-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fmr4jj+er7wOYPvhFjtAgIiK5F05EfXpRY+DCoNCscWIYCQzvUG8YBQO1yqugRFr nPRGxQoLY5eeiT6xw+itbg== 0000897069-97-000449.txt : 19971114 0000897069-97-000449.hdr.sgml : 19971114 ACCESSION NUMBER: 0000897069-97-000449 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970927 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANTA CORP CENTRAL INDEX KEY: 0000009801 STANDARD INDUSTRIAL CLASSIFICATION: COMMERCIAL PRINTING [2750] IRS NUMBER: 390148550 STATE OF INCORPORATION: WI FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06187 FILM NUMBER: 97713973 BUSINESS ADDRESS: STREET 1: 225 MAIN ST CITY: MENASHA STATE: WI ZIP: 54952 BUSINESS PHONE: 4147227777 FORMER COMPANY: FORMER CONFORMED NAME: BANTA GEORGE CO INC DATE OF NAME CHANGE: 19890509 FORMER COMPANY: FORMER CONFORMED NAME: BANTA GEORGE PUBLISHING CO DATE OF NAME CHANGE: 19720505 10-Q 1 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 September 27, 1997 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 (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 (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 September 27, 1997, 29,911,278 shares of $.10 par value common stock. BANTA CORPORATION AND SUBSIDIARIES Quarterly Report on Form 10-Q For the Quarter Ended September 27, 1997 INDEX PART I - FINANCIAL INFORMATION Page Number Item 1 - Financial Statements: Unaudited Consolidated Condensed Balance Sheets September 27, 1997 and December 28, 1996 . . . . . . . . . 3 Unaudited Consolidated Condensed Statements of Earnings for the Three Months and Nine Months Ended September 27, 1997 and September 28, 1996 . . . . . . . . . . . . . . . 4 Unaudited Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 27, 1997 and September 28, 1996 . . . . . . . . . . . . . . . . . . . . 5 Notes to Unaudited Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . . 6-7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . 8-10 PART II - OTHER INFORMATION Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . 11 Item 2 - Changes in Securities . . . . . . . . . . . . . . . . 11 Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . 11 Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 PART I FINANCIAL INFORMATION Item 1 - Financial Statements BANTA CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands) September 27, December 28, 1997 1996 ASSETS Current Assets Cash $ 12,793 $ 57,417 Receivables 238,550 206,245 Inventories 90,535 69,063 Other current assets 18,624 14,730 -------- --------- Total Current Assets 360,502 347,455 -------- --------- Plant and Equipment 694,712 650,243 Less: Accumulated Depreciation (368,580) (330,304) -------- --------- Plant and Equipment, net 326,132 319,939 -------- --------- Other Assets 13,970 11,886 Cost in Excess of Net Assets of Subsidiaries Acquired 60,430 39,938 -------- --------- $ 761,034 $ 719,218 ======== ========= LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities Short-term debt $ 29,078 $ 4,620 Accounts payable 98,562 75,428 Accrued salaries and wages 19,956 18,269 Other accrued liabilities 32,248 23,888 Current maturities of long- term debt 5,124 5,620 -------- --------- Total Current Liabilities 184,968 127,825 -------- --------- Long-term Debt 128,960 133,696 Deferred Income Taxes 23,269 21,805 Other Non-Current Liabilities 16,930 15,300 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; 29,911,278 and 30,969,069 shares issued and outstanding, respectively 2,991 3,097 Amount in excess of par value of stock 38,844 66,119 Cumulative translation adjustment (2,481) 1,473 Retained earnings 367,553 349,903 -------- --------- Total Shareholders' Investment 406,907 420,592 -------- --------- $ 761,034 $ 719,218 ======== ========= 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 Nine Months Ended September 27, September 28, September 27, September 28, 1997 1996 1997 1996 Net sales $ 298,322 $ 264,552 $ 849,902 $ 794,472 Cost of goods sold 238,615 207,902 679,827 636,128 --------- --------- --------- --------- Gross earnings 59,707 56,650 170,075 158,344 Selling and administrative expenses 34,976 30,239 104,471 92,497 Restructuring charge 13,500 0 13,500 0 --------- --------- --------- --------- Earnings from operations 11,231 26,411 52,104 65,847 Interest expense (2,456) (2,331) (7,673) (7,894) Other, net 327 1,215 1,773 1,704 --------- --------- --------- --------- Earnings before income taxes 9,102 25,295 46,204 59,657 Provision for income taxes 3,500 10,000 18,000 23,700 --------- --------- --------- -------- Net earnings $ 5,602 $ 15,295 $ 28,204 $ 35,957 ========= ========= ========= =========== Earnings per share of common stock $ 0.19 $ 0.49 $ 0.94 $ 1.15 ========= ========= ========== =========== Average common shares outstanding 29,977,369 31,260,177 30,163,102 31,310,216 ========== ========== ========== =========== Cash dividends per common share $ .12 $ .11 $ .35 $ .32 ========== ========= ========== ===========
See accompanying notes to consolidated financial statements. BANTA CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in thousands) Nine Months Ended September 27, September 28, 1997 1996 Cash Flow From Operating Activities Net earnings $ 28,204 $ 35,957 Depreciation and amortization 44,160 43,338 Restructuring charge 13,500 Deferred income taxes (1,000) 448 Change in assets and liabilities Increase in receivables (18,195) (7,028) (Increase) decrease in inventories (6,546) 4,438 Increase in other current assets (2,613) (1,243) Increase in accounts payable and accrued liabilities 10,068 4,157 (Increase) decrease in other non-current assets (1,989) 885 Other, net 75 (186) -------- -------- Cash provided from operating activities 65,664 80,766 -------- -------- Cash Flow From Investing Activities Capital expenditures (38,774) (47,582) Acquisition of businesses (50,666) 0 -------- -------- Cash used for investing activities (89,440) (47,582) -------- -------- Cash Flow From Financing Activities Proceeds from notes payable, net 24,458 0 Repayment of long-term debt (5,232) (6,450) Dividends paid (10,554) (10,151) Proceeds from exercise of stock options 3,050 2,324 Repurchase of common stock (32,570) (5,466) -------- -------- Cash used for financing activities (20,848) (19,743) -------- -------- Net (decrease) increase in cash (44,624) 13,441 Cash at beginning of period 57,417 27,130 -------- -------- Cash at end of period $ 12,793 $ 40,571 ======== ======== Cash payments for: Interest, net of amount capitalized $ 7,269 $ 7,656 Income taxes 22,384 17,615 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 period ended September 27, 1997 are not necessarily indicative of results that may be expected for the year ending January 3, 1998. 2) Acquisitions In September of 1997, the Corporation acquired The Omnia Group ("Omnia") for approximately $50.7 million in cash. Omnia is a supplier of single-use medical and dental products. Omnia reported sales of approximately $65 million in 1996. This acquisition was accounted for as a purchase and, accordingly, the accompanying financial statements of the Corporation include the results of Omnia beginning with the acquisition date. In September of 1997, the Corporation acquired Bock West, Inc. ("Bock West") for 75,715 shares of the Corporation's common stock. Bock West provides mailing and fulfillment services. Bock West reported 1996 sales of approximately $12 million. This acquisition was accounted for as a purchase and, accordingly, the accompanying financial statements of the Corporation include the results of Bock West beginning with the acquisition date. 3) Subsequent Event In October of 1997, the Corporation acquired Greenfield Printing & Publishing Company, ("Greenfield"), for approximately $21.3 million in cash. Greenfield is a printer of special-interest and trade magazines. Greenfield reported 1996 sales of approximately $22 million. This acquisition will be accounted for as a purchase and, accordingly, Greenfield's results will be included in the Corporation's financial statements beginning in the fourth quarter of 1997. 4) Restructuring Charge During the third quarter of 1997 the Corporation took several actions to restructure certain of its businesses. These actions included entering into an agreement to sell its point-of-purchase sign and display business, discontinuing its intaglio print-based security products business, closing its interactive video operation in Boston, Massachusetts, and closing three Global Turnkey facilities. These actions resulted in a one-time pretax charge of $13.5 million. The costs included in this charge consisted of asset write-offs, employee separation costs and other costs related to the closure of the facilities. 5) Inventories The majority of the Corporation's inventories used in its printing operations are accounted for at cost determined on a last-in, first- out (LIFO) basis, which is not in excess of market. The remaining 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 September 27, 1997 and December 28, 1996 were as follows: (Dollars in thousands) September 27, December 28, 1997 1996 Raw Materials and Supplies $ 50,389 $ 40,980 Work-In-Process and Finished Goods 45,219 32,456 ------- -------- FIFO value (current cost of all inventories) 95,608 73,436 Excess of current cost over carrying value of LIFO inventories (5,073) (4,373) ------- ------- Net Inventories $ 90,535 $ 69,063 ======= ======= 6) Accounting for Earnings per Share In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share." The new statement requires changes in the manner in which earnings per share are calculated and is effective for fiscal years ending after December 15, 1997. The Standard does not allow early adoption. The Corporation intends to adopt this standard during the fourth quarter of 1997. The adoption of this standard is not expected to have a material effect on the Corporation's earnings per share. Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Liquidity and Capital Resources The Corporation's net working capital decreased by approximately $44 million during the first three quarters of 1997. This reduction was primarily caused by the Corporation's repurchase of approximately 1.3 million shares of its common stock (at an aggregate cost of $32.6 million) during the first quarter of 1997 and by the acquisitions completed during the third quarter of 1997. For a description of third quarter acquisitions, see Note 2 to the Notes to Unaudited Consolidated Condensed Financial Statements. The acquisitions were financed with a combination of cash and increased short-term borrowings. In April 1997, following the first quarter stock repurchases, the Board of Directors of the Corporation authorized the repurchase of up to an additional 1.5 million shares. In addition to the acquisitions described above, in October 1997 the Corporation completed its acquisition of Greenfield Printing and Publishing for $21.3 million in cash. This acquisition, which was completed after the end of the third quarter, was financed with a combination of cash and short-term borrowings. RESULTS OF OPERATIONS Net Sales Sales for the third quarter of 1997 were $33.8 million (13%) higher than for third quarter of 1996. Operating activity levels during the third quarter of 1997, in all of the Corporation's market classifications, except for healthcare products, were above 1996 third quarter levels. Significant sales gains were made in the book market where demand for educational products was strong and activity levels were also strong in the magazine market as page counts have increased from 1996 levels. The plants previously serving the computer software documentation publishers are making progress in refocusing their efforts toward serving more diverse markets. Sales from the turnkey market increased due to the opening of a new facility in France. There was no significant sales contribution from the companies acquired in the third quarter of 1997 because such acquisitions were completed late in the quarter. Sales for the first three quarters of 1997 were $55.4 million (7%) higher than for the first three quarters of 1996. The sales increase was moderated by the impact of lower paper prices in the first half of 1997. The cost of paper is generally passed on to the Corporation's customers and, as a result, as paper prices decreased from 1996 levels, the Corporation's sales were reduced. Comparable paper prices to those in the first three quarters of 1996 would have increased first three quarters of 1997 sales by approximately an additional $36 million. Paper prices rose during the third quarter of 1997 resulting in little impact on the comparison to 1996 third quarter sales. Trends in operating activity levels for the first three quarters of 1997 were similar to those described above for the third quarter. Cost of Goods Sold Cost of goods sold as a percentage of sales increased from 78.6% for the third quarter of 1996 to 80.0% for the third quarter of 1997. The most significant factors contributing to the margin reduction were pricing pressures in the catalog and direct marketing materials markets, a higher proportion of turnkey sales (which generally contain a higher material content, and therefore lower margins), one- time costs associated with the start up of several new turnkey facilities, and low margins prior to closure for the facilities ultimately closed during the period. Also contributing to the margin reduction was a $2.5 million increase in 1997 third quarter costs compared to the third quarter of 1996 costs due to the impact rising paper prices have on the LIFO inventory valuation adjustment. Since paper prices have continued to increase, the Corporation expects a larger LIFO impact in the fourth quarter of 1997. Cost of goods sold as a percentage of sales decreased from 80.1% for the first three quarters of 1996 to 80.0% for the first three quarters of 1997. During the first half of 1997, most of the Corporation's operations operated at higher levels of activity than in the first half of 1996, which allowed them to return higher margins. The lower paper prices in the first half of 1997 resulted in margin improvement because paper sales have a lower margin than manufacturing sales. These factors offset the impact of third quarter factors mentioned above which reduced third quarter's margins. Selling and Administrative Expenses Selling and administrative expenses were $4.7 million higher for the third quarter of 1997 than for the third quarter of 1996 and $12.0 million higher for the first three quarters of 1997 than for the first three quarters of 1996. The increase is primarily due to the higher level of operating activity and the selling and administrative expenses related to that higher level as well as the new turnkey facilities opened during 1997. The increase also includes costs associated with its new online catalog and digital content management businesses. Restructuring Charge During the third quarter of 1997 the Corporation took several actions to restructure certain of its businesses. These actions included entering into an agreement to sell its point-of-purchase sign and display business, discontinuing its intaglio print-based security products business, closing its interactive video operation in Boston, Massachusetts, and closing three Global Turnkey facilities. These actions resulted in a one-time pretax charge of $13.5 million ($8.1 million after tax, or $.27 per share). The costs included in this charge consisted of asset write-offs, employee separation costs and other costs related to the closure of the facilities. Interest Expense Interest expense was $125,000 higher in the third quarter of 1997 than for the third quarter of 1996 and $228,000 lower for the first three quarters of 1997 than for the first three quarters of 1996. These changes were due to lower debt levels during the first half of 1997 than in 1996 and higher debt levels during the third quarter of 1997 than in 1996. Income Taxes The Corporation's effective income tax rates declined as indicated in the table below due to an increase in tax-free interest income earned in 1997 as compared to 1996. Effective Tax Rate 1997 1996 Third Quarter 38.5% 39.5% First Three Quarters 39.0% 39.7% PART II: OTHER INFORMATION Item 1 - Legal Proceedings In September 1997, Banta Direct Marketing Group received a Notice of Violation from the United States Environmental Protection Agency ("US EPA"), Region V, relating to air emissions and operating an air emission source without a permit from one of its facilities located in Illinois. The US EPA has not yet indicated what penalty, if any, it may seek in connection with these allegations. Although the Company believes that its operations are currently in compliance with applicable regulations, it is currently working to resolve these issues with the US EPA. At this date, Management is unable to predict the specific outcome of the ongoing discussions. However, Management believes that any such outcome will not have a material adverse effect on the Corporation's results of operations or financial condition. Item 2 - Changes in Securities On September 11, 1997, the Corporation issued 75,715 shares of its Common Stock, $.10 par value ("Common Stock"), in connection with its acquisition of Bock West, Inc. ("Bock West"). The acquisition was structured as a statutory merger of Bock West, Inc. into Banta Direct Marketing-Berkeley, Inc., ("BDMB") a wholly owned subsidiary of the Corporation. In connection with such merger, BDMB, as the surviving entity in the merger, acquired all the outstanding capital stock of Bock West and the two shareholders of Bock West received the 75,715 shares of Common Stock, certain of which shares are subject to an escrow agreement. The offer and sale of the Common Stock to such shareholders in the above- referenced private placement were exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. Item 6 - Exhibits and Report on Form 8-K (a) Exhibits - 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 Gerald A. Henseler Executive Vice President and Chief Financial Officer Date November 10, 1997 BANTA CORPORATION EXHIBIT INDEX TO FORM 10-Q For The Quarter Ended September 27, 1997 Exhibit Number 27 Financial Data Schedule (EDGAR version only) EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF BANTA CORPORATION AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JAN-03-1998 DEC-30-1996 SEP-27-1997 12,793 0 241,551 3,001 90,535 360,502 694,712 368,580 761,034 184,968 128,960 0 0 2,991 404,426 761,034 849,902 849,902 679,827 679,827 104,471 0 7,673 46,204 18,000 28,204 0 0 0 28,204 0.94 0.94
-----END PRIVACY-ENHANCED MESSAGE-----