UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File No. 1-5842

Bowne & Co., Inc.

(Exact name of Registrant as specified in its charter)

(212) 924-5500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

     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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

      The aggregate market value of the Common Stock issued and outstanding and held by nonaffiliates of the Registrant as of February 28, 2005, based upon the closing price for the Common Stock on the New York Stock Exchange on June 30, 2004, was $511,639,030. For purposes of the foregoing calculation, the Registrant’s 401(K) Savings Plan and its Global Employees Stock Purchase Plan are deemed to be affiliates of the Registrant.

      The Registrant had 33,790,829 shares of Common Stock outstanding as of February 28, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

      Certain portions of the documents of the Registrant listed below have been incorporated by reference into the indicated parts of this Annual Report on Form 10-K:

TABLE OF CONTENTS

PART I

      Bowne & Co., Inc. (Bowne and its subsidiaries are hereinafter collectively referred to as “Bowne”, the “Company”, “We” or “Our” unless otherwise noted), established in 1775, is a global leader in providing high-value solutions that empower our clients’ communications. The Company is the world’s largest financial printer and a market leader in providing globalization, localization, translation, interpretation and technical writing services. The Company also provides a comprehensive suite of litigation support services for law firms and corporate law departments. Bowne empowers clients’ information by combining superior customer service with advanced technologies to manage, repurpose and distribute that information to any audience, through any medium, in any language, anywhere in the world. The Company’s operations are classified into two reportable business segments: financial print and globalization. The services of each of these segments are described further below:

      Financial Print — Historically Bowne’s principal segment, it encompasses:

      Further information regarding segment revenue, operating results, identifiable assets and capital spending attributable to the Company’s operations for the calendar years 2004, 2003 and 2002, as well as a reconciliation of segment profit to pre-tax income (loss), are shown in Note 19 of the Notes to the Consolidated Financial Statements.

Industry Overview

      Through Bowne’s business units, the Company competes in a number of related industries, namely financial printing, personalized communications, globalization services, and litigation support services.

      The printing industry is highly fragmented, with hundreds of independent printers that provide a full range of traditional printing services. However, specific to transactional and compliance financial printing, there are three primary companies, including Bowne, and a few regional financial printers that participate in a material way. Transactional financial printing volume tends to be cyclical with the capital markets for new debt and equity issuances and public mergers and acquisitions activity. Compliance financial printing volume is less sensitive to market changes and represents a recurring periodic activity, with some seasonality linked to significant filing deadlines imposed by law on public reporting companies and mutual funds. Volume is also impacted by changing regulatory and corporate disclosure requirements.

      The complete and integrated communications solution Bowne provides to its clients to help them deliver personalized and customized communications to their customers is a subset of the emerging customer relationship management industry. This industry is populated by a number of active participants with a different focus and core capabilities that range from creative branding and message design services, to technical solutions design, to printing. The Company competes in this industry through BES, which operates as part of its financial print segment. BES is focused on providing integrated document creation, production, distribution and management solutions that address the growing personalized communications needs of the financial services industry, in particular the retirement services, asset management and broker segments. Financial services firms are increasingly looking to digital, variable-data-driven solutions that will provide them with a broad range of competitive and operational benefits. For example, a financial services firm’s ability to create relevant, engaging, and targeted communications to both customers and prospective customers can help increase customer retention and sales, as well as protect brand integrity. The technologies Bowne leverages to provide clients with automated, creation, printing and distribution capabilities also create efficiencies that will help Bowne’s clients lower document-related costs.

      The globalization services industry traditionally has been managed by in-house departments of multinational companies that use a large cottage industry of small translation and localization contractors located in different countries around the world, whom offer their services to adapt foreign materials for use in that country. While the in-house operations and independent single-language translators traditionally have worked together, over the past few years two trends have begun to change the globalization industry. First, although thousands of independent freelance translators remain, the highly fragmented industry has started to consolidate, with three major participants today, including BGS. An advantage to employing a consolidated provider of globalization services is that the scale of the larger players allows them to manage large globalization projects across multiple countries and offer integrated services. Second, multinational companies are increasingly outsourcing their globalization needs, although the Company estimates that a substantial majority of all globalization management is still performed in-house. The advantages to increased outsourcing are the ability of clients to improve the quality of their translated content, hasten time to market and reduce their fixed costs in these non-core activities.

      The litigation support services industry has numerous competitors in the United States that compete for clients among law firms and medium-sized to large corporations that have significant litigation support services needs. Bowne is currently a leader in providing litigation support services to the legal industry. The services generally fall into the three following categories:

The Company

      Bowne Financial Print has long ranked as the world’s largest financial printer in a field populated by three primary companies, including Bowne, and a few regional financial printers. The Company’s transactional financial printing includes registration statements, prospectuses, bankruptcy solicitation materials, special proxy statements, offering circulars, tender offer materials and other documents related to corporate financings, acquisitions and mergers. The Company’s compliance financial printing includes annual and interim reports, regular proxy materials and other periodic reports that public companies are required to file with the SEC or other regulatory bodies around the world. Bowne Financial Print is also a leading filing agent for EDGAR, the SEC’s electronic filing system. The Company provides both full-service and self-service filing, the latter through Internet-based filing products: BowneFile16®, 8-K Express^tm, and 6-K Express^tm. A component of compliance printing includes mutual fund printing. Mutual fund printing includes regulatory and shareholder communications such as annual or interim reports, prospectuses, information statements and marketing-related documents. Bowne Financial Print also provides some commercial printing, which consists of annual reports, sales and marketing literature, point of purchase materials, research reports, newsletters and other custom-printed matter. The Company also provides language translation services for highly confidential legal and financial documents in connection with its financial print operations. Over the past few years, Bowne has expanded its financial print capabilities within all phases of the document life-cycle, including electronic receipt and dissemination of client documents, composition, content management, conversion, translation, assembly, packaging, output, delivery, and archiving.

      The Company’s international financial printing business provides similar services as those delivered by its domestic operations. International print capabilities are delivered primarily by the Company or in some areas, through strategic relationships.

      Historically, transactional financial print has been the largest contributor to the Company’s total revenue. However, this line of business is cyclical with the financial markets and experienced a marked downturn from 2001 through 2003. In response, the Company began to reduce fixed costs and increase the flexibility of its financial print segment to respond to market fluctuations. The Company has reorganized its regional operations and closed or consolidated eleven of its U.S. offices and facilities. While the Company still maintains its own printing capabilities, Bowne also outsources some printing needs to independent printers, especially during times of peak demand. This outsourcing allows the Company to preserve flexibility while reducing its staffing, maintenance and operating expense of underutilized facilities, and is in line with industry practice. In addition, since November 2000, Bowne has significantly reduced its financial print workforce. The Company also has successfully established an arrangement with a company in India that allows it to outsource some of its document conversions and related functions on cost-effective terms, especially at times of peak demand. Importantly, in preceding years the Company invested significantly in new technologies that it now leverages to perform the same volume of high-quality service for its clients despite the reductions in its workforce. This has allowed the Company to permanently reduce its fixed and direct labor costs. As a result of the flexibility Bowne has achieved in the last few years, the Company expects that its cost savings will be long term and that it will not need to fully replace personnel or otherwise incur such costs.

      The Company believes that its technology investments have produced one of the most flexible and efficient typesetting, printing and distribution systems in the industry, for example:

      The Company has continued to diversify its business mix within the financial print segment with the introduction of Bowne Enterprise Solutions. Using a model that involves extensive consultation with clients with respect to their customer communications challenges, BES partners with clients to deliver quality applications based upon the effective integration of document creation, content management and distribution methods. These methods include offset and digital printing and electronic delivery. BES helps its clients create, manage and distribute critical information, such as brokerage statements and introductory enrollment kits for new participants in 401(k) plans and new brokerage accounts, and brokerage statements, in order to produce better returns on their marketing dollars. Using advanced database technology, coupled with high-speed digital printing, BES offers clients the opportunity to personalize and customize communications to their customers. BES’s digital, print-on-demand services also eliminate the need to conventionally print generic information and hold it in inventory until it is used or becomes obsolete. BES maintains an electronic library of the client’s documents that can be edited in real-time by the client’s sales, marketing, legal and other authorized users. This allows customized and individual fulfillment with the most current copies available, while reducing waste. Because of the extensive integration of systems between BES and its clients, contracts for these services tend to involve longer-term relationships. The clients for these services include mutual funds, stock brokerage firms, defined contribution providers, investment banks, insurance companies and commercial banks.

      Bowne Global Solutions enables customers to succeed in global markets by providing innovative linguistic and cultural solutions. As a company’s domestic market becomes saturated or faces an economic downturn, the drive to “go global” is accelerated. Whether this means establishing international sales channels, developing manufacturing plants in low cost regions, or simply putting up an e-commerce Web site, the result is that companies today, large and small, are doing more and more business across borders and languages. Yet, while forecasts and market potential often look promising, successfully executing in these markets against entrenched local competition is very challenging. As a result, these companies seek a flexible partner with the scope and breadth to support their globalization efforts. With its scale and skill, backed by proven project management methods, BGS is able to rapidly respond to its clients’ changing needs while maintaining the highest standards of production quality.

      BGS is the leading provider in the industry and serves clients in a wide variety of vertical markets including information technology, telecommunications, aerospace, automotive, medical devices, pharmaceuticals, financial services, entertainment, and government agencies in the United States and Europe. BGS provides support to these customers in three primary areas:

      The Company operates this business by building and maintaining a network of employees and independent translators, authors and interpreters located around the globe who are engaged, as needed, based on their domain expertise and the needs of the client. One of the Company’s key competitive advantages is its ability to manage this global network of employees and linguistic agents through uniform processes and standards of quality performance and the ability to coordinate delivery of translated product in multiple locations according to its client’s schedule.

      In the past, BGS relied heavily on revenue from information technology clients. However, BGS has steadily decreased its reliance on these clients through diversification of its customer base. Revenues from information technology clients have further decreased on an individual project basis as those clients become more efficient at segmenting their larger programs into smaller discrete amounts, reducing the revenue per transaction even as the volume and number of languages covered increases. BGS has expanded its client base by reaching clients in new and diverse industries (such as transportation, telecommunications, aerospace/defense, manufacturing, life sciences, financial services, entertainment and consumer brands) and continues to focus on penetrating the significant number of companies that still perform their globalization and localization services in-house. The Company believes that any new business from companies that currently handle this work in-house will further increase the size of the currently served market.

      BGS has approximately 1,800 full-time employees in 24 countries, as well as a global contractor network of more than 10,000 qualified linguists covering over 80 languages and dialects.

      The Company’s litigation support services business consists of DecisionQuest, DecisionQuest Discovery Services, and JFS Litigator’s Notebook® (JFS). DecisionQuest, acquired in December 2002, is a strategic communications firm which allows the Company to deliver litigation support services spanning the entire “litigation lifecycle”^tm, from inception of the case through trial. These services include trial consulting and jury research, strategic communications, courtroom graphics and presentation technologies, litigation support and case evaluation software, and custom case strategy Web sites. DecisionQuest also owns a 50% interest in CaseSoft, Ltd., which develops software tools used primarily by litigators, litigation paralegals, and investigators. DecisionQuest Discovery Services offers its clients off-site support when they need help processing data and documents for large litigation projects. These project-based services include electronic data discovery processing, document imaging and coding, optical character recognition, high-speed, high volume printing, Web-based document hosting, and photocopying. JFS provides custom database management and litigation software application support and training which helps litigation teams work with the critical evidence retrieved from the underlying documents and transcript databases. In October 2004, DecisionQuest acquired

Tri-Coastal Legal Technologies, Ltd. (‘’Tri-Coastal”) for approximately $4.5 million. Tri-Coastal was the largest litigation graphics design firm in the Houston area and will help expand DecisionQuest’s presence throughout the Southwestern United States.

      The Company’s litigation solutions leverage technology and our litigation services expertise to add structure and support to our clients’ entire litigation process, allowing them to focus on winning cases instead of managing support services. Our litigation solutions provide legal professionals with a single, expert resource to assist them throughout the entire process — from pre-case strategy development to post-trial support.

Other Information

      For each of the last three fiscal years, the Company’s financial print segment has accounted for the largest share of consolidated total revenue, as shown below:

      We have facilities to serve customers throughout the United States, Canada, Europe, Latin America, South America and Asia.

      Although investment in equipment and facilities is required, the Company’s business is principally service-oriented. In all of our activities, speed, accuracy, and the need to preserve the confidentiality of the customers’ information is paramount.

      The Company maintains conference rooms and telecommunications capabilities at all of its financial print offices for use by clients while transactions are in progress. On-site conveniences are also provided to clients, which promote speed and ease of editorial changes and otherwise facilitate the completion of jobs. The Company’s globalization activities are conducted in a number of countries around the world. In addition, the Company uses an extensive electronic communications network, which facilitates data handling and makes collaboration practicable among clients at different sites.

      The Company was established in 1775, incorporated in 1909, reincorporated in 1968 in the State of New York, and reincorporated again in 1998 in Delaware. Its corporate offices are located at 345 Hudson Street, New York, NY 10014, telephone (212) 924-5500. The Company’s Web site is www.bowne.com. Our Web site contains electronic copies of Bowne news releases and U.S. Securities and Exchange Commission filings, as well as descriptions of Bowne’s corporate governance structure, products and services, and other information about the Company. This information is available free of charge.

Competition

      The Company believes that it offers a unique array of solutions for its clients to empower their information. However, competition in the various individual services described above is intense. Factors in this competition include not only the speed and accuracy with which the Company can meet customer needs, but also the price of the services, quality of the product and supporting services.

      In transactional financial, compliance and mutual fund printing, the Company competes directly with a number of other financial printers having similar degrees of specialization. Some of those financial printers operate at multiple locations and some are subsidiaries or divisions of companies having greater financial resources than those of the Company. Based upon the most recently available published information, the Company is the largest in terms of sales volume in the financial printing market. In addition to its customer base, the Company has experienced competition for sales, customer service and production personnel in financial printing.

      In commercial printing, the Company competes with general commercial printers, which are far more numerous than those in the financial printing market. The digital printing unit faces diverse competition from a variety of industries including other printers, transfer agents, banks and Internet consultants.

      With respect to its globalization offerings, the Company believes it holds the leading market position. The Company’s competition is from (i) the in-house globalization and localization departments of companies, (ii) small single-language vendors, and (iii) multi-language vendors.

      Competition in the litigation support services industry comes primarily from two national competitors and from regional/local competitors as well. The Company believes it is currently a leader in providing litigation support services to the legal industry.

Cyclical, Seasonal and Other Factors Affecting the Company’s Business

      The Company’s transactional financial printing service is affected by conditions in the world’s capital markets. Revenue and net income depend upon the volume of public financings, particularly equity offerings, which are influenced by corporate funding needs, stock market fluctuations, prevailing interest rates, and general economic and political conditions.

      Revenue derived from compliance printing is seasonal as the greatest number of proxy statements and regulatory reports are required to be printed during the Company’s first fiscal quarter ending March 31 and the early part of the Company’s second quarter ending June 30. Because of these cyclical and seasonal factors, coupled with the general need to complete certain printing jobs quickly after delivery of copy by the customers, the Company must maintain physical plant and customer service staff sufficient to meet peak work loads. However, mutual fund, commercial and digital printing are not considered to be as cyclical or seasonal.

      In the first quarter of the year, the globalization segment revenues are seasonally low due to the relatively high volume of consumer and commercial products that ship in the fourth quarter of any given year. This segment has historically relied on more than half of its business from the recently weak technology sector. Beginning in 2003 however, the segment began to realize the benefits of a change in product mix reflecting a continuing decline in the concentration of revenues from the technology sector.

      During the last four years, the Company has reduced costs in its financial print segment largely through a combination of staff reductions, the application of advanced technologies, outsourcing during peak periods and through office closings and consolidations. The Company does not anticipate the need to add significantly to staffing as the capital markets return to higher levels of volume, because it believes it will continue to be able to leverage the technology investments of the past few years and outsource certain work to third parties.

Research and Development

      The Company evaluates, on an ongoing basis, advances in computer software, hardware and peripherals, computer networking, telecommunications systems and Internet-related technologies as they relate to the Company’s business and to the development and installation of enhancements to the Company’s proprietary systems.

      The Company utilizes a computerized typesetting and telecommunications system in the process of preparing financial print documents. In addition, in order to respond to the shift from traditional forms of print manufacturing and document creation, the Company continues to research and develop its digital print

technology. In order to serve the customers of its globalization business, the Company continually tests new programs and often works directly with its customers in the design and development of new software and other technological products.

Patents and Other Rights

      The Company has no significant patents, licenses, franchises, concessions or similar rights other than certain trademarks. Except for a proprietary computer typesetting and telecommunication system, the Company does not have significant specialized machinery, facilities or contracts which are unavailable to other firms providing the same or similar services to customers. The Company and its affiliates utilize many trademarks and service marks worldwide, most of which are registered or pending registration. The most significant of these is the trademark and trade name Bowne®. The Company also utilizes the following service marks: Empowering Information^sm, Empowering Your Information^sm, ExpressStart^sm and QuickPath^sm, and trademarks: BowneFax^tm, BowneFile16®, BowneLink®, CaseMap®, DecisionQuest®,
8-K Express^tm, 6-K Express^tm, Elcano®, FundSmith®, Litigation Lifecycle®, JFS Litigator’s Notebook®, RapidView^tm, Securities Connect®, TimeMap^tm, Transforming Digital Capital^tm and XMark^tm.

Sales and Marketing

      The Company employs approximately 326 sales and marketing people. In addition to soliciting business from existing and prospective customers by building relationships and delivering customized solutions, the sales people act as a liaison between the customer and the Company’s customer service operations. They also provide advice and assistance to customers. The Company periodically advertises in trade publications and other media, and conducts sales promotions by mail, by presentations at seminars and trade shows and by direct delivery of marketing collateral material to customers.

Customers and Backlog of Orders

      The Company’s customers include a wide variety of corporations, law firms, investment banks, insurance companies, bond dealers, mutual funds and other financial institutions, as well as leading software, manufacturing, transportation and life sciences companies.

      During the fiscal year ended December 31, 2004, no customer accounted for 10% or more of the Company’s sales. However, one customer, Microsoft, is significant to the globalization segment. The Company has no backlog, within the common meaning of that term, which is normal throughout the service offerings in which the Company is focused. However, within its financial print segment, the Company maintains a backlog of customers preparing for financial offerings. This backlog is greatly affected by capital market activity.

Employees

      At December 31, 2004, the Company had approximately 4,900 full-time employees. Relations with the Company’s employees are considered to be good. Approximately four percent of the Company’s employees are members of various unions. The Company provides pension, 401(k), profit-sharing, certain insurance and other benefits to most non-union employees.

Suppliers

      The Company purchases or leases various materials and services from a number of suppliers, of which the most important items are paper, computer hardware, copiers, software and peripherals, communication equipment and services, and electrical energy. The Company purchases paper from paper mills and paper merchants. The Company has experienced no difficulty to date in obtaining an adequate supply of these materials and services. Alternate sources of supply are presently available. However, a severe paper or multi-market energy shortage could have an adverse effect upon many of the Company’s operations.

International Sales

      The Company conducts operations in Canada, Europe, Latin America, South America and Asia. In addition, the Company has affiliations with certain firms providing similar services abroad. Revenues derived from foreign countries other than Canada were approximately 24% of the Company’s total revenues in 2004, 22% in 2003 and 18% in 2002. During 2004, 2003 and 2002, revenues derived from foreign countries other than Canada totaled $217, $186 and $143 million, respectively. The financial print segment had revenues of $57, $36 and $44 million in these years, respectively. The globalization segment had revenues of $160, $151 and $99 million in 2004, 2003 and 2002, respectively. Canadian revenues were approximately 7% of the Company’s total sales in 2004, and 6% of the Company’s total sales in 2003 and 2002. During 2004, 2003, and 2002, revenues derived from Canada totaled $62, $48, and $43 million, respectively.

      Information regarding the material facilities of the Company, as of December 31, 2004, seven of which were leased and seven of which were owned, is set forth below.

      All of the properties described above are well maintained, in good condition and suitable for all presently anticipated requirements of the Company. The majority of the Company’s equipment in the financial print and globalization segments is owned outright. In May 2004, the Company sold its financial print facility in Dominguez Hills, California and moved to a new leased facility in Carson, CA in September 2004. In

February 2005, the Company announced that it will relocate its New York offices currently located at 345 Hudson Street to 55 Water Street. The Company will occupy 200,000 square feet under a 20-year lease, with the relocation scheduled for January 2006. Refer to Note 15 of the Notes to Consolidated Financial Statements for additional information regarding property and equipment leases.

      The Company is involved in no pending legal proceedings other than routine litigation incidental to the conduct of its business which is not material to its business.

      No matters were submitted to a vote of stockholders during the fourth quarter of fiscal year 2004.

      The following information is included in accordance with the provisions of Part III, Item 10 of Form 10-K. The executive officers of the Company and their recent business experience are as follows:

      There are no family relationships among any of the executive officers, and there are no arrangements or understandings between any of the executive officers and any other person pursuant to which any of such officers was selected. The executive officers are normally elected by the Board of Directors at its first meeting following the Annual Meeting of Stockholders for a one-year term or until their respective successors are duly elected and qualify.

PART II

Share Prices

      The Company’s common stock is traded on the New York Stock Exchange under the symbol “BNE.” The following are the high and low share prices as reported by the New York Stock Exchange, and dividends paid per share for calendar 2004 and 2003 by year and quarters.

      The closing price of the Company’s common stock on February 28, 2005 was $15.80 per share, and the number of holders of record on that date was approximately 1,101.

Stock Repurchase

      Through an Overnight Share Repurchase program with Bank of America, Bowne repurchased 2,530,000 shares on December 2, 2004, at a price of $15.75 per share, for approximately $40.2 million, net of costs. In connection with the program, Bank of America has been purchasing, and will continue to purchase, shares in the open market over the next three to six months. At the end of the program, Bowne will receive or pay a price adjustment based on the volume weighted average price of shares acquired during the purchase period. As of December 31, 2004, Bank of America purchased 442,800 shares in the open market at an average price of $15.55. Bank of America has purchased a total of 1,191,400 shares at an average price of $15.34 through February 28, 2005.

      The Company’s Board of Directors also authorized an open market stock repurchase program to repurchase up to $35 million of the Company’s common stock. Over a period of up to two years, the Company will purchase shares from time to time at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. The program may be discontinued at any time. No share purchases have occurred in the public market related to this program as of February 28, 2005.

Five Year Financial Summary

      In November 2004 the Company sold its document outsourcing business to Williams Lea. The results from this business are reported as discontinued operations and all prior years amounts have been reclassified to reflect this presentation. Refer to Note 3 of the Notes to Consolidated Financial Statements for additional information regarding the sale of the Company’s document outsourcing business. Also refer to Items Affecting Comparability in Management’s Discussion and Analysis of Financial Condition and Results of Operations for other items affecting the comparability of the financial information presented above.

      The 2003 and 2002 financial information reflects a restatement to correct excess depreciation taken in error on certain assets of the globalization segment during those years, as well as certain tax adjustments. The impact of this restatement on prior years’ results was to decrease previously reported depreciation expense by $1,379 and $1,152 for the years ended December 31, 2003 and 2002, respectively. The net of tax impact on loss from continuing operations was a decrease of $1,379, or $.04 per share, and $929, or $.03 per share, for the years ended December 31, 2003 and 2002, respectively. In addition, the restatement increased total assets and stockholders’ equity by $2,837 and $1,054 compared to what was previously reported at December 31, 2003 and 2002, respectively.

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.

      This report includes and incorporates by reference forward-looking statements within the meaning of the 1995 Act. These statements are included throughout this report, and in the documents incorporated by reference in this report, and relate to, among other things, projections of revenues, earnings, earnings per share, cash flows, capital expenditures, working capital or other financial items, output, expectations regarding acquisitions, discussions of estimated future revenue enhancements, potential dispositions and cost savings. These statements also relate to the Company’s business strategy, goals and expectations concerning the Company’s market position, future operations, margins, profitability, liquidity and capital resources. The words

“anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will” and similar terms and phrases identify forward-looking statements in this report and in the documents incorporated by reference in this report.

      Although the Company believes the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. The Company’s operations involve risks and uncertainties, many of which are outside the Company’s control, and any one of which, or a combination of which, could materially affect the Company’s results of operations and whether the forward-looking statements ultimately prove to be correct.

      Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors including, but not limited to:

      Many of these factors are described in greater detail in the Company’s filings with the Securities and Exchange Commission, including those incorporated by reference in this report. All future written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by the previous statements.

Overview

      The Company had favorable results for the first two quarters of 2004 primarily due to the effect of the increased activity in the capital markets on the financial print segment. However, the second half of the year had weaker results primarily due to significant competitive pressure within the financial print business, continued weak technology sector spending and delays of key customer technology projects in the global solutions business, and increased corporate expenses related to Sarbanes-Oxley compliance. The capital market began to improve during the fourth quarter of 2004 and has shown some positive momentum in the

early stages of 2005, and the Company continues to be optimistic regarding the future results of its Financial Print business. The Company is also optimistic regarding the Globalization segment’s results for 2005 as key customer technology projects that were delayed earlier in 2004 have now begun.

      During the fourth quarter of 2004, the Company sold its document outsourcing business, Bowne Business Solutions, to Williams Lea for $180 million in total consideration, resulting in a gain of approximately $31.6 million, net of taxes. With the proceeds from the sale, the Company retired its $60 million private placement senior notes, and used $40.2 million to repurchase 2,530,000 shares of its common stock through an overnight share repurchase program with Bank of America. These actions helped to significantly improve the Company’s balance sheet, resulting in net cash (cash and marketable securities less total outstanding debt) of $3.7 million at December 31, 2004, compared with net debt of $123.5 million at December 31, 2003.

      The document outsourcing business is reflected as a discontinued operation in the accompanying consolidated financial statements. The portion of the business that was previously included in the Outsourcing segment and has been excluded from the sale is referred to as the litigation support services business and is included in the Corporate/ Other category in the accompanying consolidated financial statements.

      The results of the Company’s two reporting segments are discussed below:

Items Affecting Comparability

      The Company continually reviews its business, manages costs, and aligns its resources with market demand, especially in light of the volatility of the capital markets and sustained decrease in transactional financial printing activity. In addition, the Company has also completed implementation of a new operating model, which uses technology to better manage its resources. As a result, the Company took several steps over the last three years to reduce fixed costs, eliminate redundancies, and better position the Company to respond to market pressures or unfavorable economic conditions.

      The following table summarizes the amounts incurred for restructuring, integration and asset impairment charges for each segment over the last three years:

      The actions taken in the year ended December 31, 2004 are estimated to result in additional annualized savings to continuing operations of approximately $21 million. Since beginning its cost cutting initiatives in the fourth quarter of 2000, the Company has reduced its annual cost base for continuing operations by approximately $145 to $150 million through December 31, 2004. Much of the expense reductions within the financial print segment are the result of the elimination of redundant staff and facilities that the Company maintained while it was bringing new technology solutions and manufacturing capacity on-line to support the unprecedented growth in transactional financial print work during the period from 1996 through 2000. The Company does not anticipate the need to replace this staff or the closed facilities in order to respond to a recovery in the capital markets, therefore yielding a higher degree of operating leverage and allowing the Company to increase productivity in such a recovery. In addition to the cost reductions in its financial print segment, the Company has also made workforce reductions in its globalization segment to better respond to fluctuations in demand and to integrate the acquisitions of Mendez and GlobalNet into the existing BGS operation. Further discussion of the restructuring activities is included in the segment information which follows, as well as in Note 10 to the Consolidated Financial Statements.

      The Company expects to incur additional restructuring and integration charges in 2005 of approximately $3 to $8 million.

      Some other transactions that affect comparability of results from year to year are as follows:

      In the fourth quarter of 2004, the Company sold its document outsourcing business to Williams Lea for $180 million, recognizing a gain of approximately $31.6 million after tax, or $0.86 per share.

      In the fourth quarter of 2004, the Company prepaid its private placement senior notes, incurring a loss of $8.8 million ($5.6 million after taxes, or $.15 per share), primarily related to the make-whole payment.

      During 2004, the Company incurred legal and settlement expenses related to the discontinued document outsourcing business of $1.0 million ($615 after taxes, or $0.02 per share).

      During 2004, the Company provided a valuation allowance of $1.1 million, or $0.03 per share, on its previously recognized deferred tax assets related to net operating losses in the Globalization segment, due to uncertainty regarding their realization.

      In May 2004, the Company sold its financial print facility in Dominguez Hills, California for net proceeds of $6.73 million, recognizing a gain on the sale of $896 ($551 after tax, or $0.01 per share) during the quarter ended June 30, 2004. The Company moved to a new leased facility in Southern California in September 2004.

      In the third quarter of 2003 the Company recognized a gain on the disposition of long-term investments of $0.7 million ($0.4 million after tax, or $0.01 per share.)

      In the third quarter of 2003 the Company incurred $0.8 million ($0.5 million after tax, or $0.01 per share) related to the prepayment and amendment of the Company’s Revolving Credit Facility and certain Private Placement notes.

      The Company completed two other transactions in the third quarter of 2002 that affect comparability of results. The Company sold certain publishing assets and liabilities in its financial print segment, resulting in a

pre-tax gain of $15,369 ($8,785 after tax, or $0.26 per share). The Company also completed the sale of the Chicago office building, resulting in a pre-tax gain of $4,889 ($2,787 after tax, or $0.08 per share).

Results of Operations

      Management evaluates the performance of its operating segments separately to monitor the different factors affecting financial results. 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 over the next few pages.

      Management uses segment profit to evaluate the performance of its operating segments. Segment profit is defined as gross margin (revenue less cost of revenue) less selling and administrative expenses. Segment performance is evaluated exclusive of interest, income taxes, amortization, certain shared corporate expenses, restructuring, integration and asset impairment charges, gain in the sale of subsidiary and building, loss on extinguishment of debt, other expenses and other income. Segment profit is measured because management believes that such information is useful in evaluating the results of certain segments relative to other entities that operate within these industries and to its affiliated segments.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

      Financial print revenue increased 8% for the year ended December 31, 2004 compared to the year ended December 31, 2003, with the largest class of service in this segment, transactional financial printing, up 13% in 2004. There was increased transactional activity in the first half of 2004 over the same period in 2003. This was partially offset by lower activity in the second half of 2004 compared to that of 2003. Revenue from the international market increased 44% to approximately $112,429 for the year ended December 31, 2004, as compared to $78,016 for the year ended December 31, 2003. This increase is primarily due to increased transactional market activity in all international markets, as well as increases in mutual fund and commercial revenue during 2004 as compared to 2003. Some of the increase in revenue is also attributable to the weakness in the U.S. dollar compared to foreign currencies. At constant exchange rates, revenue from international

markets increased 35% for the year ended December 31, 2004 compared to 2003. The increase in the international markets was driven primarily by higher revenue in Asia, which rebounded from the impact of the SARS outbreak and its effect on the Asian capital markets in 2003. In addition, the Company provided services on three large projects in Asia in the fourth quarter which accounted for approximately 11% of the total revenue from international markets for the year.

      Despite competitive pressures the Company remains the leading financial printer in both domestic and international markets and handled the largest percentage of IPO and mergers and acquisitions announced in 2004. During 2004 the Company worked on 83 IPOs, which is more than double the number worked on in 2003, and the Company was also awarded six of the ten largest merger and acquisition transactions over $50 million that were announced in 2004. The Company is optimistic regarding the future results of its financial print business due to the building momentum in the capital markets in the beginning of 2005.

      Compliance printing revenue increased 4% for the year ended December 31, 2004 as compared to 2003. Improvement in compliance printing revenue is linked to the new Securities and Exchange Commission regulations and the extensive disclosure requirements under which the Company’s clients are now required to comply.

      Mutual fund services revenue increased 3% for the year ended December 31, 2004, despite tightened spending by certain mutual fund clients and the loss of some clients due to pressure from competitive pricing. The increase is due to the addition of several new clients and additional work from existing clients.

      Other revenue increased 12% for the year ended December 31, 2004 compared to the prior year resulting from increases in digitally printed investor kit volumes and the introduction of two new products designed to enable the Company’s clients to personalize their marketing messages to their clients.

      Gross margin of the financial print segment increased by 7%, and the margin percentage remained at approximately 38%. The increased activity in transactional financial printing positively impacts gross margins since, historically, transactional financial printing is our most profitable class of service. Gross margins were also positively impacted compared to the prior year due to the consolidation of the Company’s fulfillment operations with the digital print facility. Gross margins were negatively impacted due to the competitive pricing pressure in the IPO market along with higher employee compensation and benefit costs.

      Selling and administrative expenses increased 6%. This increase is primarily the result of expenses that are directly associated with sales, such as selling expenses (including commissions and bonuses) and certain variable administrative expenses, along with higher employee benefit costs. As a percent of sales, selling and administrative expenses remained flat at approximately 27% for the years ended December 31, 2004 and 2003.

      The resources that the Company commits to the transactional financial printing market are significant and management continues to balance these resources with market conditions. In 2004, the Company initiated cost reductions aimed at increasing operational efficiencies, including the consolidation of certain administrative functions, the relocation of its Southern California financial print facility, and the consolidation of the Company’s fulfillment operations with its digital print facility. Total restructuring and asset impairment charges related to the financial print segment for the year ended December 31, 2004 were $5,799 compared to $12,380 for the year ended December 31, 2003.

      In May 2004, the Company sold its financial print facility in Dominguez Hills, California for net proceeds of $6,731, recognizing a gain on the sale of $896 during the year ended December 31, 2004. The Company relocated to a new leased facility in Southern California in September 2004.

      Segment profit (as defined in Note 19 to the Consolidated Financial Statements) from this segment increased 12% for 2004 as compared to 2003 primarily as a result of increased revenue. Segment profit as a percentage of revenue remained flat at approximately 11% for both years. Refer to Note 19 of the Consolidated Financial Statements for additional segment financial information and reconciliation of segment profit to income (loss) from continuing operations before income taxes.

      Revenue increased 2% for the year ended December 31, 2004. Adjusting for the impact of foreign currency rates, revenue decreased approximately 5% from 2003. The decline in revenue at constant rates generally resulted from a decline in the demand for interpretation services primarily from the Department of Justice contract, delays in commitments from certain localization customers in the technology sector from 2004 to 2005, and continued pricing pressure.

      Gross margin from this segment declined 4% for the year ended December 31, 2004, while the gross margin percentage decreased two percentage points to approximately 34%. The decline in gross margin percentage is primarily due to decreased pricing resulting from competitive price pressures including a decline in prices on the renewal of the Department of Justice contract, higher fixed costs on lower than anticipated revenue and the impact of foreign currency. During the fourth quarter, the Company strategically reduced certain idle capacity in its production platform and reduced selling and administrative expenses to compensate for the tightening margins. The Company anticipates margin improvement from these actions and from anticipated revenue growth from projects in the technology sector that were delayed until 2005.

      Selling and administrative expenses were flat in both dollars and as a percentage of revenue, for both years. Taken at constant exchange rates, selling and administrative expenses would have decreased 6% as the weaker U.S. dollar had a significant negative impact on expenses. The decrease in expenses at constant rates is generally related to merging redundant facilities, reduction of corporate management and staff, a decrease in research and development resources, and lower incentive compensation expenses. The general decline in expenses is offset by increases due to investment in sales and marketing initiatives, including global sales force training and an extensive management meeting.

      Depreciation expense for the year ended December 31, 2003 has been restated to correct for excess depreciation taken in error on certain assets acquired as a result of the 2001 acquisition of Mendez. The correction decreases previously reported depreciation expense by $1,379.

      For the year ended December 31, 2004, restructuring, integration and asset impairment charges related to the globalization segment were $6,195 in 2004 as compared to $8,605 in 2003. In 2004, these charges were primarily related to the consolidation of offices in the segment’s Italian operations, closure of the segment’s San Diego facility, a reduction of corporate management, and scaling back the investment in research and development.

      As a result of the foregoing, segment profit (as defined in Note 19 to the Consolidated Financial Statements) for this segment decreased 27% for the year ended December 31, 2004 as compared to 2003. Segment profit as a percentage of revenue decreased two percentage points from approximately 6% in 2003 to approximately 4% in 2004. Refer to Note 19 of the Consolidated Financial Statements for additional segment financial information and reconciliation of segment profit to income (loss) from continuing operations before taxes.

      Overall revenue increased $51,375, or 6.1%, to $899,011 for 2004. The increase is largely attributed to the increase in financial printing, specifically transactional financial printing during the first half of the year, which was offset significantly by the unfavorable results in the second half of 2004 as compared to the same period in the prior year. There was a $13,277, or 4.3% increase in gross margin, and the gross margin percentage remained flat at approximately 36%.

      Selling and administrative expenses on a company-wide basis increased by approximately $18,057, or 7%, to $266,034. This increase is primarily the result of expenses that are directly associated with sales, such as selling expenses (including commissions and bonuses) and certain variable administrative expenses. The increase is also due to higher professional fees, marketing, and travel-related expenses, offset by decreases in pension and bad debt expense. The increase in professional fees is primarily from consulting projects related to long-term strategic planning initiatives, recruiting fees, legal fees, and Sarbanes-Oxley compliance costs. Shared corporate expenses were approximately $22,062 in 2004 as compared to approximately $15,655 in 2003, an increase of approximately $6.4 million, primarily due to increased incentive compensation and consulting expenses, offset by reduced salaries due to headcount reductions. As a percentage of sales, overall selling and administrative expenses increased one percentage point to 30%.

      Depreciation decreased approximately $3,345, primarily as a result of reduced capital expenditures in recent years.

      There were approximately $14,644 in restructuring, integration, and asset impairment charges during 2004, as compared to $23,076 in 2003, as discussed in Note 10 to the Consolidated Financial Statements.

      The gain on the sale of building of $896 for 2004 relates to the sale of the Company’s manufacturing facility in California as discussed in Note 9 to the Consolidated financial statements.

      Interest expense decreased $680, a 6% decrease, primarily as a result of lower average borrowings in 2004 ($147 million for the year ended December 31, 2004, as compared to $175 million for the year ended December 31, 2003) offset by a slightly higher average interest rate in the current year (6.2% for the year ended December 31, 2004 as compared to 5.6% for the year ended December 31, 2003.)

      Loss on extinguishment of debt resulted from the early retirement of the Company’s senior notes in December 2004. The loss represents the make-whole payment required in accordance with the debt agreement and the write-off of approximately $272 of deferred costs that were previously being amortized over the life of the senior notes, as discussed in Note 12 to the Consolidated Financial Statements.

      Other expense, net was $118 for the year ended December 31, 2004 as compared to $1,367 for the year ended December 31, 2003. The change was primarily due to fluctuations in foreign currency translation gains and losses, and legal settlement expenses incurred during the year ended December 31, 2003.

      Income tax benefit for 2004 was $1,313 on pre-tax loss from continuing operations of $9,511 compared to a tax benefit in 2003 of $729 on pre-tax loss from continuing operations of $10,283. Income tax benefits in both years were impacted because there was no benefit taken for losses in certain foreign jurisdictions because of the uncertainty regarding their realization. In addition, in 2004 the Company recorded a valuation allowance of approximately $1.1 million on its previously recognized deferred tax assets related to net operating losses of its globalization segment, due to uncertainties regarding their realization. The size of the non-deductible expenses are relatively unchanged from year to year, and the rate applied to U.S. taxable income remained at approximately 39%.

      Net income from discontinued operations increased $33,897 in 2004 to $35,702 as compared to $1,805 for 2003. The increase is primarily due to the gain on the sale of the document outsourcing business to Williams Lea in November 2004, as discussed in Note 3 to the Consolidated Financial Statements.

      As a result of the foregoing, net income for 2004 was $27,504 as compared to a net loss of $7,749 for 2003.

     Domestic Versus International Results of Operations

      The Company has operations in the United States, Canada, Europe, Mexico, South America and Asia. All of the Company’s segments have operations in the United States. United States and foreign components of (loss) income from continuing operations before income taxes for 2004 and 2003 are as follows:

      Domestic pre-tax loss from domestic operations increased significantly in 2004 due to the loss on the early retirement of the senior notes, increased corporate spending, and an increase in the pre-tax loss related to the globalization segment’s domestic operations.

      Foreign pre-tax income (loss) from continuing operations improved in 2004 compared to 2003 primarily due to improvement in the financial print segment’s results due to the increased transactional market activity in international markets during 2004. In addition, the foreign results for 2003 included approximately $12.9 million of restructuring charges, primarily associated with the integration of GlobalNet’s operations with BGS and the closing of the London financial printing manufacturing facility and a portion of the London financial printing customer service center. The foreign results for 2004 included approximately $4.6 million of restructuring charges, which included costs associated with the consolidation of offices in the globalization segment’s Italian operations.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

      Revenue decreased 7% for the twelve months ended December 31, 2003, with the largest class of service in this segment, transactional financial printing, down 11% in 2003. The market for transactional financial printing remained low and was down during 2003, as compared to 2002, primarily due to reduced capital market activity in 2003, both domestic and international. There were also some significant transactions for which the Company provided financial printing services during 2002, with no transactions of similar significance in 2003. The market for transactional financial printing began to experience a rebound during the second half of 2003, with transactional financial printing revenues for the second half of 2003 increasing 43% over the first half of 2003, primarily due to increased domestic capital market activity in 2003 as well as an increase in mergers and acquisitions transactions. Revenues from transactional financial printing services during the fourth quarter of 2003 were 54% higher than in the first quarter of 2003.

      The Company maintained its industry-leading market share in both the domestic and international markets, capturing the business connected with approximately 42% of the IPO market in 2003, as well as 42% of all U.S. public mergers and acquisitions valued over $50 million. In the IPO market, 84 companies came to market in 2003, down from 94 companies in 2002, however, 53 of that 84 came to market in the second half of 2003, with 24 coming in December.

      The international market was also affected by the downturn in the capital markets, with revenues of $78 million for 2003 compared to 2002 revenues of $87.5 million, an 11% decline. The majority of this decline is from the Asian subsidiaries which may have been impacted by the SARS illness outbreak and its effect on the Asian capital markets.

      Mutual fund services revenue decreased 17%, for 2003, which is primarily due to the continued consolidation of funds, tightened spending by mutual funds in reaction to slowness in the financial markets, and the loss of some clients due to pressure from competitive pricing. There were also certain special proxy statement print jobs which were completed in 2002 that were not repeated in 2003.

      Financial print revenue also declined $4,530 due to the sale of certain publishing assets and liabilities during the third quarter of 2002. This was offset by an increase of $5,292 related to fulfillment services which are included in consolidated results as a result of the Company’s acquisition of its fulfillment operation which was previously operated as a joint venture during most of 2002.

      Gross margin of the financial print segment decreased 10% and the margin percentage decreased by approximately one percentage point to 38%. The reduced activity in transactional financial printing impacted gross margin since, historically, transactional financial printing is the most profitable class of service. There were also some significant transactions for which the Company provided financial printing services during the second quarter of 2002, which increased the 2002 gross margin percentage, with no transactions of similar significance in 2003. Margins were also impacted by competitive pricing pressure, as well as diminished resource utilization resulting from the decreased mutual fund services revenue. Offsetting these factors were the results of the Company’s ongoing cost reduction initiatives which led to improvements in gross margins.

      Selling and administrative expenses decreased 10% primarily as a result of cost reductions that were implemented during 2002 and 2003, including workforce reductions and office closings during that time frame, offset by higher employee benefit, incentive compensation, and insurance costs. The decrease was also the result of lower expenses that were directly associated with sales such as selling expenses (including commissions) and certain variable administrative expenses. As a percent of sales, selling and administrative expenses decreased approximately one percentage point to 27% from 2002 to 2003.

      During 2003, the Company responded to the continued lower levels of activity in the capital markets by further reducing its staffing and other operating expenses, including closing its London manufacturing facility and a portion of its London customer service center, as well as several other offices. Total restructuring and asset impairment charges related to the financial print segment incurred as a result of these programs were $12,380 compared to $6,876 in 2002.

      Segment profit (as defined in Note 19 to the Consolidated Financial Statements) from this segment for the year ended December 31, 2003 decreased 7%, from segment profit of $66,569 in 2002. The decrease in segment profit was primarily a result of decreased revenues in 2003. Segment profit as a percentage of revenue

remained consistent from 2002 to 2003. Refer to Note 19 of the Consolidated Financial Statements for additional segment financial information and reconciliation of segment profit to income (loss) from continuing operations before income taxes.

      Revenue increased 67% for the year ended December 31, 2003. The increase was primarily attributable to the acquisition of GlobalNet in September 2002, as well as organic growth. The increase in revenue was accompanied by a change in product mix reflecting a continuing decline in the concentration of revenues from the information technology and telecommunications sectors, consistent with the Company’s efforts to diversify its customer base. The diversification was evidenced by increases in the government, life sciences, financial services, manufacturing and transportation sectors. During 2003 the Company completed significant projects for Microsoft, Nissan and the Special Olympics, among others. Significant contracts signed included the renewal of the U.S. Department of Justice contract, and new contracts with the Irish Department of Justice and BKK AS, one of Norway’s largest producers, wholesalers and transmitters of electrical power. The Company also entered into a five-year collaborative business agreement with SAAB AB.

      Gross margin from this segment increased 79%, while the gross margin percentage increased approximately two percentage points to 36%. Gains realized from facility consolidation, headcount reductions and process improvements related to the GlobalNet acquisition fueled the increase in gross margin percentage, offset by pricing pressure in the globalization market along with the negative impact from the weak dollar.

      Selling and administrative expenses increased 35%, but as a percentage of revenue decreased approximately seven percentage points to 30%. The increase in selling and administrative expenses was generally related to the acquisition of GlobalNet. Economies realized from merging redundant facilities and integrating the workforces of BGS and GlobalNet was the primary contributor to the decrease of selling and administrative costs as a percentage of revenue.

      Depreciation expense for the years ended December 31, 2003 and 2002 has been restated to correct for excess depreciation taken in error on certain assets acquired as a result of the 2001 acquisition of Mendez. The correction decreases previously reported depreciation expense by $1,379 and $1,152 for the years ended December 31, 2003 and 2002, respectively. The increase in depreciation from 2002 to 2003 is due to the acquisition of GlobalNet in September 2002.

      For the year ended December 31, 2003 restructuring, integration and asset impairment charges related to the globalization segment were $8,605 compared to $10,624 for the year ending December 31, 2002. These charges primarily related to workforce reductions, office closings, and other costs associated with the integration of GlobalNet.

      As a result of the foregoing, segment profit (as defined in Note 19 to the Consolidated Financial Statements) for this segment for the year ending December 31, 2003 was $13,072. This compares to a

segment loss in 2002 of $4,441. The significant improvement in segment profit was largely a result of economies created through the integration of GlobalNet and BGS. Refer to Note 19 of the Consolidated Financial Statements for additional segment financial information and reconciliation of segment profit (loss) to income (loss) from continuing operations before income taxes.

Summary

      Overall revenue increased $68,771, or 9%, to $847,636 for 2003. The increase is attributed to the acquisitions of GlobalNet and DecisionQuest in 2002, offset by a decline in financial printing. There was a $17,781, or 6%, increase in gross margin, however the gross margin percentage decreased approximately one percentage point to 37%. This decrease in gross margin percentage was attributable to decreased margin percentages in the financial print segment.

      Selling and administrative expenses increased slightly from $247,705 in 2002 to $247,977 in 2003. The slight increase was primarily due to the acquisitions of GlobalNet and DecisionQuest, and higher employee benefit costs, incentive compensation, and insurance and was offset slightly by lower costs directly related to the decrease in sales in financial printing, such as selling expenses (including commissions) and certain variable administrative expenses, as well as decreases in administrative expenses as a result of workforce reductions, office closings, and reductions in discretionary spending. In addition, shared corporate expenses were $15,655 in 2003 compared to $17,351 in 2002, a decrease of $1,696, primarily due to lower professional and consulting fees. As a percentage of sales, these expenses decreased three percentage points to 29%. This percentage was affected by the improvement in the globalization segment primarily due to realizing economies created by the acquisition of GlobalNet and cost savings realized as it merged redundant facilities and integrated the two workforces.

      Depreciation decreased $218 primarily as a result of reduced capital expenditures in recent years. Amortization increased $1,604 as a result of the acquisitions of GlobalNet and DecisionQuest in 2002.

      There were $23,076 in restructuring, integration, and asset impairment charges for the year ended December 31, 2003, as compared to $17,658 in 2002, as discussed in Note 10 to the financial statements.

      Interest expense increased $4,270, a 60% increase, primarily as a result of higher average borrowings in 2003 ($175 million for the year ending December 31, 2003, as compared to $133 million for the year ending December 31, 2002), and a slightly higher average interest rate in 2003 (5.6% for 2003, as compared to 5.2% for 2002). The increase in interest expense is also the result of a $909 increase in the amortization of deferred financing costs, resulting from the fees relating to the Company’s revolving credit facility, senior notes and convertible subordinated debentures, all of which were either completed or amended since February 2002. In addition, there was also a write-off of $455 of previously deferred financing costs in connection with the retirement of portions of the revolving credit facility and senior notes during the third quarter of 2003.

      The gain on sale of certain printing assets of $15,369 for the year ended December 31, 2002 relates to the sale of certain publishing assets and liabilities associated with the financial print segment.

      The gain on the sale of building of $4,889 for the year ended December 31, 2002 relates to the sale of the Company’s Chicago office building.

      Income tax benefit in 2003 was $729 on a pre-tax loss from continuing operations of $10,283, compared to income tax expense in 2002 of $6,482 on pre-tax income from continuing operations of $3,480. The 2002 tax expense is $223 higher than previously reported as a result of the tax effect of the restatement to correct for excess depreciation taken in error on certain assets acquired as a result of the 2001 acquisition of Mendez, as previously mentioned in the discussion of the globalization segment’s results. Income tax expense in both years was impacted significantly because there was no benefit taken for losses in certain foreign jurisdictions because of the uncertainty regarding their realization. The size of the non-deductible expenses is relatively unchanged from year to year, and the rate applied to U.S. taxable income (loss) remained at approximately 39%.

      Net income from discontinued operations was $1,805 in 2003 as compared to $4,286 in 2002.

      As a result of the foregoing, the net loss for 2003 was $7,749 as compared to net income in 2002 of $1,284.

      The Company has operations in the United States, Canada, Europe, Mexico, South America and Asia. All of the Company’s segments have operations in the United States. United States and foreign components of income (loss) from continuing operations before income taxes for 2003 and 2002 are as follows:

      Domestic pre-tax income from continuing operations decreased significantly due to the gain on the sale of certain printing assets and the gain on the sale of building in 2002 of approximately $15,369 and $4,889, respectively.

      Foreign pre-tax loss from continuing operations was slightly lower in 2003 compared to 2002 primarily due to the increase in pre-tax income from the foreign operations in the globalization segment. This increase was attributable to the acquisition of GlobalNet that occurred in September 2002.

2005 Outlook

      The following statements and certain statements made elsewhere in this document are based upon current expectations. These statements are forward looking 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 excludes the effect of potential dilution from the Convertible Subordinated Debentures and the impact from any future purchases under our share repurchase program. Refer also to the Cautionary Statement Concerning Forward Looking Statements included at the beginning of this Item 7.

      For 2005, the Company expects improved results over 2004. The Company is optimistic about the financial print business due to the increase in the capital markets activity. The Company expects improvement in its globalization segment as it realizes the benefits of cost reductions made during 2004 and as delayed projects start up in 2005.

      Although several circumstances, including volatile market conditions, have limited the Company’s ability to predict future financial results, we estimate that full year 2005 results will be in the ranges shown below.

Liquidity and Capital Resources

      At December 31, 2004, the Company had a working capital ratio of 2.00 to 1 and working capital of approximately $158.0 million compared to a ratio of 1.51 to 1 and working capital of $90.8 million at December 31, 2003. The increase in working capital is primarily due from an increase in cash and marketable securities of approximately $64 million as a result of the net receipt of approximately $167.3 million from the sale of the document outsourcing business that closed on November 9, 2004. The Company used approximately $69 million of the proceeds from the sale for the principal and a make-whole payment related to the early retirement of the Company’s $60 million senior notes during the fourth quarter of 2004. The Company also used approximately $40.2 million of the proceeds to repurchase 2,530,000 shares on December 2, 2004 through an overnight share repurchase program with Bank of America. Also contributing to the increase in working capital was a decrease in accrued employee compensation and benefits of approximately $12.2 million primarily due to a decrease in the current accrued pension costs of approximately $16.3 million, resulting from contributions to the pension plan made during 2004. This decrease was offset slightly by an increase in accrued bonuses of approximately $9.3 million from 2003 to 2004.

      The Company’s Board of Directors has authorized an open market stock repurchase program to repurchase up to $35 million of the Company’s common stock. Over a period of up to two years, the Company will purchase shares from time to time at prevailing prices as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. The program may be discontinued at any time. No trading activity has occurred in the public market related to this program as of February 28, 2005.

      The Company had all of the borrowings available under its $115 million revolving credit facility as of December 31, 2004. The Company is in the process of renewing the revolving credit facility, which expires in July 2005, and expects completion in the next few months. The Company’s Canadian subsidiary also had all of its borrowings available under its $4.3 million Canadian dollar credit facility as of December 31, 2004. The components of the Company’s debt and available borrowings are described fully in Note 12 to the Company’s Consolidated Financial Statements.

      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, if any, and capital expenditures, provide for the payment of dividends, meet its debt service requirements and provide for repurchases of the Company’s common stock under the aforementioned stock repurchase program. 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 year ended December 31, 2004 were $24,057. For the full year 2005, the Company plans capital spending of approximately $25 million.

Cash Flows

      The Company continues to focus on cash management, including managing receivables and inventory. Year-to-date average days sales outstanding improved one day for the year ended December 31, 2004 as compared to 2003. The Company had net cash provided by operating activities of $34,199, $20,249, and $45,964 for the years ending December 31, 2004, 2003, and 2002 respectively. The increase in net cash provided by operating activities in 2004 as compared to 2003 is primarily due to larger cash flow from collections of beginning of the year accounts receivable balances in 2004 as compared to 2003 resulting in an increase of cash flow of approximately $9,215. In addition, the Company had overall improved results in 2004 compared to 2003, with operating income of $10,131 in 2004 compared to $2,473 in 2003. Also contributing to the increase in cash flow in 2004 as compared to 2003 is that more cash was used to pay for restructuring related activities in 2003, resulting in a significant decrease in accrued expenses in 2003 from 2002, as compared to the slight increase in accrued expenses in 2004. Offsetting these increases in cash flow from operations was the increase in contributions to the pension plan and supplemental retirement plan in 2004 as compared to 2003. The Company contributed approximately $25 million to these plans in 2004 as compared to approximately $9 million in 2003. Overall, cash provided by operating activities increased by approximately $12,420 from 2003 to 2004. The fluctuation from 2002 to 2003 is due primarily to a significant increase in accounts receivable as compared to a significant decrease in the prior year (when excluding the effect of 2002 acquisitions) and a significant decrease in accrued expenses, primarily caused by a decline in the accrued restructuring balance in 2003.

      Net cash provided by (used in) investing activities was $126,390, ($21,117) and ($89,506) for the years ended December 31, 2004, 2003, and 2002, respectively. The change from 2003 to 2004 was primarily the result of approximately $167,264 of proceeds received from the sale of the Company’s document outsourcing business in the fourth quarter of 2004, and $6,731 of net proceeds received from the sale of the Company’s facilities in Dominguez Hills, California during the second quarter of 2004. Offsetting these increases was approximately $3,500 used in the acquisition of Tri-Coastal Legal Technologies in the fourth quarter of 2004, and the purchase of marketable securities of approximately $20,280 also in the fourth quarter of 2004. The fluctuation from 2002 to 2003 is primarily due to the cash used in the acquisitions of GlobalNet and DecisionQuest in 2002 and was slightly offset by the proceeds received from the sale of certain printing assets and the Chicago building.

      Net cash (used in) provided by financing activities was ($97,784), ($10,872) and $22,769 for the years ended December 31, 2004, 2003, and 2002, respectively. The increase in cash used from 2003 to 2004 was primarily due to the Company’s early retirement of its $60 million senior notes and the repurchase of approximately 2.5 million shares of common stock during the fourth quarter of 2004, which was partially offset by the proceeds received from the increased stock options exercises in 2004. The change in 2003 compared to 2002 primarily resulted from net repayments of debt in 2003, as compared to net borrowings in 2002, partially offset by slightly higher proceeds from stock option exercises in 2003.

      Net cash (used in) provided by discontinued operations was ($18,593), ($4,131) and $25,885 for the years ended December 31, 2004, 2003 and 2002, respectively. The increase in cash used in discontinued operations from 2004 to 2003 is primarily the result of the tax expense associated with the sale of the document outsourcing business in the fourth quarter of 2004. The fluctuation from 2002 to 2003 is due primarily to a large customer deposit received in 2002 related to the discontinued document outsourcing business, a significant decrease in accounts receivable from 2001 to 2002 as compared to the change in accounts receivable during 2003, and a decrease in the net income from the discontinued operations in 2003 as compared to 2002.

Contractual Obligations, Commercial Commitments, and Off-Balance Sheet Arrangements

      The Company’s debt consists primarily of the convertible subordinated debentures issued in a private placement in September 2003. The Company also leases equipment under leases that are accounted for as capital leases, where the equipment and related lease obligation are recorded on the Company’s balance sheet.

      The Company and its subsidiaries also occupy premises and utilize equipment under operating leases that expire at various dates through 2020. In accordance with generally accepted accounting principles, the obligations under these operating leases are not recorded on the Company’s balance sheet. Many of these leases provide for payment of certain expenses and contain renewal and purchase options.

      The Company has a synthetic lease for printing equipment in the United States which is accounted for as an operating lease. The equipment under the facility had a fair value of approximately $13.8 million at the date of inception in May 2003. This facility has a term of four years, with expected minimum lease payments remaining of approximately $2.5 million in 2005 and 2006 and $1.0 million in 2007. At the end of this facility, the Company has the option of purchasing the equipment at the estimated residual value of approximately $6.3 million. The equipment under this lease has an aggregate residual value of approximately $11.0 million as of December 31, 2004.

      The Company’s contractual obligations and commercial commitments are summarized in the table below:

      As discussed in Note 14 to the Consolidated Financial Statements, the Company has long-term liabilities for deferred employee compensation, including pension, supplemental retirement plan, and deferred compensation. The payments related to the supplemental retirement plan and deferred compensation are not included above since they are dependent upon when the employee retires or leaves the Company, and whether the employee elects lump-sum or annuity payments. In addition, minimum pension funding requirements are not included above as such amounts are not available for all periods presented. In 2005, the Company is not required to make any contributions to its pension plan and estimates it will contribute approximately $6 million to its supplemental retirement plan. During 2004, the Company made approximately $25 million in pension and supplemental retirement plan contributions.

      The Company has issued standby letters of credit in the ordinary course of business totaling $7,538. These letters of credit expire in 2005 ($6,869) and 2006 ($669). Pursuant to the terms of the lease entered into in February 2005 for the relocation of its primary New York City offices, the Company is required to deliver to the landlord a letter of credit for approximately $9,392 to secure the Company’s performance of its obligations under the lease. Provided no event of default has occurred and is continuing, the amount of the letter of credit will be reduced in equal amounts annually until 2016, at which point the Company shall have no further obligation to post the letter of credit. The letter of credit obligation shall also be terminated if the entire amount of the Company’s 5% Convertible Subordinated Debentures due October 1, 2033 are converted into stock of the Company, or repaid and refinanced on certain specified terms, or remain outstanding beyond October 1, 2008.

      During 2004, the Company also issued a guarantee related to a lease agreement for facilities occupied by its wholly-owned subsidiary in the litigation support services business. The minimum annual commitment under this lease agreement is $948 as of December 31, 2004. The guarantee is effective through the term of the lease, which expires in October 2011.

      The Company does not use derivatives, variable interest entities, or any other form of off-balance sheet financing (other than the synthetic lease discussed above).

Critical Accounting Policies and Estimates

      The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States. The Company’s significant accounting polices are disclosed in Note 1 to the Consolidated Financial Statements. The selection and application of these accounting principles and methods requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as certain financial statement disclosures. On an ongoing basis, the Company evaluates its estimates, including those related to the recognition of revenue under the percentage of completion method of accounting, allowance for doubtful accounts, valuation of goodwill and other intangible assets, income tax provision and deferred taxes, restructuring costs, actuarial assumptions for employee benefit plans, and contingent liabilities related to litigation and other claims and assessments. The Company bases its

estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. While management believes that the estimates and assumptions it uses in preparing the financial statements are appropriate, these estimates and assumptions are subject to a number of factors and uncertainties regarding their ultimate outcome, and therefore, actual results could differ from these estimates.

      The Company has identified its critical accounting policies and estimates below. These are policies and estimates that the Company believes are the most important in portraying the Company’s financial condition and results, and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management has discussed the development, selection and disclosure of these critical accounting policies and estimates with the Audit Committee of the Company’s Board of Directors.

      Accounting for Goodwill and Intangible Assets — Two issues arise with respect to these assets that require significant management estimates and judgment: a) the valuation in connection with the initial purchase price allocation and b) the ongoing evaluation for impairment.

      In accordance with Statement of Financial Accounting Standard No. 141 (“SFAS No. 141”), “Business Combinations,” the Company allocates the cost of acquired companies to the identifiable tangible and intangible assets and liabilities acquired, with the remaining amount being classified as goodwill. Certain intangible assets, such as customer relationships, are amortized to expense over time, while in-process research and development costs, if any, are recorded as a one-time charge at the acquisition date if it is determined that it has no alternative future use. The Company’s future operating performance will be impacted by the future amortization of identifiable intangible assets and potential impairment charges related to goodwill and other indefinite lived intangible assets. Accordingly, the allocation of the purchase price to intangible assets and goodwill has a significant impact on the Company’s future operating results. The allocation of the purchase price of the acquired companies to intangible assets and goodwill requires management to make significant estimates and assumptions, including estimates of future cash flows expected to be generated by the acquired assets and the appropriate discount rate to value these cash flows. Should different conditions prevail, material write-downs of net intangible assets and/or goodwill could occur.

      The Company has acquired certain identifiable intangible assets in connection with its acquisitions of Mendez in 2001, GlobalNet and DecisionQuest in 2002, and Tri-Coastal in 2004. These identifiable intangible assets primarily consist of the value associated with customer relationships, trade name, covenants not to compete, software licenses and proprietary technology. The valuation of these identifiable intangible assets is subjective and requires a great deal of expertise and judgment. For these reasons, the Company has used independent third party valuation firms to value these assets. The values of the customer relationships were primarily derived using estimates of future cash flows to be generated from the customer relationships. This approach was used since the inherent value of the customer relationship is its ability to generate current and future income. The value of the software licenses were derived using the market approach, which is based upon the value of similar or alternative technology. This approach was used due to the uncertainty regarding the amount of future cash flows to be generated from the software license. The value of the trade name was determined using an estimated market-based royalty rate applied to projected future revenue. The value of the proprietary technology was based on estimated replacement cost. The value of the covenant not to compete was determined using a discounted cash flow methodology. While different amounts would have been reported using different methods or using different assumptions, the Company believes that the methods selected and the assumptions used are the most appropriate for each asset analyzed.

      Statement of Financial Accounting Standard No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets” requires annual impairment testing of goodwill based upon the estimated fair value of the Company’s reporting units. At December 31, 2004, our goodwill balance was $171,326, which primarily related to the globalization segment ($132,676) and the litigation solutions business ($22,133).

      In testing for potential impairment of goodwill, SFAS 142 requires the Company to: 1) allocate goodwill to the reporting units to which the acquired goodwill relates, 2) estimate the fair value of those reporting units

to which goodwill relates, and 3) determine the carrying value (book value) of those reporting units. Furthermore, if the estimated fair value is less than the carrying value for a particular reporting unit, then we are required to estimate the fair value of all identifiable assets and liabilities of the reporting unit in a manner similar to a purchase price allocation for an acquired business. Only after this process is completed is the amount of goodwill impairment determined.

      Accordingly, the process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment at many points during the analysis. For impairment testing purposes, the Company has utilized the services of independent consultants to perform valuations of the Company’s reporting units that contained significant balances of goodwill. The fair value of the Company’s reporting units was estimated based on discounted expected future cash flows using a weighted average cost of capital rate. Additionally, an assumed terminal growth rate was used to project future cash flows beyond base years. The estimates and assumptions regarding expected cash flows, terminal growth rates and the discount rate require considerable judgment and are based upon historical experience, financial forecasts, and industry trends and conditions. These assumptions are consistent with the plans and estimates we use to manage the underlying business.

      Based on our estimates, the Company has concluded that there is no impairment of goodwill. However, a decline in expected cash flows or the estimated terminal value could cause reporting units to be valued differently. If the reporting units do not meet projected operating results, then this analysis could potentially result in a non-cash goodwill impairment charge, depending on the estimated value of the Company’s reporting units. Additionally, an increase in the assumed discount rate (weighted average cost of capital) could also result in goodwill impairment.

      Revenue Recognition — The Company recognizes revenue for substantially all services within its financial print segment and litigations solutions business when products or services are delivered to customers or when completed. Revenue for services provided within the Company’s globalization segment are recognized under the percentage of completion method, which relies on estimates of total expected contract revenues and costs. The Company follows this method since reasonably dependable estimates of the revenue and costs applicable to various elements of the contract can be made. Since the financial reporting of these contracts depends on estimates, which are assessed continually during the term of these contracts, recognized revenues and profit are subject to revisions as the contract progresses toward completion. Revisions in profit estimates are reflected in the period in which the facts that give rise to the provision become known. The Company believes these revenue recognition methods best represent when the Company has earned revenue.

      Allowance for Doubtful Accounts — The Company realizes that it will be unable to collect all amounts that it bills to its customers. Therefore, it estimates the amount of billed receivables that it will be unable to collect and provides an allowance for doubtful accounts during each accounting period. A considerable amount of judgment is required in assessing the realization of these receivables. The Company’s estimates are based on, among other things, the aging of its account receivables, its past experience collecting receivables, information about the ability of individual customers to pay, and current economic conditions. While such estimates have been within our expectations and the provisions established, a change in financial condition of specific customers or in overall trends experienced may result in future adjustments of our estimates of recoverability of our receivables. As of December 31, 2004, the Company had an allowance for doubtful accounts of $14,392.

      Accounting for Income Taxes — Accounting for taxes requires significant judgments in the development of estimates used in income tax calculations. Such judgments include, but are not limited to, the likelihood the Company would realize the benefits of net operating loss carryforwards, the adequacy of valuation allowances, and the rates used to measure transactions with foreign subsidiaries. As part of the process of preparing the Company’s financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which the Company operates. The judgments and estimates used are subject to challenge by domestic and foreign taxing authorities. It is possible that either domestic or foreign taxing authorities could challenge those judgments and estimates and draw conclusions that would cause the Company to incur liabilities in excess of those currently recorded. The Company uses an estimate of its annual effective tax rate

at each interim period based upon the facts and circumstances available at that time, while the actual effective tax rate is calculated at year-end. Changes in the geographical mix or estimated amount of annual pre-tax income could impact the Company’s overall effective tax rate.

      The Company accounts for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes,” which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

      At December 31, 2004 and 2003, the Company had deferred tax assets in excess of deferred tax liabilities of $31,034 and $29,890, respectively. At December 31, 2004 and 2003, management determined that it is more likely than not that $17,544 and $19,009, respectively, of such assets will be realized, resulting in a valuation allowance of $13,490 and $10,881, respectively.

      The Company evaluates quarterly the realization of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The primary factor used to assess the likelihood of realization is the Company’s forecast of future taxable income. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, should the Company determine that it would not be able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period such determination was made. In management’s opinion, adequate provisions for income taxes have been made for all years presented.

      Accounting for Pensions — The Company sponsors a defined benefit pension plan in the U.S. The Company accounts for its defined benefit pension plan in accordance with SFAS No. 87, “Employers’ Accounting for Pensions,” which requires that expenses and liabilities recognized in financial statements be actuarially calculated. Under these accounting standards, assumptions are made regarding the valuation of benefit obligations and the future performance of plan assets. Delayed recognition of differences between actual results and expected or estimated results is a guiding principle of these standards. This delayed recognition of actual results allows for a smoothed recognition of changes in benefit obligations and plan performance over the working lives of the employees who benefit under the plan. The primary assumptions used in calculating pension expense and liability are related to the discount rate at which the future obligations are discounted to value the liability, expected rate of return on plan assets, and projected salary increases. These rates are estimated annually as of December 31.

      The discount rate assumption is tied to a long-term high quality bond index and is therefore subject to annual fluctuations. A lower discount rate increases the present value of the pension obligations, which results in higher pension expense. The discount rate was 6.00% at December 31, 2004, compared to 6.25% at December 31, 2003 and 6.50% at December 31, 2002. The 6.25% percent at December 31, 2003 was used to calculate the 2004 pension expense. Each 0.5 percentage point change in the discount rate would result in an $11.9 million change in the projected pension benefit obligation and a $0.87 million change in pension expense.

      The expected rate of return on plan assets assumption is based on the long-term expected returns for the investment mix of assets currently in the portfolio. Management uses historic return trends of the asset portfolio combined with anticipated future market conditions to estimate the rate of return. From 1998 to 2001, the Company had been using an expected return on plan assets assumption of 9.5%, which was consistent with the long-term asset returns of the portfolio. In 2002, management lowered the expected rate of return assumption to 9.0%, and during 2003 lowered it again to 8.5% due to the expected lower future performance of the U.S. equity markets. Each 0.5 percentage point change in the assumed long-term rate of return would result in a $0.24 million change in pension expense.

      The projected salary increase assumption is based upon historical trends and comparisons of the external market. Higher rates of increase result in higher pension expenses. As this rate is also a long-term expected rate, it is less likely to change on an annual basis. Management has used the rate of 4.0% for the past three years.

      Restructuring Accrual — During fiscal 2004, 2003, and 2002, the Company recorded significant restructuring charges. Prior to the fourth quarter of 2002, these costs were accrued in accordance with EITF 94-3 “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring).” During the fourth quarter of 2002, the Company adopted Statement of Financial Accounting Standard No. 146 (“SFAS 146”), “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, whereas under EITF 94-3, the liability was recognized at the commitment date to an exit plan.

      As a component of the 2004 restructuring charge of $14,644, the Company recorded an expense related to facility closures and lease termination costs totaling $4,018. The recorded amount was based on the fair value of contractual obligations contained in the leases (net of estimated sublease income) discounted using a credit-adjusted risk-free rate. This expense was recorded using our estimates of future expected cash flows associated with these office closings. The liability associated with the facility closures will be adjusted for revisions related to the timing and amount of estimated cash flows in the period they become known.

Recent Accounting Pronouncements

      In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS 123 (revised 2004), “Share-Based Payment” (SFAS 123(R)) which replaces SFAS 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees. Among other items, SFAS 123(R) eliminates the use of APB 25 and the intrinsic method of accounting, and requires all share-based payments, including grants of employee stock options, to be recognized in the financial statements based on their fair values. SFAS 123(R) is effective for public companies beginning with the first interim period that begins after June 15, 2005. The Company will adopt SFAS 123(R) in 2005 and in accordance with its provisions will recognize compensation expense for all share-based payments and employee stock options based on the grant-date fair value of those awards. The Company is currently evaluating the impact of the statement on its financial statements.

      In December 2004, the FASB issued FASB Staff Position, 109-1 (“FSP FAS 109-1”), “Application of FASB Statement No. 109, “Accounting for Income Taxes,” to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004”. In FSP FAS 109-1, the FASB concluded that the tax relief (special tax deduction for domestic manufacturing) from this legislation should be accounted for as a “special deduction” instead of a tax rate reduction. The guidance in FSP FAS 109-1 was effective December 21, 2004 and had no impact on the Company’s results of operations or its financial position.

      In December 2004, the FASB issued FSP FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004”. The American Jobs Creation Act of 2004 introduces a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer (repatriation provision), provided certain criteria are met. FSP FAS 109-2 gives a company additional time to evaluate the effects of the legislation on any plan for reinvestment or repatriation of foreign earnings for purposes of applying SFAS No. 109, Accounting for Income Taxes. The deduction is subject to a number of limitations, and uncertainty remains as to how to interpret numerous provisions in the Act. As such, the Company is not in a position to decide on whether, and to what extent, it might repatriate foreign earnings that have not yet been remitted to the U.S. based on its analysis to date. The Company therefore cannot reasonably estimate the income tax effect of such repatriation. The Company expects to be in a position to finalize its assessment by December 31, 2005.

      In September 2004, the Emerging Issues Task Force (“EITF”) of the FASB reached a consensus on EITF Issue No. 04-08, “The Effect of Contingently Convertible Debt on Diluted Earnings Per Share,” which requires the shares issuable under contingently convertible debt, such as the Company’s convertible

subordinated debentures, to be included in diluted earnings per share computations, regardless of whether the contingency had been met, if the effect would be dilutive to the earnings per share calculation. The provisions are effective for reporting periods ending after December 15, 2004. If the impact is dilutive, all prior period earnings per share amounts presented are required to be restated to conform to the provisions of the EITF. The Company adopted this rule during the fourth quarter of 2004 and there was no effect on diluted income (loss) per share for all periods presented since the effect was anti-dilutive to the earnings per share calculation. In future periods the effect of this rule, if the impact is dilutive, would be to increase the average shares outstanding used in the calculation of diluted earnings per share by the amount of the shares issuable under the Company’s convertible subordinated debentures (4,058,445 shares for the year ended December 31, 2004) and increase the numerator used in the calculation of diluted earnings per share by an amount equal to interest cost, net of tax, on the convertible subordinated debentures (approximately $2,306 for the year ended December 31, 2004).

      In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities”, and amended the interpretation with FIN 46(R) in December 2003. This interpretation and its amendment set forth a requirement for an investor with a majority of the variable interests in a variable interest entity (“VIE”) to consolidate the entity and also requires majority and significant variable interest investors to provide certain disclosures. A VIE is an entity in which the equity investors do not have a controlling interest, or the equity investment at risk is insufficient to finance the entity’s activities without receiving additional subordinated financial support from the other parties. The provisions of FIN 46 were effective immediately for all arrangements entered into with new VIEs created after January 31, 2003. The Company has not entered into any arrangements with VIEs after January 31, 2003. For arrangements entered into with VIEs created prior to January 31, 2003, the provisions of FIN 46 were adopted by the Company as of March 31, 2004; the impact of such adoption did not have an effect on the Company’s financial statements.

      The Company’s market risk is principally associated with trends in the domestic and international capital markets, particularly in the financial print segment. This includes trends in the initial public offerings and mergers and acquisitions markets, both important components of the financial print segment. The Company also has market risk tied to interest rate fluctuations related to its debt obligations and fluctuations in foreign currency, as discussed below.

Interest Rate Risk

      The Company’s exposure to market risk for changes in interest rates relates primarily to its short-term investment portfolio, long-term debt obligations, revolving credit agreement and synthetic lease agreement.

      The Company does not use derivative instruments in its short-term investment portfolio. The Company’s debentures issued in September 2003 consist of fixed rate instruments, and therefore, would not be impacted by changes in interest rates. The debentures have a fixed interest rate of 5%. Amounts borrowed under the three-year $175 million revolving credit facility that was completed in July 2002 (and amended in March and September 2003, with the facility reduced to $115 million in October 2003) bear interest at LIBOR plus 125-325 basis points or an alternative base rate (greater of Federal Funds rate plus 50 basis points or the Prime rate) depending on certain leverage ratios. During the year ended December 31, 2004, the average interest rate on this line of credit approximated 5.5%. A hypothetical change in the annual interest rate of 1% per annum would result in a change in annual interest expense of approximately $119 thousand, based on the average outstanding balances under the revolving credit facility during the year ended December 31, 2004.

Foreign Exchange Rates

      The Company derives a portion of its revenues from various foreign sources. The Company’s globalization segment is impacted by foreign currency fluctuations since its labor costs are predominantly denominated in foreign currencies, while a significant portion of its revenue is denominated in U.S. dollars. This is somewhat mitigated by the fact that revenue from the Company’s international financial print

operations is denominated in foreign currencies, while some of its costs are denominated in U.S. dollars. To date, the Company has not used foreign currency hedging instruments to reduce its exposure to foreign exchange fluctuations. The Company has reflected translation income of $13,471, $24,961 and $12,227 in its consolidated statements of comprehensive income (loss) included in stockholders’ equity for the years ended December 31, 2004, 2003 and 2002, respectively. This income is primarily attributed to the fluctuation in value between the U.S. dollar and the euro, pound sterling and Canadian dollar.

Equity Price Risk

      The Company’s investments in marketable equity securities consist primarily of auction rate securities. These securities are fixed income securities with minimal market fluctuation risk. The Company’s defined benefit pension plan holds investments in both equity and fixed income securities. The amount of the Company’s annual contribution to the plan is dependent upon, among other things, the return on the plan’s assets. To the extent there are fluctuations in equity values, the amount of the Company’s annual contribution could be affected. For example, a decrease in equity prices could increase the amount of the Company’s annual contributions to the plan.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Bowne & Co., Inc.

      We have audited the accompanying consolidated balance sheets of Bowne & Co., Inc. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004. In connection with our audits of the consolidated financial statements, we also audited the consolidated financial statement schedule listed in Item 15(a)(2). These consolidated financial statements and the consolidated financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and the consolidated financial statement schedule based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bowne & Co., Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related consolidated financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

      As discussed in Note 2, the consolidated financial statements as of December 31, 2003 and for each of the years ended December 31, 2003 and 2002 have been restated.

/s/ KPMG LLP

New York, New York

March 16, 2005

BOWNE & CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

See Notes to Accompanying Consolidated Financial Statements

BOWNE & CO., INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See Notes to Accompanying Consolidated Financial Statements

BOWNE & CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS