July 26, 2005
| Contact: | Geoff Hibner, Chief Financial Officer Mark Fleming, Director, Investor and Corporate Communications |
BANTA REPORTS STRONG PERFORMANCE IN 2005’s SECOND QUARTER
| • | Second quarter 2005 revenue from continuing operations increased 7 percent to $366 million from $341million in the same period last year. |
| • | Earnings from continuing operations rose 4 percent to $14.0 million compared with $13.4 million in2004’s second quarter. |
| • | Second quarter diluted earnings per share from continuing operations reached 56 cents, 6 percent aheadof the prior year’s 53 cents. |
| • | Gain from the sale of Banta’s discontinued healthcare products business provided an additional 80 centsto the corporation’s second quarter diluted EPS. |
MENASHA, WI . . . Banta Corporation (NYSE: BN) today reported strong 2005 second quarter results from continuing operations, achieving an all-time high for the quarter in revenue, and increases in earnings and diluted earnings per share of 4 percent and 6 percent, respectively.
Second quarter revenue reached $366 million, 7 percent higher than last year’s $341 million. These numbers exclude results from Banta’s healthcare business that was sold effective Apr. 12, 2005.
Second quarter earnings from continuing operations were $14.0 million, 4 percent above the $13.4 million reported in the same period last year. Second quarter diluted earnings per share from continuing operations increased 6 percent to 56 cents compared with 53 cents in 2004. Results were favorably impacted by a lower tax rate in 2005 compared with 2004, and by share repurchase activity since the beginning of 2005. Including operating results from the discontinued healthcare products operation and an after-tax gain of $20.1 million from the sale of the business, second quarter net earnings were $33.8 million ($1.35 per diluted share) compared with last year’s $15.2 million (60 cents per diluted share).
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“We made significant progress during the second quarter, both financially and operationally,” said Banta Chairman, President and Chief Executive Officer Stephanie A. Streeter. “I’m pleased with our record results, but what’s critically important is the tremendous successes our employees achieved operationally during the quarter. We completed major press rebuilds and relocations, and, in the process, met growing customer demand. Our focus on operational excellence and delighting customers is clearly paying off. As a result of everyone’s efforts, I believe we are well positioned to achieve our aggressive growth targets in the second half of the year.”
For the six months ended July 2, 2005, revenue from continuing operations reached $752 million, 9 percent ahead of last year’s $691 million. Earnings from continuing operations increased 6 percent to $27.7 million compared with the prior year’s $26.3 million. First half 2005 diluted earnings per share from continuing operations were $1.10, which was 8 percent higher than the $1.02 reported in the comparable period last year. Including operating results from the discontinued operation and after-tax gains from the sale of assets in two separate transactions – $20.1 million from the sale of the healthcare business and $1.3 million from the first quarter sale of a related warehouse – net earnings for the first six months of 2005 were $49.8 million ($1.98 per diluted share) compared with the prior year’s $29.3 million ($1.14 per diluted share).
HIGHLIGHTS
| • | Second quarter Print Sector revenue reached $257 million, 8 percent above 2004’s $238 million, as all print divisions reported revenue improvements compared with the same period last year. Approximately half of the increase was due to higher paper prices. Sector operating earnings were comparable to 2004’s second quarter. Profitability was affected by the loss of productive capacity due to two press rebuilds and two press relocations completed during the quarter, the absence of two large promotional programs that printed last year, additional expenses related to the new literature management division, and the cost of launching new productivity programs. |
| o | The book division’s revenue increased 8 percent compared with last year’s second quarter, primarily the result of higher paper prices and increased educational print activity from a more robust period of state curriculum adoptions. Revenue from education-related services increased 24 percent over 2004’s second quarter. Operating earnings, however, declined 6 percent due to higher operating and repair costs associated with a press relocation and the rebuild of a highly productive press. The presses were off line nearly the entire quarter, which required the shifting of production to less efficient equipment. |
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| o | The direct marketing division benefited from strong demand and a healthy environment for product promotions, recording a 7 percent increase in revenue and a 38 percent increase in operating earnings compared with 2004’s second quarter. Growth in sales of higher-margin personalized print materials drove the division’s second quarter performance, as did improved activity in traditional direct mail products. |
| o | Banta’s literature management division made significant progress in the second quarter in establishing its go-to-market profile. While revenue increased modestly compared with the same period last year, operating earnings were below 2004’s strong second quarter due to the absence of two large customer promotional programs, and the additional year-over-year expenses related to establishing the infrastructure for the new division. |
| o | Banta’s consumer catalog business reported a 5 percent increase in revenue and improved operating earnings, despite a major press rebuild that significantly reduced capacity during the entire second quarter. Even with the production disruption, customer retention continued to be very strong, and productivity efforts and an improved mix of business enhanced profitability. |
| o | The corporation’s publications division achieved a healthy 18 percent increase in revenue, led by market share gains, as well as higher paper prices. Earnings, however, declined 4 percent due to work mix changes and expenditures associated with the division’s productivity improvement program. During the second quarter, the average number of pages printed per magazine declined. Offsetting the reduced pages per magazine was a significant gain in the number of magazines printed year over year. This increase resulted in total printed impressions growing nearly 9 percent. |
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| • | Banta’s Supply-Chain Management Sector continued to deliver strong results in the second quarter. Revenue increased 6 percent to $109 million, compared with a very strong second quarter in 2004. Operating earnings of $11.1 million matched last year’s second quarter. The modest decrease in operating margin was primarily due to one-time costs related to customer service requirements and personnel expenses. Second quarter activity remained strong across a wide range of customers, including the sector’s major technology accounts. |
| • | During the second quarter, Banta repurchased 724,600 shares at an average price of $44.40 per share. Through the first half of 2005, the corporation repurchased 1,084,100 shares, at a cost of $47.8 million. |
“We have strong momentum going into the final six months of the year,” notes Streeter. “We expect the educational print market to remain healthy through the third quarter, and we believe business catalog production on our newly rebuilt book division press will be a solid contributor to performance for the remainder of the year. In addition, the other presses coming on line, especially in our direct marketing and consumer catalog divisions, will contribute to growth during the traditionally busier part of the year. We also like our prospects for gaining additional revenue in our supply-chain management business, as we take advantage of a healthy technology sector, pursue growth in other parts of the world, and expand within other vertical markets.”
Banta management reaffirms its previous 2005 guidance, which is for revenue to be in a range of $1.5 billion to $1.55 billion and diluted earnings per share from continuing operations to be in a range of $2.80 to $2.95, an increase over 2004’s diluted earnings per share from continuing operations of 16 percent to 22 percent. In addition to results from continuing operations, 2005’s net results will also include earnings from operations of the discontinued healthcare business through April 12, and the gains from both the sale of the healthcare business and a related warehouse, which contributes an additional diluted earnings per share of 88 cents.
Banta will host a conference call to discuss its second quarter results on Wednesday, July 27 at 8:00 a.m. Central (9:00 a.m. Eastern). The call will be simultaneously broadcast in the Investor Information area of Banta’s Web site atwww.banta.com, and a replay of the call will be available.
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Banta Corporation is a technology and market leader in printing and supply-chain management. Banta provides a comprehensive combination of printing and digital imaging solutions to leading publishers and direct marketers, including advanced digital content management and e-business services. Banta’s global supply-chain management businesses provide a wide range of outsourcing capabilities to many of the world’s largest companies. Services range from materials sourcing and product configuration, to customized kitting, order fulfillment and global distribution.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
This news release includes forward-looking statements. Statements that describe future expectations, including revenue and earnings projections, plans, results or strategies, are considered forward-looking. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated. Factors that could affect actual results include, among others, changes in customers’ order patterns or demand for the corporation’s products and services, pricing, changes in raw material costs and availability, unanticipated changes in sourcing of raw materials (including paper) by customers, unanticipated changes in operating expenses, unanticipated production difficulties, unanticipated issues associated with the corporation’s non-U.S. operations, changes in the pattern of outsourcing supply-chain management functions by customers, unanticipated costs or delays associated with ongoing productivity-enhancing projects, unanticipated acquisition or loss of significant customer contracts or relationships, unanticipated issues associated with the strategic objective of growing the supply-chain management business, unanticipated difficulties and costs associated with the design and implementation of new administrative systems, the impact of any acquisition or divestiture effected by Banta, changes in the corporation’s effective income tax rate, unanticipated swings in foreign currency exchange rates, and any unanticipated weakening of the economy. These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. The forward-looking statements included herein are made as of the date hereof, and Banta undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances.
An electronic version of this news release, as well as other information about Banta Corporation, is available through the company’s World Wide Web home site atwww.banta.com
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Banta Corporation
Unaudited Condensed Consolidated Financial Statements
($000’s omitted, except per share data)
| 3 Months Ended June | 6 Months Ended June | |||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||
| Revenue | $ | 366,060 | $ | 341,062 | $ | 752,337 | $ | 690,590 | ||||||
Cost of Printing and Supply-Chain Services | 286,748 | 268,700 | 589,106 | 546,002 | ||||||||||
| Gross Earnings | 79,312 | 72,362 | 163,231 | 144,588 | ||||||||||
SG&A Expense | 58,543 | 50,972 | 121,840 | 102,038 | ||||||||||
| Earnings from Operations | 20,769 | 21,390 | 41,391 | 42,550 | ||||||||||
| Other Income (Expense) | ||||||||||||||
| Interest Expense | (1,541 | ) | (1,688 | ) | (3,097 | ) | (3,578 | ) | ||||||
| Interest Income | 923 | 476 | 1,660 | 1,003 | ||||||||||
| Other Income, net | 383 | 560 | 797 | 719 | ||||||||||
| Earnings from Continuing Operations | ||||||||||||||
| before Income Taxes | 20,534 | 20,738 | 40,751 | 40,694 | ||||||||||
| Provision for Income Taxes | 6,570 | 7,305 | 13,040 | 14,444 | ||||||||||
| Earnings from Continuing Operations | 13,964 | 13,433 | 27,711 | 26,250 | ||||||||||
Discontinued Operations | ||||||||||||||
| Earnings (loss) from Operations of | ||||||||||||||
| Healthcare Segment, Net of Income Taxes | (258 | ) | 1,771 | 702 | 3,028 | |||||||||
| Gain from the Sale of Healthcare Segment, | ||||||||||||||
| Net of Income Taxes | 20,075 | -- | 21,375 | -- | ||||||||||
Net Earnings | $ | 33,781 | $ | 15,204 | $ | 49,788 | $ | 29,278 | ||||||
Basic Earnings per Share: | ||||||||||||||
| Continuing Operations | $ | 0.57 | $ | 0.54 | $ | 1.12 | $ | 1.04 | ||||||
| Discontinued Operations | $ | (0.01 | ) | $ | 0.07 | $ | 0.03 | $ | 0.12 | |||||
| Gain from Sale of Discontinued Operations | $ | 0.82 | $ | - | $ | 0.86 | $ | - | ||||||
Diluted Earnings per Share: | ||||||||||||||
| Continuing Operations | $ | 0.56 | $ | 0.53 | $ | 1.10 | $ | 1.02 | ||||||
| Discontinued Operations | $ | (0.01 | ) | $ | 0.07 | $ | 0.03 | $ | 0.12 | |||||
| Gain from Sale of Discontinued Operations | $ | 0.80 | $ | - | $ | 0.85 | $ | - | ||||||
Average Shares Outstanding: | ||||||||||||||
| Basic | 24,601 | 24,892 | 24,800 | 25,308 | ||||||||||
| Diluted | 24,941 | 25,358 | 25,158 | 25,747 | ||||||||||
Composite Tax Rate on Continuing Operations | 32.0 | % | 35.2 | % | 32.0 | % | 35.5 | % | ||||||
SEGMENT INFORMATION
| 3 Months Ended June | 6 Months Ended June | |||||||||||||
| Revenue | 2005 | 2004 | 2005 | 2004 | ||||||||||
Printing Services | $ | 256,747 | $ | 238,278 | $ | 531,684 | $ | 484,814 | ||||||
| Supply-Chain Management Services | 109,313 | 102,784 | 220,653 | 205,776 | ||||||||||
| $ | 366,060 | $ | 341,062 | $ | 752,337 | $ | 690,590 | |||||||
Earnings from Operations | ||||||||||||||
Printing Services | $ | 16,959 | $ | 17,267 | $ | 33,436 | $ | 33,704 | ||||||
| Supply-Chain Management Services | 11,114 | 11,120 | 23,521 | 21,794 | ||||||||||
| Segment earnings from operations | ||||||||||||||
| 28,073 | 28,387 | 56,957 | 55,498 | |||||||||||
| Unallocated corporate expenses | (7,304 | ) | (6,997 | ) | (15,566 | ) | (12,948 | ) | ||||||
| Interest expense | (1,541 | ) | (1,688 | ) | (3,097 | ) | (3,578 | ) | ||||||
| Interest income | 923 | 476 | 1,660 | 1,003 | ||||||||||
| Other income, net | 383 | 560 | 797 | 719 | ||||||||||
| Earnings from continuing operations before income taxes | 20,534 | 20,738 | 40,751 | 40,694 | ||||||||||
Banta Corporation
Unaudited Condensed Consolidated Financial Statements
($000’s omitted, except per share data)
| As of | ||||||||
| ASSETS | Jul. 2, 2005 | Jan. 1, 2005 | ||||||
Cash and cash equivalents | $ | 155,505 | $ | 133,093 | ||||
| Receivables | 242,705 | 263,087 | ||||||
| Inventories | 95,781 | 102,892 | ||||||
| Other current assets | 18,481 | 25,169 | ||||||
| Total current assets | 512,472 | 524,241 | ||||||
Plant and equipment, net | 269,429 | 288,127 | ||||||
| Other assets | 71,979 | 93,205 | ||||||
| Total Assets | $ | 853,880 | $ | 905,573 | ||||
LIABILITIES AND SHAREHOLDERS' INVESTMENT | ||||||||
| Accounts payable | $ | 96,440 | $ | 105,656 | ||||
| Other accrued liabilities | 85,657 | 92,356 | ||||||
| Current maturities of long-term debt | 11,282 | 25,594 | ||||||
| Total current liabilities | 193,379 | 223,606 | ||||||
Long-term debt | 58,534 | 62,333 | ||||||
| Deferred income taxes | 20,639 | 25,622 | ||||||
| Other noncurrent liabilities | 60,629 | 56,046 | ||||||
| Shareholders' investment | 520,699 | 537,966 | ||||||
| Total Liabilities and Shareholders' Investment | $ | 853,880 | $ | 905,573 | ||||
| Statement of Cash Flows | 6 Months Ended June | |||||||
|---|---|---|---|---|---|---|---|---|
| 2005 | 2004 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES | ||||||||
| Net Earnings | $ | 49,788 | $ | 29,278 | ||||
| Adjustments to reconcile net earnings to net cash | ||||||||
| provided | ||||||||
| Depreciation | 28,497 | 30,709 | ||||||
| Deferred income taxes | -- | (723 | ) | |||||
| Tax benefit from the exercise of stock options | 1,865 | 1,046 | ||||||
| Non-cash stock compensation | 314 | 61 | ||||||
| Gain on sale of Healthcare Segment | (25,748 | ) | -- | |||||
| Gain on sale of fixed assets | (355 | ) | (543 | ) | ||||
| Change in assets and liabilities | 7,321 | (4,680 | ) | |||||
| Cash provided by operating activities | 61,682 | 55,148 | ||||||
CASH FLOW FROM INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (23,984 | ) | (38,096 | ) | ||||
| Proceeds from sale of fixed assets | 1,072 | 757 | ||||||
| Proceeds from sale of Healthcare Segment | 69,145 | -- | ||||||
| Cash used for investing activities | 46,233 | (37,339 | ) | |||||
CASH FLOW FROM FINANCING ACTIVITIES | ||||||||
| Repayments of long-term debt, net | (18,110 | ) | (16,809 | ) | ||||
| Dividends paid | (8,474 | ) | (8,620 | ) | ||||
| Proceeds from exercise of stock options | 4,122 | 1,919 | ||||||
| Repurchase of common stock | (47,837 | ) | (43,690 | ) | ||||
| Other | (58 | ) | -- | |||||
| Cash used for financing activities | (70,357 | ) | (67,200 | ) | ||||
Effect of exchange rate changes on cash | ||||||||
| and cash equivalents | (15,146 | ) | (2,366 | ) | ||||
Net increase (decrease) in cash | $ | 22,412 | $ | (51,757 | ) | |||