By Ann Levine January 30, 2004 - Banta Corporation (NYSE: BN) announced fourth quarter results today with diluted earnings per share of $0.47 as compared to $0.02 for the same period last year. Fourth quarter sales increased 13% to $394 million over $348 million for the fourth quarter in 2002. Full year 2003 sales were $1.42 billion as compared to $1.37 billion for 2002 total sales. Full year diluted earnings per share were $1.81 and $1.71 for 2002. Net earnings for Q4 were $12.2 million, compared with $392,000 for the same quarter in 2002, while net earnings for the year were $60.1 million, equal to 2002's net earnings. Excluding special charges diluted earning per share for the fourth quarter 2003 were $0.67 and $0.66 for the same period in 2002. Also excluding special charges, 2003 full year earnings per share were $2.34 compared with $2.35 in 2002. Topics of this summary: Sector Performance 2004 Guidance Q & A Sector Performance Print - Overall print sector sales in the fourth quarter showed a 6.1% increase, or $252 million, as compared to the fourth quarter of 2002. Operating margins in the print sector were at 4.6%. For the year, sales declined 2% at $959.3 million. In the fourth quarter there were positive signs of a pick-up in the economy with increased promotional activities, increased capital spending, and an increase in estimates for ad spending. Direct Marketing – Fourth quarter sales were up 8%. This sector suffered an overall decrease in 2003, but there are encouraging signs moving forward as January 2004 bookings are ahead the January 2003 levels. Catalog – The catalog business experienced a 10% decline in sales due to a delay in relocating equipment and work being transferred to other plants. Equipment was out of service for a few months during the second quarter and the Banta did not aggressively pursue sales during that period. Book Printing – Book printing sales and earnings were at levels below those of 2002 due to external factors related to State budget difficulties and the subsequent decreased purchasing of educational books and the lull in the adoption of educational materials. The 2004 projections are for a similar performance as 2003. Publications – Sales in this division showed an 11% increase in the fourth quarter. There has been a decline in the overall number of pages printed; however, Banta has offset this trend with gaining market share through additional titles. In 2003 alone, the company gained 70 new magazine titles. At mid-year a new short cutoff web offset press and high speed stitcher will be added to operations to expand capacity. Literature Management and Fulfillment - This division was a key driver for Banta during the fourth quarter. The company expanded capacity in 2003 with the addition of two facilities and the expansion of three literature management facilities bringing the total number of facilities to 10. Supply Chain Management – Sales during the fourth quarter increased 31% at $114 million and operating earnings increased 50% compared to fourth quarter in 2002. Restructuring charges reduced overall operating margins. The success in this sector was due to the product and customer mix. In the future, the expected mix will change and margins will decline. In the fourth quarter, the consolidation of business and closure of two facilities, in Ireland and Mexico, was completed. Exploration of geographic expansion is currently under consideration in SE Asia. Health Care - Fourth quarter sales were $27.8 million, up 18%. Increased sales in this sector were attributed to growth in new products and market share gains. 2004 Guidance Banta expects revenue to grow to the low-to-mid single digits and diluted earnings per share to the high single digits or low double digits over 2003. Q & A Of the $100 million in capital expenditures for 2004, 20% will be spent on systems and technology, 40% on growth and 40% on maintenance. The $20 million in technology is not entirely the implementation of PeopleSoft as it also includes other IT needs. Although CEO, Stephanie Streeter, would not comment specifically on the acquisition front, she did admit acquisitions would be geographic in nature and would be opportunities for Banta to add capabilities and scalability. Because of the economic pressures over the past few years, Banta has observed more acquisition candidates than previously. Most likely this is due to changes in valuation and companies see the benefits of joining forces. Banta's inability to consummate an acquisition in the printing sector is said to be a matter of not finding the right opportunity in the right geographic region. The combination of valuation and capabilities has not yet been identified. Banta has conducted its own surveys and research on expanding capabilities. Areas of expansion include reprint and premedia in the publications area, and creating and hosting websites for clients. The Donnelley/Moore Wallace merger will not have significant impact on Banta. Banta does not compete head to head with Donnelley and with Moore Wallace in the Literature Management space. The company looks forward to any competition with the new company. The company's tax rate for the first quarter will be in the 36.5%-40% range. Banta's practical print capacity level is 85%, however, there is variability in the number as there is variability in Banta's difference businesses. The industry print capacity level is 73%. Banta has been able to maintain capacities in the high 70's to low 80's. Banta has existing authorization from its Board of Directors to use $80 million to repurchase shares and has repurchased shares over the last five years. Looking forward, Banta's margin decline in Supply Chain Management will most likely fall off by a few percentage points. The company hopes to identify new business and continuing business with higher margins.