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 30, 2002
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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
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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 (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 30, 2002, 25,034,476 shares of $.10
par value common stock.
BANTA CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Quarter Ended March 30, 2002
INDEX
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Page Number
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PART I FINANCIAL INFORMATION:
Item 1 - Financial Statements
Unaudited Consolidated Condensed Balance Sheets
March 30, 2002 and December 29, 2001.............................1
Unaudited Consolidated Condensed Statements of Earnings for
the Three Months Ended March 30, 2002 and March 31, 2001.........2
Unaudited Consolidated Condensed Statements of Cash Flows
for the Three Months Ended March 30, 2002 and March 31, 2001.....3
Notes to Unaudited Consolidated Condensed
Financial Statements...........................................4-6
Item 2 - Management's Discussion and Analysis...........................6-9
Item 3 - Qualitative and Quantitative Disclosures about Market Risk......10
PART II OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K................................11
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Part 1 Item 1. Financial Statements
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
ASSETS March 30, 2002 December 29, 2001
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Current Assets
Cash and cash equivalents $ 111,526 $ 65,976
Receivables 185,292 215,505
Inventories 64,564 71,079
Other current assets 21,707 21,056
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Total Current Assets 383,089 373,616
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Plant and Equipment 914,513 908,525
Less accumulated depreciation (600,331) (583,541)
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Plant and Equipment, net 314,182 324,984
Other Assets 25,056 25,645
Goodwill 64,151 63,801
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$ 786,478 $ 788,046
================= =================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities
Accounts payable $ 92,457 $ 98,391
Accured salaries and wages 27,974 32,218
Other accrued liabilities 28,925 28,226
Current maturities of long-term debt 19,509 25,915
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Total Current Liabilities 168,865 184,750
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Long-term Debt 130,881 130,981
Deferred Income Taxes 21,281 21,080
Other Non-Current Liabilities 44,323 43,957
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Total Liabilities 365,350 380,768
================= =================
Shareholder's Investment
Preferred stock-$10 par value;
authorized 300,000 shares; none issued - -
Common stock-$.10 par value, authorized 75,000,000 shares;
28,178,610 and 27,874,263 shares issued, respectively 2,817 2,787
Amount in excess of par value of stock 11,291 3,366
Accumulated other comprehensive loss (11,541) (10,914)
Treasury stock, at cost (3,144,400 shares) (66,814) (66,814)
Retained earnings 485,375 478,853
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Total Shareholders' Investment 421,128 407,278
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$ 786,478 $ 788,046
================= =================
See accompanying notes to consolidated financial statements
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BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Dollars in thousands)
Three Months Ended
March 30, 2002 March 31, 2001
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Net sales $ 332,773 $ 372,777
Cost of goods sold 263,881 305,381
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Gross earnings 68,892 67,396
Selling and administrative expenses 48,415 46,815
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Earnings from operations 20,477 20,581
Interest expense (3,110) (4,011)
Write-off of investment 0 (12,500)
Other income(expense), net (61) 162
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Earnings before income taxes 17,306 4,232
Provision for income taxes 6,818 1,600
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Net earnings $ 10,488 $ 2,632
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Basic earnings per share of common stock $ 0.42 $ 0.11
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Diluted earnings per share of common stock $ 0.41 $ 0.11
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Cash dividends per common share $ 0.16 $ 0.15
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See accompanying notes to consolidated financial statements
2
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended
March 30, 2002 March 31, 2001
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Cash Flows from Operating Activities
Net earnings $ 10,488 $ 2,632
Depreciation and amoritization 18,677 18,952
Deferred income taxes 201 194
Write-off of investment 0 12,500
Change in assets and liabilities
Decrease in receivables 30,213 28,403
Decrease in inventories 6,515 14,600
Increase in other current assets (651) (1,555)
Decrease in accounts payable
and accrued liabilities (9,303) (34,283)
Increase in other non-current assets (214) (2,046)
Other, net (437) (643)
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Cash provided from operating activities 55,489 38,754
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Cash Flows From Investing Activities
Capital expenditures, net (6,723) (15,499)
Additions to long-term investments (699) (1,223)
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Cash used for investing activities (7,422) (16,722)
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Cash Flows From Financing Activities
Repayments of short-term debt, net 0 (11,620)
Repayment of long-term debt (6,506) (3,815)
Dividends paid (3,966) (3,685)
Proceeds from exercise of stock options 7,955 383
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Cash used for financing activities (2,517) (18,737)
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Net increase in cash 45,550 3,295
Cash and cash equivalents at the beginning of period 65,976 27,660
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Cash and cash equivalents at the end of the period $ 111,526 $ 30,955
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Cash payments for:
Interest, net amount of capitalized $ 2,527 $ 2,562
Income taxes 4,535 885
See accompanying notes to consolidated financial statements
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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 30, 2002 are not necessarily indicative of results
that may be expected for the year ending December 28, 2002.
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 30, 2002 and
December 29, 2001 were as follows:
(Dollars in thousands)
March 30, 2002 December 29, 2001
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Raw Materials and Supplies $ 35,100 $ 38,432
Work-In-Process and Finished Goods 29,464 32,647
FIFO value (current cost of all inventories) $ 64,564 $ 71,079
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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 30, 2002 March 31, 2001
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Basic 25.0 24.6
Diluted 25.4 24.7
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4) Comprehensive Income
Total comprehensive income, comprised of net income and other comprehensive
income (loss) was $9,861,000 and $382,000 for the first quarter of 2002 and
2001, 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
supply-chain management, with other business operations in healthcare
products. Summarized segment data for the three months ended March 30, 2002
and March 31, 2001 are as follows:
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Supply-chain
Dollars in thousands Printing Management Healthcare Total
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2002
Net sales $235,977 $73,203 $23,593 $332,773
Earnings from operations 18,666 4,705 2,585 25,956
2001
Net sales $256,009 $91,795 $24,973 $372,777
Earnings from operations 17,424 5,833 2,537 25,794
The following table presents a reconciliation of segment earnings from
operations to the totals contained in the condensed financial statements
for the three months ended March 30, 2002 and March 31, 2001.
Dollars in thousands 2002 2001
Reportable segment earnings $25,956 $25,794
Unallocated corporate expenses (5,479) (5,213)
Interest expense (3,110) (4,011)
Write-off of investment 0 (12,500)
Other income (expense) (61) 162
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Earnings before income taxes $17,306 $4,232
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6) Write-off of Investment
XYAN.com, Inc. ("Xyan") filed for bankruptcy under Chapter 11 on March 31,
2001 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. In response to Xyan's filing for
bankruptcy, the Corporation wrote-off the cost of 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 per diluted share, after tax).
7) Accounting Pronouncement
On June 30, 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other
Intangible Assets. SFAS No. 142 establishes accounting and reporting
standards associated with goodwill, reflected simply as "Goodwill" on the
balance sheet.
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Following adoption of SFAS No. 142, goodwill is no longer subject to
amortization over its estimated useful life. Rather, goodwill and
intangibles with indefinite lives are subject to at least annual assessment
for impairment by applying a fair-value-based test. The Corporation adopted
SFAS No. 142 on December 30, 2001 and will be required to analyze its
goodwill for impairment issues during the first six months of 2002, and on
an annual basis thereafter.
The following table reflects adjustments to the Corporation's earnings had
SFAS No. 142 been adopted on December 31, 2000:
Thousands except for earnings-per
share amounts
March 30, 2002 March 31, 2001
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Reported net earnings $ 10,488 $ 2,632
Add back: Goodwill amortization - 457
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Adjusted net earnings $ 10,488 $ 3,089
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Basic earnings per share:
Reported net earnings $ 0.42 $ 0.11
Goodwill amortization - 0.02
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Adjusted net earnings $ 0.42 $ 0.13
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Diluted earnings per share
Reported net earnings $ 0.41 $ 0.11
Goodwill amortization - 0.02
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Adjusted net earnings $ 0.41 $ 0.13
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net Sales
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Net sales for the first quarter of 2002 were $332.8 million, 10.7% lower than
the $372.8 million in the prior year quarter.
First quarter sales for the print segment of $236.0 million were 7.8% below the
prior year's $256.0 million. This decrease is primarily the result of:
o Paper prices being approximately 15% lower as compared to the prior year
first quarter, which resulted in an approximate reduction in print segment
revenue of $10 million to $12 million.
o Advertising spending and corresponding page counts being down 15% in the
first quarter compared to 2001. This reduction in spending reduced revenue
in the Corporation's Publications and Direct Marketing groups.
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Supply-chain management sales of $73.2 million for the 2002 first quarter were
20% lower than the prior period's $91.8 million. This reduction in revenue was
primarily the result of lower demand from the Corporation's major technology
customers.
Healthcare sales of $23.6 million for the 2002 first quarter were comparable to
the prior year first quarter.
Earnings
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Operating earnings of $20.5 million for the 2002 first quarter were down
slightly from the $20.6 million in the prior year first quarter. Following
adoption of SFAS No. 142, goodwill is no longer subject to amortization over its
estimated useful life. Amortization for the prior period first quarter was
approximately $750,000, which reduced earnings per share by 1.8 cents.
Print segment earnings from operations were $18.7 million, an increase of $1.2
million over the prior year first quarter. This was achieved despite a 7.8%
decrease in revenues and reflects an improved operating margin, which increased
from 6.8% in the 2001 first quarter to 7.9% in the 2002 first quarter. The
improvement in operating margin was primarily the result of:
o Impact of ongoing cost controls initiated in 2001
o Continuous improvement in reducing paper trim waste
o Improved utilization of press equipment, especially in the Corporation's
Book group
Earnings from operations for the supply-chain management segment were $4.7
million, a decrease of $1.1 million from the prior year first quarter. Despite
lower revenues in 2002, operating margins remained consistent from first quarter
2001 to first quarter 2002 at 6.4%.
Healthcare segment earnings from operations of $2.6 million were comparable to
the prior year first quarter.
Interest Expense
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Interest expense for the first quarter of 2002 was $3.1 million, a reduction of
22% compared to interest expense of $4.0 million in the prior year first
quarter. The Corporation's improved balance sheet has resulted in no short-term
debt outstanding in the first quarter of 2002, compared to $35.2 million in
short-term debt at the end of first quarter 2001. The reduction in interest
expense is the result of this reduction in short-term debt.
Income Taxes
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The Corporation's effective first quarter income tax rate for 2002 of 39.4% was
slightly above the 2001 first quarter rate of 37.8%. The 2001 tax rate was lower
due to the impact of the investment write-off in the 2001 first quarter. Without
giving effect to the investment write-off, the effective income tax rate for the
first quarter of 2001 was 39.4%.
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FINANCIAL CONDITION
Liquidity and Capital Resources
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The Corporation's net working capital (current assets less current liabilities)
increased by approximately $25.4 million during the first quarter of 2002.
Although working capital increased, the Corporation actually reduced levels of
accounts receivable, inventories and accounts payable during the first quarter
of 2002 due to continued focus on improving its balance sheet.
Capital expenditures were $6.7 million during the first quarter of 2002, a
decrease of $8.8 million from the amount expended during the prior year first
quarter. Capital requirements for the full year are expected to be approximately
$70 million and will be funded by a combination of cash provided from operations
and borrowings. During the first quarter of 2002, the Corporation repurchased no
shares of common stock.
Long-term debt as a percentage of total capitalization at March 30, 2002 was
comparable to the percentage at December 29, 2001.
Given cash and cash equivalents on hand as well as borrowing capacity currently
in place, the Corporation believes it has sufficient liquidity to fund its
operations for the foreseeable future.
FUTURE OUTLOOK
Projections for the Corporation's first half are for earnings to be comparable
with the prior year period. Projections for the full-year 2002 are for
mid-single digit growth in sales and earnings, reflecting the outlook for a
gradually improving economy.
CRITICAL ACCOUNTING POLICIES
The Corporation's accounting policies are more fully described in Note 1 to the
consolidated financial statements included in the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 29, 2001. As disclosed in Note 1,
the preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions about future events that affect the amounts reported in the
financial statements and footnotes. Future events and their effects cannot be
determined with absolute certainty. Therefore, the determination of estimates
requires the exercise of judgment. Actual results inevitably will differ from
those estimates, and such differences may be material to the financial
statements.
The most significant accounting estimates inherent in the preparation of the
Corporation's consolidated financial statements include estimates as to the
recovery of receivables and realizability of inventories, property, plant and
equipment. Significant assumptions are also used in the determination of
liabilities related to pension and post-retirement benefits. The process of
determining significant estimates is fact specific and takes into account
factors such as historical experience, current and expected economic conditions,
product mix, and in some cases, actuarial techniques. The Corporation
re-evaluates these significant factors as facts and circumstances dictate.
Historically, actual results have not differed significantly from those
determined using the estimates described above.
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The Corporation believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements:
o Revenue Recognition. Revenues are recognized on products shipped to
unaffiliated customers when the risk of loss transfers or when services are
performed. The Securities and Exchange Commission's Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition," provides guidance on the
application of accounting principles generally accepted in the United
States to selected revenue recognition issues. In addition, revenues in the
supply-chain management segment are recognized in accordance with EITF
Issue No. 99-19, which provides guidance on whether revenue should be
recorded gross as a principal or net as an agent. Each major contract is
evaluated based on various criteria, with management judgment required to
assess the importance of each criterion in reaching the final decision.
o Goodwill. On December 30, 2001, the Corporation adopted Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets," and will be required to analyze its goodwill for impairment issues
during the first six months of fiscal 2002, and then on an annual basis
thereafter. The Corporation has not completed this analysis and has not yet
determined what effect, if any, this may have on the results of operations.
At December 29, 2001, the Corporation had $63.8 million in goodwill and
recognized $3 million of amortization expense for the year ended December
29, 2001.
o 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.
Cautionary Statements for Forward-Looking Information
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This document 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, changes in raw material costs and
availability (particularly paper), unanticipated changes in operation expenses,
unanticipated production difficulties, changes in demand for products and
services in the technology sector, the impact of increased competition resulting
from industry consolidation, and any anticipated delay in the economic recovery.
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.
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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 30, 2002, the Corporation had no notes payable
outstanding against lines of credit with banks. Since essentially all the
Corporation's long-term debt is at fixed interest rates, exposure to interest
rate fluctuations is minimal.
Exposure to adverse changes in foreign exchange rates is not considered
material. Potential market risk associated with changes in foreign exchange is
considered in contractual arrangements with customers.
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - No exhibits are filed with this report.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter for which this report is filed.
SIGNATURE
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
By:/s/ Daniel W. Kiener
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Daniel W. Kiener
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer and Duly Authorized Officer)
Date: May 14, 2002
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