-----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, SlELAluOR3ZSJsijCrhbnze/leDTEviI7lyTb9UPKtUokLBxPa6qkT8CQ56AMTc7 tK5zr9wL9e2YSjvycc5jmw== 0000897069-99-000321.txt : 19990519 0000897069-99-000321.hdr.sgml : 19990519 ACCESSION NUMBER: 0000897069-99-000321 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990518 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: 001-14637 FILM NUMBER: 99629694 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 FORM 10-Q 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 3, 1999 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 on its charter) Wisconsin 39-0148550 (State of 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 April 3, 1999, 27,574,609 shares of $.10 par value common stock. BANTA CORPORATION AND SUBSIDIARIES Quarterly Report on Form 10-Q For the Quarter Ended April 3, 1999 INDEX ----- Page Number ----------- PART I FINANCIAL INFORMATION: Item 1 - Financial Statements Unaudited Consolidated Condensed Balance Sheets April 3, 1999 and January 2, 1999 ..............................3 Unaudited Consolidated Condensed Statements of Earnings for the Three Months Ended April 3, 1999 and April 4, 1998 ..........4 Unaudited Consolidated Condensed Statements of Cash Flows for the Three Months Ended April 3, 1999 and April 4, 1998.......5 Notes to Unaudited Consolidated Condensed Financial Statements ..........................................6-8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations ....................................9-11 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................................12 Exhibit Index ................................................................13 PART I Item 1. Financial Statements BANTA CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands) April 3, 1999 January 2, 1999 ------------- --------------- ASSETS - ------ Current Assets Cash and cash equivalents $ 28,118 $ 26,584 Receivables 198,866 233,200 Inventories 77,474 74,724 Other current assets 21,853 20,112 ------------ ------------- Total Current Assets 326,311 354,620 ------------ ------------- Plant and Equipment 772,486 758,440 Less: Accumulated Depreciation (453,169) (439,805) ------------ ------------- Plant and Equipment, net 319,317 318,635 Other Assets 21,851 20,989 Cost in Excess of Net Assets of Subsidiaries Acquired 74,391 75,722 ------------ ------------- $ 741,870 $ 769,966 ============ ============= LIABILITIES AND SHAREHOLDERS' INVESTMENT - ---------------------------------------- Current Liabilities Short-term debt $ 33,865 $ 36,140 Accounts payable 90,127 107,649 Accrued salaries and wages 23,150 25,085 Other accrued liabilities 23,936 20,706 Current maturities of long-term debt 6,829 6,911 ------------ ------------- Total Current Liabilities 177,907 196,491 ------------ ------------- Long-term Debt 120,573 120,628 Deferred Income Taxes 21,617 22,214 Other Non-Current Liabilities 21,235 20,702 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; 27,574,609 and 28,260,957 shares issued and outstanding, respectively 2,757 2,826 Accumulated other comprehensive loss (4,699) (2,308) Retained earnings 402,480 409,413 ------------ ------------- Total Shareholders' Investment 400,538 409,931 ------------ ------------- $ 741,870 $ 769,966 ============ ============= 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 3, 1999 April 4, 1998 ------------- ------------- Net sales $ 309,286 $ 330,810 Cost of goods sold 247,591 265,996 ------------ ------------ Gross earnings 61,695 64,814 Selling and administrative expenses 42,304 43,500 ------------ ------------ Earnings from operations 19,391 21,314 Interest expense (2,947) (2,918) Other, net (432) (364) ------------ ------------ Earnings before income taxes 16,012 18,032 Provision for income taxes 6,300 7,000 ------------ ------------ Net earnings $ 9,712 $ 11,032 ============ ============ Basic earnings per share of common stock $ .35 $ .37 ============ ============ Diluted earnings per share of common stock $ .35 $ .37 ============ ============ Cash dividends per common share $ .14 $ .13 ============ ============ 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 3, 1999 April 4, 1998 ------------- ------------- Cash Flows From Operating Activities Net earnings $ 9,712 $ 11,032 Depreciation and amortization 17,172 16,533 Deferred income taxes (597) 143 Change in assets and liabilities: Decrease in receivables 34,334 4,051 Decrease in inventories 1,803 11,992 Increase in other current assets (1,741) (1,197) Decrease in accounts payable and accrued liabilities (18,048) (2,315) Increase in other non-current assets (862) (872) Other, net (1,327) (663) ------------- ------------- Cash provided from operating activities 40,446 38,704 ------------- ------------- Cash Flows From Investing Activities Capital expenditures, net (17,051) (16,392) ------------- ------------- Cash Flows From Financing Activities Repayment of short-term debt, net (2,275) (13,175) Repayment of long-term debt (137) (149) Dividends paid (3,950) (3,575) Proceeds from exercise of stock options 55 1,238 Repurchase of common stock (15,554) (3,232) ------------- ------------- Cash used for financing activities (21,861) (18,893) ------------- ------------- Net increase in cash 1,534 3,419 Cash and cash equivalents at beginning of period 26,584 16,432 ------------- ------------- Cash and cash equivalents at end of period $ 28,118 $ 19,851 ============= ============= Cash payments for: Interest, net of amount capitalized $ 2,035 $ 3,123 Income taxes 1,373 1,338 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 3, 1999, are not necessarily indicative of results that may be expected for the year ending January 1, 2000. 2) Inventories The Corporation's inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) method. Until the current fiscal year, approximately one-third of the Corporation's inventories were accounted for at cost determined on a last-in, first-out (LIFO) basis. Effective January 3, 1999, these operations changed to the FIFO method. The change in accounting principle was made to provide a better matching of revenue and expenses and to be consistent with prevalent industry practice. This accounting change was not material to the financial statements on an annual or quarterly basis, and accordingly, no retroactive restatement of prior years' financial statements was made. Inventories include material, labor and manufacturing overhead. Inventory amounts at April 3, 1999 and January 2, 1999 were as follows:
(Dollars in thousands) April 3, 1999 January 2, 1999 ------------- --------------- Raw Materials and Supplies $ 38,267 $ 35,270 Work-In-Process and Finished Goods 39,207 43,963 ------------- --------------- FIFO value (current cost of all inventories) 77,474 79,233 LIFO reserve - (4,509) ------------- --------------- Net Inventories $ 77,474 $ 74,724 ============= ===============
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 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, which 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 3, 1999 April 4, 1998 ------------- ------------- Basic 27.9 29.7 Diluted 27.9 29.9 4) Comprehensive Income Total comprehensive income, comprised of net income and other comprehensive income (loss), was $7,321,000 and $9,873,000 for the first quarter of 1999 and 1998, 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 one primary business segment, print, with other business operations in turnkey services and healthcare products. Summarized segment data for the three months ended April 3, 1999 and April 4, 1998 are as follows: Dollars in thousands Printing All Other 1 Total --------------------------------------------------------------------- 1999 Net sales $236,420 $72,866 $309,286 Intersegment sales 1,301 4 1,305 Earnings from operations 19,321 4,173 23,494 1998 Net sales $254,467 $76,343 $330,810 Intersegment sales 330 332 662 Earnings from operations 21,223 4,465 25,688 1 "All Other" includes the operations within turnkey services and healthcare products which have been aggregated. The following table presents a reconciliation of segment earnings from operations to the totals contained in the condensed financial statements: Dollars in thousands 1999 1998 Reportable segment earnings $19,321 $21,223 Other segment earnings 4,173 4,465 Unallocated corporate expenses (4,103) (4,374) Interest expense (2,947) (2,918) Other income (expense) (432) (364) ------- ------- Earnings before income taxes $16,012 $18,032 ======= ======= 6) Subsequent Event On April 12, 1999, the Corporation announced a major profit-improvement program that targets revenue and earnings growth, increased efficiencies and enhanced shareholder returns. The program will result in a pretax restructuring charge of between $50 million and $55 million ($1.30-$1.40 per diluted share, after tax) to be recorded in the second quarter of 1999. The restructuring initiatives primarily involve the Corporation's print segment and include three facility closings and the elimination of certain underperforming business lines. These initiatives will result in workforce reductions of approximately 650 employees (350 employees at the three facilities closed) and the writedown of certain long-lived assets, including goodwill. Actions within the print segment include the closing of the mailing and fulfillment facility in Berkeley, Illinois, the prepress facility in Charlotte, North Carolina and the printing plant in Kent, Washington. These closings and the related asset writedowns were primarily the result of volume shortfalls and continuing losses in 1999. Actions taken during 1998 improved operating results, but fell short of substantial improvement necessary to create profitability and create positive shareholder value. Initiatives within the turnkey services and healthcare products business operations primarily relate to the elimination or realignment of manufacturing capacity based on anticipated customer sourcing requirements. 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 $9.7 million during the first quarter of 1999 due to a reduction in the level of receivables offset in part by a decrease in payables. The decrease in receivables compared to the balance at January 2, 1999 was the result of seasonality in the Corporation's business and a continued emphasis on asset management. The decrease in payables compared to the balance at January 2, 1999 was primarily due to lower sales volume. Also during the first quarter of 1999, the Corporation repurchased approximately 689,000 shares of common stock at an aggregate purchase price of $15.6 million pursuant to its common stock repurchase program. Cash provided from operations funded these repurchases. Future stock repurchases will be funded by a combination of cash provided from operations and short-term borrowings, if necessary. Capital expenditures were $17.1 million during the first quarter of 1999, an increase of $0.7 million from the amount expended during the prior year first quarter. 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 short-term borrowings. Long-term debt as a percentage of total capitalization remained consistent with the percentage at January 2, 1999. On April 12, 1999, the Corporation announced a major profit-improvement program that targets revenue and earnings growth, increased efficiencies and enhanced shareholder returns. The program will result in a pretax restructuring charge of between $50 million and $55 million to be recorded in the second quarter of 1999. The initiatives are expected to generate between $5 million and $7 million in cost savings during the second half of 1999 and savings for the years 2000 and forward of $18 million to $20 million annually. The restructuring initiatives primarily involve the Corporation's print segment and include three facility closings and the elimination of certain underperforming business lines. These initiatives will result in workforce reductions of approximately 650 employees and the writedown of certain long-lived assets, including goodwill. The cash portion of the charge is expected to be between $20 million and $25 million and will be funded by the cost savings from the restructuring initiatives. RESULTS OF OPERATIONS Net Sales Sales for the first quarter of 1999 were $21.5 million (7%) lower than the first quarter of 1998. The decrease in print segment sales was primarily due to lower volume in the educational book market and lower paper prices in the first quarter of 1999 as compared with the first quarter of 1998. The cost of paper is generally passed on to the Corporation's customers and, as a result, as paper prices decreased from 1998 levels, the Corporation's sales also decreased. Turnkey services sales were lower in the first quarter of 1999 compared to the prior year's first quarter due to the loss of low margin business from certain U.S. customers and lower material pass-through from the type of projects performed during the current year quarter. Healthcare products sales for the first quarter of 1999 were comparable to the prior year first quarter. Cost of Goods Sold Cost of goods sold as a percentage of sales decreased from 80.4% for the first quarter of 1998 to 80.1% for the first quarter of 1999. This overall margin gain was partially due to the decrease in paper sales since the sale of paper generally has lower margins than manufacturing sales. Margins within the turnkey services operations improved as a result of lower material pass-through, which essentially has no margin associated with the revenue. Selling and Administrative Expenses Selling and administrative expenses were $1.2 million lower for the first quarter of 1999 than for the first quarter of 1998. The decrease is essentially due to lower sales volume in the current year's first quarter compared to the prior year's quarter. Selling and administrative expenses as a percent of sales increased from 13.1% to 13.7% primarily as a result of the aforementioned lower sales volume. Interest Expense Interest expense for the first quarter of 1999 was comparable to the prior year first quarter. Income Taxes The Corporation's effective first quarter income tax rate for 1999 of 39.3% was slightly more than the 38.8% tax rate for 1998 partially due to a decrease in tax-free interest income earned in 1999 as compared to 1998. Other Matters During 1998, the Corporation completed an evaluation of its computer software to determine its ability to handle dates beginning with the year 2000. It was determined that a significant portion of the Corporation's software was already year-2000 compliant. This evaluation also resulted in the development of detailed plans to replace certain software and to reprogram other software. The Corporation also implemented a program to confirm that business and manufacturing system hardware, control systems and software supplied by significant third party vendors is year-2000 ready. Although complete assurance cannot be given, management currently believes it is devoting the necessary resources to resolve all significant year-2000 issues, both Information Technology ("IT") and non-IT related, by mid-1999. The Corporation has nearly completed the audits and operational readiness testing as well as received certification of year-2000 readiness from significant third party vendors. The Corporation's contingency plan related to third party vendors is to identify additional suppliers and alternate sources for essential materials, primarily paper, in case one or more of its suppliers were not year-2000 ready. The majority of the Corporation's internal IT-related systems has either been replaced or is in the process of being replaced with year-2000 compliant systems. Accordingly, a contingency plan has not been developed for internal IT-related systems and is not currently considered necessary. The Corporation is continuing to test non-IT-related systems (HVAC, safety and security) and has developed a contingency plan. The risk of not being year-2000 compliant on a timely basis is that product shipments could potentially be delayed, which could have an adverse impact on, among other things, the Corporation's revenues and earnings. Additional resources, which cannot be accurately estimated at this time, would be required to process and fulfill customer orders. During 1998, the Corporation spent approximately $3.5 million to upgrade and replace its systems to ensure year-2000 readiness. The Corporation estimates it will incur additional costs of $3 to $4 million in 1999. The majority of the systems development costs will be capitalized. 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 customers' demand for the Corporation's products, changes in raw material costs and availability, seasonal or unanticipated changes in customer orders, pricing actions by competitors, success in the implementing the Corporation's recently announced revenue and margin enhancement program, unanticipated events relating to achieving year-2000 compliance, 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 3, 1999, the Corporation had notes payable outstanding aggregating $33.9 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 $339,000 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 also considered immaterial. PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - 18 - Letter regarding change in accounting principles 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, Chief Financial Officer and Treasurer Date May 18, 1999 BANTA CORPORATION EXHIBIT INDEX TO FORM 10-Q For The Quarter Ended April 3, 1999 Exhibit Number - -------------- 18 Letter regarding change in accounting principles 27 Financial Data Schedule (EDGAR version only) EX-18 2 LETTER REGARDING CHANGE IN ACCOUNTING EXHIBIT 18 May 17, 1999 Mr. Gerald A. Henseler Banta Corporation 225 Main Street Post Office Box 8003 Menasha, Wisconsin 54952-8003 Re: Form 10-Q Report for the quarter ended April 3, 1999. Dear Mr. Henseler: This letter is written to meet the requirements of Regulation S-K calling for a letter from a registrant's independent accountants whenever there has been a change in accounting principle or practice. We have been informed that, as of January 3, 1999, the Company changed from the last-in first-out method of accounting for inventory to the first-in first-out method. According to the management of the Company, this change was made to provide a better matching of revenues and expenses and to be consistent with prevalent industry practice. A complete coordinated set of financial and reporting standards for determining the preferability of accounting principles among acceptable alternative principles has not been established by the accounting profession. Thus, we cannot make an objective determination of whether the change in accounting described in the preceding paragraph is to a preferable method. However, we have reviewed the pertinent factors, including those related to financial reporting, in this particular case on a subjective basis, and our opinion stated below is based on our determination made in this manner. We are of the opinion that the Company's change in method of accounting is to an acceptable alternative method of accounting, which, based upon the reasons stated for the change and our discussions with you, is also preferable under the circumstances in this particular case. In arriving at this opinion, we have relied on the business judgment and business planning of your management. We have not audited the application of this change to the financial statements of any period subsequent to January 2, 1999. Further, we have not examined and do not express any opinion with respect to your financial statements for the three months ended April 3, 1999. Very truly yours, /s/ARTHUR ANDERSEN LLP ARTHUR ANDERSEN LLP EX-27 3 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF BANTA CORPORATION AS OF AND FOR THE THREE MONTHS ENDED APRIL 3, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-01-2000 JAN-03-1999 APR-03-1999 2,780 25,338 202,956 4,090 77,474 326,311 772,486 453,169 741,870 177,907 120,573 0 0 2,757 397,781 741,870 309,286 309,286 247,591 247,591 42,304 0 2,947 16,012 6,300 9,712 0 0 0 9,712 0.35 0.35 THE EPS UNDER THE "EPS-PRIMARY" TAG REPRESENTS BASIC EARNINGS PER SHARE
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