Revenue was $189 million in the second quarter of 2009 compared to $237 million in the second quarter of 2008, a decline of $48 million, or 20%. In the second quarter of 2009, the Company generated gross profit of $61.2 million, with a 32.4% gross margin contribution, compared to $86.9 million and a 36.7% gross margin contribution in the prior year period. Segment profit and segment profit margin were $18.8 million and 10%, respectively, in the second quarter of 2009, compared to $30.1 million and 12.7%, respectively, in the second quarter of 2008. Loss from continuing operations was ($3.7) million, or ($0.13) per diluted share, compared to income of $1.6 million, or $0.05 per diluted share, in the second quarter of 2008.

For the six months ended June 30, 2009, revenue was $358.1 million, down 20% from $445.8 million reported for the first six months of 2008. In the first half of 2009, the Company generated gross profit of $120.3 million, with a 33.6% gross margin contribution, compared to $157.5 million and a 35.3% gross margin contribution in the comparable prior year period. Segment profit and segment profit margin were $31.8 million and 8.9%, respectively, in the first half of 2009 compared to $42.8 million and 9.6% in the first half of 2008. Loss from continuing operations was ($5.6) million, or ($0.20) per diluted share for the six months ended June 30, 2009, compared to income of $2.9 million, or $0.10 per diluted share, in the first half of 2008.

Pro forma income from continuing operations totaled $2.4 million in the second quarter of 2009 and $4.5 million for the 2009 year-to-date period, compared to $12.3 million and $15.3 million, respectively, in the comparable prior year periods. This resulted in diluted earnings per share of $0.09 in the second quarter of 2009 and $0.16 for the 2009 year-to-date period, compared to $0.41 and $0.53, respectively, in the comparable 2008 periods. (See Pro Forma Supplemental Income Information, for a reconciliation between the non-GAAP financial measures and the Company's Condensed Consolidated Statements of Operations.)

"We are pleased that we achieved $32 million in segment profit during the first half of the year despite challenging economic conditions," said David J. Shea, Chairman and Chief Executive Officer. "We have been proactive in implementing a number of cost saving measures, have substantially completed the integration of our recent acquisitions and have introduced new technology solutions for our clients -- all of which will continue to benefit us on an ongoing basis. We are encouraged by increased momentum in the capital markets, and remain cautiously optimistic that activity will be stronger in the latter part of this year, particularly in the U.S. and Asia."

Additional comments on the operating results in the second quarter and first half of 2009 are provided below.

Revenue:

Capital markets services revenue was $32.7 million in the second quarter of 2009, which is $33.3 million, or 51%, lower than the comparable 2008 period. For the first half of 2009, capital markets services revenue was $58.2 million, which is $58.1 million, or 50%, lower than the first half of 2008. This decrease is directly related to the declines in overall IPO and M&A activity, which were particularly pronounced in the international markets. Included in capital market services revenue is Bowne Virtual Dataroom(TM) (VDR) revenue, which was $3.1 million and $6 million for the second quarter and year-to-date periods in 2009, compared to $3.6 million and $6.6 million in 2008.

Shareholder reporting services revenue, which includes compliance reporting, investment management services and translations services revenue, was $118.4 million and $212.6 million for the second quarter of 2009 and year-to-date periods, a decline of 3% and 7%, respectively, compared to the comparable 2008 periods. For the second quarter of 2009 and year-to-date periods, compliance reporting revenue decreased approximately 4% and 9%. Investment management services revenue increased slightly during the second quarter and decreased 2% during the first half of 2009. The decrease in revenue from shareholder reporting services is primarily the result of a decrease in the number of public filers due to bankruptcies and consolidations, partially offset by the addition of new clients and increased services to certain existing clients in 2009.

Marketing and business communications services revenue decreased $6.3 million, or 16%, to $32.8 million during the second quarter of 2009, and decreased $8 million, or 10%, to $74.5 million during the first half of 2009. The decline is primarily due to the loss of certain accounts from acquired businesses. The loss of these accounts did not have a significant impact on the Company's operating results since these clients generally had low margins or were break even. Also contributing to the decrease in revenue were lower activity levels and volumes from existing clients as companies reduced their marketing spending in the current economic downturn, as well as declines in client enrollment activities for health care and financial products, such as 401(k) enrollments.

Segment Profit: The Company generated segment profit of $18.8 million in the second quarter and $31.8 million year-to-date, compared to $30.1 million and $42.8 million in the comparable prior year periods, a decline of 38% and 26%, respectively. The Company's segment profit margin as reported in the quarter and year-to-date periods was 10% and 8.9%, respectively. Segment profit margin improved from 7.7% in the first quarter of 2009 to 10% in the second quarter of 2009, which continues a trend of improving segment profit margin for the past three quarters.

Cost Reduction Initiatives: Bowne continues to be proactive in reducing its fixed costs and consolidating operations, which have positioned the Company to respond to changing economic conditions and to compete more effectively.

As previously announced, during the second quarter of 2009, the Company implemented further reductions in its workforce and facilities resulting in approximately $20 million in additional annualized cost savings as part of its continued focus on improving its cost structure and realizing efficiencies. The Company estimates that the cost savings to be achieved in 2009 as a result of the cost savings measures implemented during 2008 and the first half of 2009 are approximately $50 to $60 million.

As a result of the Company's workforce reductions that occurred during the second quarter of 2009, the Company re-measured the funded status of its pension plan and recalculated the benefit obligations as of May 31, 2009. The re-measurement resulted in a $22.5 million reduction to the projected benefit liability, a $9.3 million reduction in deferred income tax assets, and a $13.2 million increase in stockholders' equity. In addition, the Company recognized a curtailment gain of approximately $1.6 million as a result of the workforce reductions during the six months ended June 30, 2009.

Balance Sheet and Cash Flow: During the quarter ended June 30, 2009, cash and marketable securities increased $2 million from December 31, 2008. Net cash used in operating activities was $11.1 million for the six months ended June 30, 2009, compared to $36.5 million for the six months ended June 30, 2008.

Average days sales outstanding was 71 days as of June 30, 2009 compared to 68 days as of June 30, 2008. Work-in-process inventory was $15.6 million at June 30, 2009 compared to $16.8 million at June 30, 2008.

As of June 30, 2009 the Company had $79.4 million outstanding under its $123 million revolving credit facility, $24.2 million of term loans outstanding, and $8.3 million outstanding under the Company's Convertible Subordinated Debentures. The Company was in compliance with its debt covenants as of June 30, 2009.

In July 2009, the Company filed a universal shelf registration statement on Form S-3 with the SEC, which was declared effective on July 31, 2009. The shelf registration statement permits Bowne to offer and sell from time to time, up to $150 million of equity, debt or other types of securities described in the registration statement, or any combination thereof, in one or more future public offerings. The shelf registration statement provides the Company with flexibility to quickly access the capital markets with equity, debt or other types of securities through one or more methods of distribution if its strategy warrants such access.

Business Outlook:

Due to the continued economic downturn, which has resulted in significant declines in IPO and M&A activity, as well as softness in non-transactional areas, including marketing communications and shareholder reporting services, the Company is revising its business outlook as indicated below. The revised outlook is based on Company results during the first six months of 2009, as well as estimates for the remainder of the year.

The Company notes that forward-looking statements of future performance made 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.

                                                  Original       Updated (in millions)                                  2009 Outlook   2009 Outlook                                               -------------- -------------- Revenue:   Transactional                               $ 120 to $ 175 $ 110 to $ 140   Total                                       $ 700 to $ 770 $ 640 to $ 700 Segment Profit (1)                            $   40 to $ 60 $   35 to $ 55 (1)  Excludes restructuring, integration and asset impairment charges. 

Bowne & Co., Inc.