By Susan Kelly August 3, 2005 -- Banta Corporation (NYSE: BN) reported second quarter 2005 from continuing operations increased 7% to $366 million from $341 million in the same period last year. Earnings from continuing operations rose 4% to $14.0 million compared with $13.4 million in 2004's second quarter. Second quarter diluted earnings per share from continuing operations reached $0.56, 6 % ahead of the prior year. Gain from the sale of Banta's discontinued healthcare products business, as of April 12 th, provided an additional $0.80 to the corporation's second quarter diluted EPS. Stephanie Streeter spoke openly about the strategic plan responsible for the financial performance success. She outlined the plan as their four corner stones: A focus on productivity gains using Lean Sigma, 5S, cell manufacturing, etc. with 44 implementation projects underway today. Grow by differentiating in high growth segments such as direct mail and inline imaging. This has required a heavy investment is in sales, capacity and equipment. The tech sector and medical devices are becoming the next major target verticals. Acquisition and alliance opportunities are focused in special interest magazines, literature management services, supply chain management sectors. Leadership and talent to succeed has been a corner stone with strong investments in training and development Topics of this summary: Segment Performance Guidance Raine Radar Q & A Segment Performance Supply Chain Management Segment Revenue increased 6% to $109 million, compared with second quarter in 2004. Operating earnings of $11.1 million matched last year's second quarter. The modest decrease in operating margin was primarily due to one-time costs related to customer service requirements and personnel expenses. Second quarter activity remained strong across a wide range of customers, including the sector's major technology accounts. Print Segment Second quarter print revenue reached $257 million, 8% above last year, as all print divisions reported revenue improvements compared with the same period last year. Approximately half of the increase was due to higher paper prices. Sector operating earnings were comparable to 2004's second quarter. Profitability was affected by the loss of productive capacity due to two press rebuilds and two press relocations completed during the quarter, the absence of two large promotional programs that printed last year, additional expenses related to the new literature management division, and the cost of launching new productivity programs. The direct marketing division benefited from strong demand for product promotions, recording a 7% increase in revenue and a 38% increase in operating earnings compared with 2004's second quarter. Growth in sales of higher-margin personalized print materials drove the division's second quarter performance, as did improved activity in traditional direct mail products. Literature Management Segment While revenue increased modestly compared with the same period last year, operating earnings were below 2004's strong second quarter due to the absence of two large customer promotional programs, and the additional year-over-year expenses related to establishing the infrastructure for the new division. The consumer catalog business reported a 5% increase in revenue and improved operating earnings, despite a major press rebuild that significantly reduced capacity during the entire second quarter. The corporation's publications division achieved a healthy 18% increase in revenue, led by market share gains, as well as higher paper prices. Earnings, however, declined 4% due to work mix changes and expenditures associated with the division's productivity improvement program. During the second quarter, the average number of pages printed per magazine declined. Offsetting the reduced pages per magazine was a significant gain in the number of magazines printed year over year. This increase resulted in total printed impressions growing nearly 9%. Guidance Banta reaffirmed, once again, its previous annual revenue guidance of between $1.5 billion and $1.55 billion and diluted earnings between the range of $2.80 and $2.95 per share. Banta expects to spend $60 to $70 million for capital in 2005. Raine Radar As reported last quarter, Banta undertook major initiatives to take restructure their press lines during a high volume quarter, and still delivered an impressive bottom line. The number of actions undertaken in Q2 was mind boggling. For example, two book division presses were taken offline, including a high speed 5 web press which was down for the entire quarter. Then there was the 10-week rebuild for a catalog press. A new press installation of a zero make-ready press went better than expected. Direct mail inline personalization press is now being installed. Banta claims they didn’t lose a single customer. And as the books clearly show, continued positive growth in their financial results. Banta’s secret? Focus on serving the middle tier, a dogmatic attention to quality and consistency, new value add services in pre-media, and online proofing and distribution services. Banta claims that the well will not run dry any time soon. Demand from publishers and advertisers will remain strong. Double digit growth is expected for four-color digital print, direct mail, and documentation for the foreseeable future up to 2009 Banta continues to set the performance standard and shows how, what was once thought of as a commodity business, can find new ways to deliver value. Q & A Analysts focused on the share repurchase amounts as well as at Banta’s earnings per share guidance for the balance of the year. Streeter was questioned about their progress in acquisition opportunities in supply chain management, literature management, and specialty interest magazines. Streeter responded that they haven’t found anything yet that fits their criteria such as the growth and profitability. The pilot supply chain management project to work with the military on logistics operations has not developed into anything at this time. Operating margins do not receive specific targets. Banta’s goal of improving margins for the remainder of this year entails working on reducing SG&A. All press moves and rebuilds are complete at this time. Foreign exchange is flat for 2005 and not a significant factor in their business. No paper price increases included for the rest of 2005. HP/Compaq contract is an evergreen contract and they have not indicated any changes at this point.