SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended April 1, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ___________ to
___________
Commission File Number 0-6187
BANTA CORPORATION
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0148550
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(State or other jurisdiction of (IRS Employer
incorporation or organization) I.D. Number)
225 Main Street, Menasha, Wisconsin 54952
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (920) 751-7777
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 /X/ No / /
The registrant had outstanding on April 1, 2000, 25,205,503 shares of
$.10 par value common stock.
BANTA CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Quarter Ended April 1, 2000
INDEX
Page
Number
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PART I FINANCIAL INFORMATION:
Item 1 - Financial Statements
Unaudited Consolidated Condensed Balance Sheets
April 1, 2000 and January 1, 2000 ....................................3
Unaudited Consolidated Condensed Statements of Earnings for
the Three Months Ended April 1, 2000 and April 3, 1999 ................4
Unaudited Consolidated Condensed Statements of Cash Flows
for the Three Months Ended April 1, 2000 and April 3, 1999.............5
Notes to Unaudited Consolidated Condensed
Financial Statements ................................................6-8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................................9-10
Item 3 - Quantitative and Qualitative Disclosures about Market Risk........11
PART II OTHER INFORMATION AND SIGNATURES:
Item 6 - Exhibits and Reports on Form 8-K..................................11
Exhibit Index ................................................................12
PART I Item 1. Financial Statements
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
April 1, January 1,
2000 2000
-------- ----------
ASSETS
Current Assets
Cash and cash equivalents $ 24,261 $ 27,651
Receivables, net 216,280 218,047
Inventories 93,424 86,094
Other current assets 24,089 24,069
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Total Current Assets 358,054 355,861
--------- ---------
Plant and Equipment 835,325 811,800
Less accumulated depreciation (499,670) (484,450)
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Plant and Equipment, net 335,655 327,350
Other Assets 35,440 31,111
Cost in Excess of Net Assets of
Subsidiaries Acquired 58,086 59,022
-------- ---------
$ 787,235 $ 773,344
========= =========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Short-term debt $ 81,656 $ 88,499
Accounts payable 103,467 96,456
Accrued salaries and wages 29,343 31,848
Other accrued liabilities 30,659 21,435
Current maturities of long-term debt 5,931 7,115
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Total Current Liabilities 251,056 245,353
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Long-term Debt 133,475 113,520
Deferred Income Taxes 16,771 20,382
Other Non-Current Liabilities 39,549 40,314
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Total Liabilities 440,851 419,569
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Shareholders' Investment
Preferred stock-$10 par value;
authorized 300,000 shares; none issued 0 0
Common stock-$.10 par value;
Authorized 75,000,000 shares;
25,205,503 and 25,825,803 shares issued
and outstanding, respectively 2,521 2,583
Accumulated other comprehensive loss (7,855) (6,389)
Treasury stock (54,689) (42,790)
Retained earnings 406,407 400,371
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Total Shareholders' Investment 346,384 353,775
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$ 787,235 $ 773,344
========= =========
See accompanying notes to consolidated financial statements
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Dollars in thousands,
except per share amounts)
Three Months Ended
April 1, April 3,
2000 1999
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Net sales $ 328,784 $ 309,286
Cost of goods sold 262,277 247,591
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Gross earnings 66,507 61,695
Selling and administrative expenses 45,870 42,304
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Earnings from operations 20,637 19,391
Interest expense
3,890 2,947
Other expense, net
353 432
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Earnings before income taxes 16,394 16,012
Provision for income taxes 6,500 6,300
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Net earnings $ 9,894 $ 9,712
========= =========
Basic earnings per share of common stock $ .39 $ .35
========= =========
Diluted earnings per share of common stock $ .39 $ .35
========= =========
Cash dividends per common share $ .15 $ .14
========= =========
See accompanying notes to consolidated financial statements
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended
April 1, April 3,
2000 1999
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Cash Flows From Operating Activities
Net earnings $ 9,894 $ 9,712
Depreciation and amortization 18,107 17,172
Deferred income taxes (2,505) (597)
Cash paid for restructuring (1,862) -
Change in assets and liabilities:
Decrease in receivables 1,767 34,334
(Increase) decrease in inventories (7,330) 1,803
Increase in other current assets (1,126) (1,741)
Increase (decrease) in accounts payable
and accrued liabilities 14,827 (18,048)
(Increase) decrease in other non-current assets (634) 263
Other, net (1,181) (1,327)
-------- --------
Cash provided from operating activities 29,957 41,571
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Cash Flows From Investing Activities
Capital expenditures, net (25,761) (17,051)
Additions to long-term investments (3,695) (1,125)
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Cash used for investing activities (29,456) (18,176)
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Cash Flows From Financing Activities
Repayment of short-term debt, net (6,843) (2,275)
Proceeds from issuance of long-term debt 20,000 -
Repayment of long-term debt (1,229) (137)
Dividends paid (3,858) (3,950)
Proceeds from exercise of stock options - 55
Repurchase of common stock (11,961) (15,554)
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Cash used for financing activities (3,891) (21,861)
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Net (decrease) increase in cash (3,390) 1,534
Cash and cash equivalents at beginning of period 27,651 26,584
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Cash and cash equivalents at end of period $ 24,261 $ 28,118
======== ========
Cash payments for:
Interest, net of amount capitalized $ 2,007 $ 2,035
Income taxes 3,341 1,373
See accompanying notes to consolidated statements
BANTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1) Basis of Presentation
The condensed financial statements included herein have been prepared by
the Corporation, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Corporation believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these condensed
financial statements be read in conjunction with the financial statements
and the notes thereto included in the Corporation's latest Annual Report on
Form 10-K.
In the opinion of management, the aforementioned statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the results for the interim periods. Results for the
three months ended April 1, 2000, are not necessarily indicative of results
that may be expected for the year ending December 30, 2000.
2) Inventories
The Corporation's inventories are stated at the lower of cost or market
using the first-in, first-out (FIFO) method. Inventories include material,
labor and manufacturing overhead.
Inventory amounts at April 1, 2000 and January 1, 2000 were as follows:
(Dollars in thousands)
April 1, January 1,
2000 2000
-------- ----------
Raw Materials and Supplies $ 57,100 $ 51,425
Work-In-Process and Finished Goods 36,324 34,669
-------- --------
FIFO value (current cost of all inventories) $ 93,424 $ 86,094
======== ========
3) Earnings Per Share of Common Stock
Basic earnings per share of common stock is computed by dividing net
earnings by the weighted average number of common shares outstanding during
the period. Diluted earnings per share of common stock is computed by
dividing net earnings by the weighted average number of common shares and
common equivalent shares outstanding. The common equivalent shares relate
entirely to the assumed exercise of stock options.
The weighted average shares used in the computation of earnings per share
were as follows (in millions of shares):
April 1, 2000 April 3, 1999
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Basic 25.5 27.9
Diluted 25.5 27.9
4) Comprehensive Income
Total comprehensive income, comprised of net income and other comprehensive
income (loss), was $8,428,000 and $7,321,000 for the first quarter of 2000
and 1999, respectively. Other comprehensive income (loss) was comprised
solely of foreign currency translation adjustments. The Corporation does
not provide U.S. income taxes on foreign currency translation adjustments
because it does not provide for such taxes on undistributed earnings of
foreign subsidiaries.
5) Segment Information
The Corporation operates in two primary business segments, print and
turnkey services, with other business operations in healthcare products.
Summarized segment data for the three months ended April 1, 2000 and April
3, 1999 are as follows:
Turnkey
Dollars in thousands Printing Services Healthcare Total
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2000
Net sales $245,016 $60,009 $23,759 $328,784
Intersegment sales 877 - - 877
Earnings from operations 20,732 1,223 2,615 24,570
1999
Net sales $236,420 $47,069 $25,797 $309,286
Intersegment sales 1,301 4 - 1,305
Earnings from operations 19,321 265 3,908 23,494
The following table presents a reconciliation of segment earnings from
operations to the totals contained in the condensed financial statements:
Dollars in thousands 2000 1999
Reportable segment earnings $24,570 $23,494
Unallocated corporate expenses (3,933) (4,103)
Interest expense (3,890) (2,947)
Other income (expense) (353) (432)
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Earnings before income taxes $16,394 $16,012
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6) Restructuring Charge
In the second quarter of 1999, the Corporation recorded a restructuring
charge of $55 million ($38.5 million or $1.40 diluted share, after tax).
The restructuring primarily involved the Corporation's print segment and
resulted in three facility closings and the elimination of certain
underperforming business assets. The restructuring also resulted in
workforce reductions of approximately 650 employees (350 employees at the
three facilities closed) and the writedown of certain long-lived assets,
including goodwill. It is expected that the restructuring actions will be
substantially completed in 2000. Details of the remaining restructuring
activity are as follows (in thousands):
January 1, Used in April 1,
2000 2000 2000
---------- -------- --------
Lease termination payments $8,736 $(740) $7,996
Employee severance
and termination benefit 1,712 (455) 1,257
Other facility exit costs 1,501 (667) 834
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$11,949 $(1,862) $10,087
======= ======= =======
7) Treasury Stock
At April 1, 2000, the Corporation held 2,503,600 shares of its common stock
in treasury. These shares were acquired during 1999 and the first quarter
of 2000 through the common stock repurchase program and may be reissued
pursuant to the Corporation's stock option plans or for other purposes.
8) Debt Covenants
The long-term debt agreements contain various operating and financial
covenants. The more restrictive of these covenants require that working
capital be maintained at a minimum of $40,000,000, current assets be 150%
of current liabilities and consolidated tangible net worth be not less than
$125,000,000. Funded debt of up to 50% of the sum of consolidated tangible
net worth and consolidated funded debt may be incurred without prior
consent of the noteholders. The Corporation may incur short-term debt of up
to 25% of consolidated tangible net worth at any time and is required to be
free of all such obligations in excess of 12.5% of consolidated net
tangible worth for 60 consecutive days each year.
As of April 1, 2000, the Corporation was in compliance with all of its debt
covenants except that current assets were 139% of current liabilities and
short-term debt exceeded 25% of consolidated tangible net worth. These
violations primarily were a result of the common stock repurchase program,
which has increased short-term debt and correspondingly lowered
shareholders' investment. The Corporation is currently in negotiations with
its creditors to cure these violations and as such continues to classify
the debt as long-term.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
Net sales for the first quarter of 2000 increased to $328.8 million, 6.3%
higher than the $309.3 million in the prior year quarter.
First quarter sales for the print segment reached $245.0 million, a 3.6%
increase from the prior year's $236.4 million. Increased sales within the
book and publications markets more than offset sales of approximately $10
million generated in the prior year quarter from facilities closed in
conjunction with the 1999 second quarter restructuring. Strong demand for
educational and trade books resulted in the book market sales increase
while higher magazine advertising page counts contributed to the
publications market sales increase. Also contributing to the increase in
print segment sales was an increase of approximately 6% in paper prices
compared to the prior year first quarter.
Supply-chain management sales of $60.0 million for the current quarter were
27.4% higher than the prior period's $47.1 million. This increase was
primarily due to sales from the late 1999-facility start-up in Houston to
service Compaq Computer in North America.
Healthcare sales of $23.8 million for the current year first quarter were
7.9% lower than the prior period sales of $25.8 million. Higher-than-normal
purchasing by customers during the fourth quarter of 1999 reduced demand in
the first quarter.
Earnings from Operations
First quarter earnings from operations rose to $20.6 million, 6.4% higher
than the prior year's $19.4 million.
Print segment earnings from operations increased 7.3% from the prior year
primarily due to additional sales volume within the book and publications
markets. Operating margins improved within the print segment due to the
closure of underperforming facilities in conjunction with last year's
restructuring. The three facilities closed last year had a combined
operating loss percentage of approximately 14%.
Earnings from operations for the supply-chain management segment increased
approximately $1.0 million from the prior year period due to improved
utilization at the European operations. These improvements more than offset
the amortization of start-up costs associated with the Houston facility.
Healthcare segment earnings from operations were approximately $1.3 million
lower than the prior year period primarily due to lower sales volume.
Operating margins were negatively impacted by raw material price increases,
which could not be passed onto customers due to competitive pricing
pressures.
Interest Expense
Interest expense for the first quarter of 2000 was $943,000 higher than the
prior period primarily due to increased debt levels to support the common
stock repurchase program, capital expenditures and additions to long-term
investments.
Income Taxes
The Corporation's effective first quarter income tax rate for 2000 of 39.6%
was comparable to the 1999 first quarter rate of 39.3%.
FINANCIAL CONDITION
Liquidity and Capital Resources
The Corporation's net working capital decreased by approximately $5.9
million during the first quarter of 2000 due to an increase in payables and
accrued liabilities. The increase in payables compared to the balance at
January 1, 2000 was primarily due to higher sales volume. Also during the
first quarter of 2000, the Corporation repurchased approximately 620,000
shares of common stock at an aggregate purchase price of approximately
$12.0 million pursuant to its common stock repurchase program. Short-term
borrowings funded these repurchases. Future stock repurchases will be
funded by a combination of cash provided from operations and short-term
borrowings, as necessary.
Capital expenditures were $25.8 million during the first quarter of 2000,
an increase of $8.7 million from the amount expended during the prior year
first quarter. Significant expenditures included additional equipment to
support the Compaq Computer contract and continued investment in new
printing and digital imaging technologies. Capital requirements for the
full year are expected to be approximately $110 million and will be funded
by a combination of cash provided from operations and borrowings.
Long-term debt as a percentage of total capitalization increased to 27.8%
compared with 24.3% at January 1, 2000. This increase was a result of the
Corporation converting $20 million of its short-term floating debt into
long-term debt in March 2000. At April 1, 2000, the Corporation was in
default of certain financial covenants under its long-term debt agreements.
The Corporation is currently in negotiations with its creditors to cure
these violations and as such continues to classify the debt as long-term.
Cautionary Statements for Forward-Looking Information
This document includes forward-looking statements. Statements that describe
future expectations, plans 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
customer order patterns or demand for the Corporation's products, the
timing and magnitude of orders placed by Compaq, changes in raw material
costs and availability, success with operational start-ups, and general
changes in economic conditions. 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 the Corporation undertakes no
obligation to update publicly such statements to reflect subsequent events
or circumstances.
Item 3. Qualitative and Quantitative disclosure about Market Risk
The Corporation is exposed to market risk from changes in interest rates
and foreign exchange rates. At April 1, 2000, the Corporation had notes
payable outstanding aggregating $81.7 million against lines of credit with
banks. These notes consist entirely of commercial paper and bear interest
at floating rates. Each 1% fluctuation in the interest rate will increase
or decrease interest expense for the Corporation by approximately $817,000
annually. Since essentially all long-term debt is at fixed interest rates,
exposure to interest rate fluctuations is minimal. Exposure to adverse
changes in foreign exchange rates is considered immaterial.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - 4(a) - Credit Agreement dated March 10, 2000 27 -
Financial Data Schedule (EDGAR version only)
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANTA CORPORATION
/S/GERALD A. HENSELER
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Gerald A. Henseler
Executive Vice President,
Chief Financial Officer and Treasurer
Date: May 16, 2000
BANTA CORPORATION
EXHIBIT INDEX TO FORM 10-Q
For The Quarter Ended April 1, 2000
Exhibit Number
4(a) Credit Agreement dated March 10, 2000
27 Financial Data Schedule (EDGAR version only)