Banta Corporation (NYSE: BN) announced first quarter 2004 sales increased to $373 million,11% increase from $336 million in the same period last year. Net earnings for this year's first quarter were $14.1 million, compared with $11.2 million during the same period last year. Diluted earnings per share reached $0.54 compared with $0.44 in 2003's first quarter, including last year's special charges.
Topics of this summary:
- Sector Performance
- 2004 Guidance
- Q & A
Supply-Chain Management: Sales reached $103 million, an increase of $21.4 million or 26% over 2003's first quarter, as Banta experienced the addition of several new customers. Approximately $4 million of the increase was due exchange rates. Operating earnings were 19% higher than the year-ago period, helped by improved facility utilization. During last year's fourth quarter Banta closed supply-chain management facilities in Dublin, Ireland, and Guadalajara, Mexico, as part of the corporation's 2003 restructuring.
Print Sector: Sales increased 6% over the same period last year, reaching $247 million. Sector operating earnings in the first quarter, compared with the same period a year ago, increased 27% to $3.6 million as overall utilization improved, demand strengthened in Banta's direct marketing business and productivity improved at the corporation's consumer catalog operation.
Catalog Division: First quarter pricing stabilized for the corporation's catalog business, remaining at fourth quarter 2003 levels, primarily due to Banta's focus on providing value-added services in areas such as prepress, mail list processing and distribution.
Direct Marketing Division: Sales rose 26% and operating earnings more than doubled compared with 2003's first quarter. Direct mail activity accelerated in all of Banta's product categories as direct marketers increased print quantities launched new promotional campaigns.
Literature Management and Educational Printing: Reduced publisher inventories prompted higher-than-normal reprint activity during the first quarter, helping boost the book division's sales and earnings. The outlook for educational print in 2004 remains stable. Growth will continue to be constrained by state budget deficits and this year's absence of major curriculum adoption programs. Solid first-quarter activity in literature management and trade books also contributed to the book division's improved performance.
Publications division: Sales and earnings increased 10% over first quarter of 2003. During the month of March, Banta enjoyed its first monthly page count increase in 37 months. A new press is being added to their Kansas City facility.
Healthcare division: Sales increased 4% and operating profits decreased 23% due to higher raw material prices and expenses related to a facility consolidation. During the first quarter, manufacturing at Healthcare's Rialto, CA, plant was transferred to the division's primary operation in Neenah, WI.
Banta's CEO, Stephanie Streeter refrained from giving any guidance for future quarters or for the full year 2004 given the market volatility and price pressures they are experiencing in the market. The CFO gave some formula assumptions to analysts (e.g. Cap ex will be in the $80-100 million range for the year and that they do not expect any special charges in 2004). However no specifics as to earnings and share price were estimated.
Q & A
- It was stated by an analyst that the repurchasing of shares is not reflected in their guidance. The CFO restated that they have only given a range for guidance and would not be specific about what the repurchase means to future earnings.
- Banta was pressed for Q2 guidance and was asked about margin performance. Streeter commented that it was too tough to figure out from where they are today. Analysts couldn't understand why Banta can't figure out what their business will look like in the second quarter given that they are a month into it and visibility should be there.
- When questioned once again about their $43 million stock buy back, Streeter responded that it was because where acquisitions are, where strong business lies, and our strong balance sheet; that this was the right amount to buy back. We have another $35 40 million of stock repurchase that is board approved. We will also use a reasonable amount of debt to satisfy any acquisition opportunity that might come along.
Editor's Note: Banta delivered a solid quarter of earnings but analysts want more. It was clear that not giving the second quarter guidance was a mistake and analysts tend to interpret that negative results are on the way, which may not be the case. In addition, there were very few questions asked by the audience.