well as the effect of the proceeds from the sale of a division that were realized in the first quarter of 2000.

      Net cash provided by financing activities was $36,549 and $52,580 for the three months ended March 31, 2001 and 2000, respectively. This change was the result of lower net borrowings in the current year, primarily due to a lower amount of cash used in operations, as well as the lack of treasury stock repurchases in the first quarter of 2001, compared to the prior year.

Share Repurchase Program

      No shares were purchased during the quarter ended March 31, 2001.

Foreign Exchange

      The Company derives a portion of its revenues from various foreign sources. To date, the Company has not experienced significant gains or losses as a result of fluctuations in the exchange rates of the related foreign currencies. However, as the Company expands its global presence, fluctuations may become significant. To date, the Company has not used foreign currency hedging instruments to reduce its exposure to foreign exchange fluctuations. The Company has a net translation loss of $2,456 in its accumulated comprehensive income for the three months ended March 31, 2001. This loss is primarily attributed to the fluctuation in value between the U.S. dollar and the euro, pound sterling and Canadian dollar.

Recent Accounting Pronouncement

      Statement of Financial Accounting Standards No. 133 (“SFAS 133”), “Accounting for Derivative Instruments and Hedging Activities,” was issued in June 1998. SFAS 133 standardizes the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, by requiring recognition of those instruments as assets and liabilities and measuring them at fair value.

      In June, 2000, the FASB issued Statement of Financial Accounting Standards No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities”, which amended SFAS 133 and is to be adopted concurrently with SFAS 133. The new statement addressed a limited number of issues causing implementation difficulties for a large number of entities getting ready to apply SFAS 133. The Company does not currently use derivative instruments; therefore, the adoption of this pronouncement did not have a material effect on the Company’s consolidated financial statements.

Impact of the Euro Conversion

      On January 1, 1999, certain of the member countries of the European Union established fixed conversion rates between their existing sovereign currencies (“legacy currencies”) and a single currency called the euro. The legacy currencies are scheduled to remain legal tender as denominations of the euro during the transition period from January 1, 1999 to January 1, 2002. Beginning January 1, 2002, euro-denominated bills and coins will be introduced and by July 1, 2002, legacy currencies will no longer be legal tender.

      The Company has implemented a global financial software solution as part of its overall strategy to standardize and improve its financial reporting systems globally. This system has the capability of being able to report, pay, and receive currencies using the euro as its functional currency. The costs associated with the euro

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Results of Operations

      Historically, the Company has primarily provided financial printing and other related services. Revenues related to transactional financial printing services are affected by cyclical conditions of the capital markets. Over the past few years the Company has expanded its service offerings and focused its business on empowering information to become the global market leader in this field by combining superior customer service with appropriate new technologies to manage, repurpose and distribute a client’s information anywhere in the world.

      Management evaluates the performances of its operating segments separately to monitor the different factors affecting financial results. “EBITDA” and “EBITA” are measured because management believes that such information is useful in evaluating the results of certain segments relative to other entities which operate within these industries and to its affiliated segments. EBITDA and EBITA are alternatives to and not replacement measures of operating performance as determined in accordance with generally accepted accounting principles. Each segment is subject to review and evaluation as management monitors current market conditions, market opportunities and available resources. The performance of each segment is discussed below.

  Quarter Ended March 31, 2001 Compared to Quarter Ended March 31, 2000

Financial Printing

      Sales decreased $29,380, or 13%. Demand for transactional financial printing remained very low and was down sharply during the first quarter of 2001, as compared to 2000. While we continue to maintain our share of this market, the reduced activity has impacted our revenues and gross margin. For the quarter, transactional financial printing experienced decreased revenues of $38,236 or 34%. Commercial printing decreased slightly.

      These decreases in the segment’s revenues were offset to some degree by increased corporate printing of $2,819 and increased mutual funds printing of $6,315. These increases are the result of our efforts to increase our revenues in the non-transactional financial printing market. These services are expected to provide a more stable volume of work than transactional financial and we expect these services to be less cyclical.

      Gross margin contribution of this segment decreased by $24,870, while the margin percentage decreased by approximately six percentage points to 39%. The margins in the transactional financial market were negatively impacted by the lower resource utilization as compared to the first quarter of last year.

      Selling and administrative expenses decreased $9,715, or 15%, to $55,993; moreover, as a percent of sales, these expenses decreased by approximately one percentage point to 29%. The decrease was primarily the result of lower expenses that are directly associated with sales, such as selling expenses (including commissions) and certain variable administrative expenses. Some administrative expenses which are discretionary decreased as the Company continued its cost containment programs.

      EBITDA decreased $15,156 to $19,052 as a result of the foregoing.

Outsourcing

      Sales increased $10,072, or 23%. This increase resulted primarily from new customers and expanded services with existing customers.

      Gross margin from this segment increased $2,199 while the margin percentage increased approximately one percentage point to 19%. This increase is attributed to an increase in higher margin services at existing customer locations.

      Selling and administrative expenses increased $844 or 12%; however, as a percent of sales, these expenses decreased by approximately one percentage point to 14%.

      EBITDA from this segment increased by $1,355 to $2,689.

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Globalization

      Sales increased $6,906 or 54%. While the first quarter has typically been slower than the remainder of the year, the first quarter of 2000 was adversely impacted by a large project that was delayed by the customer. Our globalization segment provides two primary services, software localization and web site content management. The market for these services appears to be growing and while our share of the market is difficult to determine we estimate that it also is growing.

      The increase in cost of sales and selling and administrative expenses of $5,631 is directly related to the additional costs required to produce and manage the increased volume, and to a lesser extent, increases in compensation and selling costs associated with increased sales.

      As a result of the foregoing, EBITDA increased to $1,075, compared to a loss of $3,290 for the quarter ended March 31, 2000.

Internet Consulting and Development

      Sales decreased to $770 as many customers delayed projects. Significant losses were incurred despite the Company’s restructuring plan that was announced and implemented during the fourth quarter. Towards the end of the quarter, it became clear that the remaining intangible assets of this segment no longer had value; therefore, the assets were written off during the quarter ended March 31, 2001.

      On April 23, 2001, the Company announced plans to close this business and exit the Internet consulting segment.

Summary

      Net sales decreased $14,956 or 5%, to $270,192. The decrease is attributed to the large decline in transactional financial printing offset by increases in outsourcing and globalization. There was a $20,072 decrease in gross margin; and, the gross margin percentage decreased approximately five percentage points to 33%. This decrease was primarily attributable to financial printing.

      Selling and administrative expenses decreased by $10,084 or 12%, to $72,827. This decrease was due to the selling and administrative costs related to the decrease in sales as well as reductions in discretionary spending. As a percentage of sales, these expenses decreased approximately two percentage points to 27%.

      Depreciation increased $112, or 1%, primarily due to the expansion of facilities and the acquisition of equipment, including computer systems. Amortization decreased $125, or 4%.

      Interest expense decreased $9 as a result of higher average borrowings offset by a lower average interest rate in the current year.

      Other income (net) changed by $353 primarily due to lower losses on foreign currency than were realized in the prior year.

      The effective overall income tax rate for the quarter was impacted by the loss incurred in the first quarter as compared to income in the prior year. The change in the effective tax rate is primarily due to the relative size of the non-deductible expenses of approximately $3,000 while the rate applied to taxable income remained approximately 39%.

      As a result of the foregoing, the net loss was $5,291 as compared to net income of $6,261 for the same period last year.

Quantitative and Qualitative Disclosure about Market Risk

      The Company’s market risk is principally associated with trends in the domestic and international capital markets, particularly in the financial print segment and to a limited degree, in the outsourcing segment. This includes trends in the initial public offerings market, an important component of the financial printing segment. The Company also has market risk tied to interest rate fluctuations related to its debt obligations and fluctuations in foreign currency.

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PART II

OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

      (a)  The Company did not file any reports on Form 8-K for the three months ended March 31, 2001.

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SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 15, 2001

Date: May 15, 2001

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