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 March 31, 2001
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
(State or other jurisdiction (IRS Employer
of 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
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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 March 31, 2001, 24,589,187 shares of
$.10 par value common stock.
BANTA CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2001
INDEX
Page Number
PART I FINANCIAL INFORMATION:
Item 1 - Financial Statements
Unaudited Consolidated Condensed Balance Sheets
March 31, 2001 and December 30, 2000...................... 3
Unaudited Consolidated Condensed Statements of Earnings for
the Three Months Ended March 31, 2001 and April 1, 2000... 4
Unaudited Consolidated Condensed Statements of Cash Flows
for the Three Months Ended March 31, 2001 and
April 1, 2000............................................ 5
Notes to Unaudited Consolidated Condensed
Financial Statements..................................... 6-8
Item 2 - Management's Discussion and Analysis........................ 9-10
Item 3 - Qualitative and Quantitative Disclosures about Market Risk.. 11
PART II OTHER INFORMATION AND SIGNATURES:
Item 6 - Exhibits and Reports on Form 8-K............................ 12
PART 1 Item 1. Financial Statements
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
March 31, 2001 December 30, 2000
-------------- -----------------
ASSETS
Current Assets
Cash and cash equivalents $ 30,955 $ 27,660
Receivables 220,272 249,200
Inventories 93,509 108,109
Other current assets 23,410 21,706
--------- ---------
Total Current Assets 368,146 406,675
--------- ---------
Plant and Equipment 889,488 876,243
Less accumulated depreciation (546,489) (531,982)
--------- ---------
Plant and Equipment, net 342,999 344,261
Other Assets 27,449 37,663
Cost in Excess of Net Assets of
Subsidiaries Acquired 65,190 65,925
--------- ---------
$ 803,784 $ 854,524
========= =========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Short-term debt $ 35,243 $ 46,863
Accounts payable 93,916 117,499
Accrued salaries and wages 31,388 43,235
Other accrued liabilities 24,768 24,217
Current maturities of long-term debt 7,346 8,505
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Total Current Liabilities 192,661 240,319
--------- ---------
Long-term Debt 176,546 179,202
Deferred Income Taxes 24,449 24,106
Other Non-Current Liabilities 42,134 39,985
--------- ---------
Total Liabilities 435,790 483,612
--------- ---------
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; 27,733,587 and 27,709,103
shares issued, respectively 2,773 2,771
Amount in excess of par value of stock 426 43
Accumulated other comprehensive loss (11,214) (8,964)
Treasury stock, at cost (3,144,400 shares) (66,814) (66,814)
Retained earnings 442,823 443,876
--------- ---------
Total Shareholders' Investment 367,994 370,912
--------- ---------
$ 803,784 $ 854,524
========= =========
See accompanying notes to consolidated financial statements
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Dollars in thousands)
Three Months Ended
March 31, 2001 April 1, 2000
-------------- ---------------
Net sales $ 372,777 $ 341,534
Cost of goods sold 305,381 275,027
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Gross earnings 67,396 66,507
Selling and administrative expenses 46,815 45,870
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Earnings from operations 20,581 20,637
Interest expense (4,011) (3,890)
Write-off of investment (12,500) 0
Other income (expense), net 162 (353)
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Earnings before income taxes 4,232 16,394
Provision for income taxes 1,600 6,500
--------- ---------
Net earnings $ 2,632 $ 9,894
========= =========
Basic earnings per share of common stock $ 0.11 $ 0.39
========= =========
Diluted earnings per share of common stock $ 0.11 $ 0.39
========= =========
Cash dividends per common share $ 0.15 $ 0.15
========= =========
See accompanying notes to consolidated financial statements
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended
March 31, 2001 April 1, 2000
-------------- ----------------
Cash Flows From Operating Activities
Net earnings $ 2,632 $ 9,894
Depreciation and amortization 18,952 18,107
Deferred income taxes 194 (2,505)
Cash paid for restructuring (596) (1,862)
Write-off of investment 12,500 --
Change in assets and liabilities:
Decrease in receivables 28,403 1,767
Decrease (increase) in inventories 14,600 (7,330)
Increase in other current assets (1,555) (1,126)
(Decrease) increase in accounts payable
and accrued liabilities (34,283) 14,827
Increase in other non-current assets (2,046) (634)
Other, net (47) (1,181)
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Cash provided from operating activities 38,754 29,957
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Cash Flows From Investing Activities
Capital expenditures, net (15,499) (25,761)
Additions to long-term investments (1,223) (3,695)
-------- --------
Cash used for investing activities (16,722) (29,456)
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Cash Flows From Financing Activities
Repayment of short-term debt, net (11,620) (6,843)
Proceeds from issuance of long-term debt -- 20,000
Repayment of long-term debt (3,815) (1,229)
Dividends paid (3,685) (3,858)
Proceeds from exercise of stock options 383 --
Repurchase of common stock -- (11,961)
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Cash used for financing activities (18,737) (3,891)
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Net increase (decrease) in cash 3,295 (3,390)
Cash and cash equivalents at beginning of period 27,660 27,651
-------- --------
Cash and cash equivalents at end of period $ 30,955 $ 24,261
======== ========
Cash payments for:
Interest, net of amount capitalized $ 2,562 $ 2,007
Income taxes 885 3,341
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 March 31, 2001 are not necessarily indicative
of results that may be expected for the year ending December 29, 2001.
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 March 31, 2001 and December 30, 2000 were as follows:
(Dollars in thousands)
March 31, 2001 December 30, 2000
Raw Materials and Supplies $ 56,255 $ 58,513
Work-In-Process and Finished Goods 37,254 49,596
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FIFO value (current cost of all inventories) $ 93,509 $ 108,109
======== =========
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):
March 31, 2001 April 1, 2000
-------------- -------------
Basic 24.6 25.5
Diluted 24.7 25.5
4) Comprehensive Income
Total comprehensive income, comprised of net income and other
comprehensive income (loss), was $382,000 and $8,428,000 for the first
quarter of 2001 and 2000, 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 March 31, 2001 and
April 1, 2000 are as follows:
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Turnkey
Dollars in thousands Printing Services Healthcare Total
-------------------------------------------------------------------------------------------------------------
2001
Net sales $256,009 $91,795 $24,973 $372,777
Earnings from operations 17,424 5,833 2,537 25,794
2000
Net sales $256,516 $60,009 $25,009 $341,534
Earnings from operations 20,732 1,223 2,615 24,570
The following table presents a reconciliation of segment earnings
from operations to the totals contained in the condensed financial
statements:
Dollars in thousands 2001 2000
Reportable segment earnings $25,794 $24,570
Unallocated corporate expenses (5,213) (3,933)
Interest expense (4,011) (3,890)
Write-off of investment (12,500) -
Other income (expense) 162 (353)
------- --------
Earnings before income taxes $ 4,232 $ 16,394
======= ========
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. With the exception of continued lease
payments for certain of the closed facilities, all restructuring actions
were substantially completed in 2000. At March 31, 2001, the remaining
restructuring reserve balance was $6.2 million.
7) Write-off of Investment
As a result of the inability to obtain additional financing for its
continued operation, coupled with the unfavorable operating results due to
the economic downturn in its market, XYAN.com, Inc. ("Xyan") filed for
bankruptcy under Chapter 11 on March 31, 2001. In response to Xyan's
filing for bankruptcy, the Corporation wrote-off its minority interest in
Xyan in March 2001. This write-off resulted in a non-operating charge of
$12.5 million ($7.5 million or $.30 diluted share, after tax).
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Sales
Net sales for the first quarter of 2001 increased to $372.8 million,
9.1% higher than the $341.5 million in the prior year quarter.
First quarter sales for the print segment were $256.0 million,
substantially equivalent to the prior year's $256.5 million. Sales in
the book market for the first quarter of 2001 were comparable to the
prior year period. Lower than expected sales to educational and trade
book customers were offset by the sales volume generated by
Southeastern Color Graphics, a second quarter 2000 acquisition.
Increased market share more than offset the approximate 2% lower page
counts impacting sales for the magazine market. Paper prices for the
current year first quarter were consistent with the prior year first
quarter.
Supply-chain management sales of $91.8 million for the current
quarter were 53% higher than the prior period's $60.0 million. This
increase was partially due to a full quarter of activity for Compaq
in three geographic locations, U.S., Europe and Asia. The Corporation
also began serving other major technology companies during the first
quarter and continued its expansion into Mexico to serve additional
customers.
Healthcare sales of $25.0 million for the current year first quarter
were comparable to the prior period sales.
Earnings from Operations
First quarter earnings from operations were $20.6 million, consistent
with the prior year's $20.6 million. Operating margins of 5.5% were
slightly lower than the prior year operating margins of 6.0%,
primarily due to product mix and lower print segment margins. This
reduction was partially offset by higher supply-chain management
operating margins. Increased sales volume from supply-chain
management will lower the overall-operating margin for the
Corporation because of the higher material content of this segment's
products.
Print segment earnings from operations were 16.0% lower than the
prior year and operating margins for this segment decreased to 6.8%
from 8.1% in 2000. These reductions were a result of lower
utilization at most print facilities and higher gas and electric
costs and employee healthcare costs. Utility costs for the current
year first quarter were approximately $1.3 million higher than the
prior year period.
Earnings from operations for the supply-chain management segment
increased nearly five-fold from $1.2 million for the first quarter of
2000 to $5.8 million for the current year first quarter. Operating
margins increased to 6.4% from 2.0% in 2000. These improvements were
primarily due to improved utilization at the facilities servicing the
Compaq contract and strong volume increases at other U.S., European
and Mexican facilities. Prior-year first quarter results were
impacted by the continued ramp-up of the Houston facility and the
start-up of the European facility servicing Compaq.
Healthcare segment earnings from operations were consistent with the
prior year period. Operating margins were slightly lower than the
prior year first quarter due to continuing pricing pressures and
increasing raw material prices.
Investment Write-off
As a result of the inability to obtain additional financing for its
continued operation, coupled with the unfavorable operating results
due to the economic downturn in its market, XYAN.com, Inc. ("Xyan")
filed for bankruptcy under Chapter 11 on March 31, 2001. In response
to Xyan's filing for bankruptcy, the Corporation wrote-off its
minority interest in Xyan in March 2001. This write-off resulted in a
non-operating charge of $12.5 million ($7.5 million or $.30 diluted
share, after tax).
Interest Expense
Interest expense for the first quarter of 2001 was comparable to the
prior year first quarter.
Income Taxes
The Corporation's effective first quarter income tax rate for 2001 of
37.8% was slightly lower than the 2000 first quarter rate of 39.6%.
The current year tax rate was impacted by the rate applied to the
investment write-off. Without giving effect to the investment
write-off, the effective income tax rate for the first quarter of
2001 was 39.4%.
FINANCIAL CONDITION
Liquidity and Capital Resources
The Corporation's net working capital increased by approximately $9.1
million during the first quarter of 2001 due to a decrease in
payables and accrued liabilities. These decreases more than offset
the reductions in receivables and inventory. Reductions in these
balances from December 30, 2000 were primarily due to lower sales
volume for the first quarter of 2001 compared to the fourth quarter
of 2000.
Capital expenditures were $15.5 million during the first quarter of
2001, a decrease of $10.3 million from the amount expended during the
prior year first quarter. Included in the prior year capital
expenditure amount were significant expenditures to support the
Compaq start-up. Capital requirements for the full year are expected
to be approximately $90 million and will be funded by a combination
of cash provided from operations and borrowings. During the first
quarter of 2001, the Corporation repurchased no shares of common
stock.
Long-term debt as a percentage of total capitalization at March 31,
2001 was comparable to the percentage at December 30, 2000.
Future Outlook
Projections for the Corporation's second quarter are for revenues and
earnings to be comparable with the prior year second quarter.
Supply-chain management results are expected to exceed the prior
year, while print segment revenues and earnings are expected to be
lower.
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 and services, changes in raw
material costs and availability, unanticipated changes in operating
expenses, unanticipated production difficulties, 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 Disclosures About Market Risk
The Corporation is exposed to market risk from changes in interest
rates and foreign exchange rates. At March 31, 2001, the Corporation
had notes payable outstanding aggregating $35.2 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 $352,000 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. Any potential market risk associated with changes in
foreign exchange is considered in contractual arrangements with
customers.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits are being filed with this report.
(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
Gerald A. Henseler
Executive Vice President, Chief Financial Officer and Treasurer
Date: May 15, 2001