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Banta Reports 1Q Earnings, Sales Increase to $373 Million

Press release from the issuing company

MENASHA, WI . . . Banta Corporation (NYSE:BN) today reported an encouraging start to 2001 as its supply-chain management business produced strong double-digit gains in sales and earnings, and its print businesses turned in good performances during a period of economic uncertainty and increasing energy costs. First quarter sales increased 9 percent to $373 million, compared with $342 million during the same period in 2000. Net earnings reached $10.1 million compared with last year's $9.9 million, excluding the previously announced one-time charge for the write off of the corporation's investment in XYAN.com, an Internet-enabled digital print solutions provider. Diluted earnings per share increased 5 percent to 41 cents compared with 39 cents in 2000, before the charge. Including the non-cash charge, net earnings for the 2001 first quarter were $2.6 million (11 cents per diluted share). Chairman Donald D. Belcher says Banta's solid first quarter performance in spite of the slowing economy was encouraging. "Our mix of businesses allowed us to continue our growth during this period of economic softness," notes Belcher. "Although our print sector revenues were comparable to the same period last year, sales for our supply-chain management sector rose 53 percent in the quarter. This sector of our business provides outsourcing services for a variety of industries, in particular computer hardware and software. Our strong performance during a time when many technology companies are reporting slower growth testifies to the strength of our customer relationships and the value we bring as an outsourcing partner." Supply-chain management first quarter operating earnings increased five-fold over the same period in 2000. Last year's first quarter included additional start-up costs related to Banta's contract with Compaq Computer. "Activity in Europe was stronger than in the U.S.," notes Belcher, "as we expanded service to a number of customers and benefited from full ramp-up of our contract with Compaq." Banta's printing businesses are feeling the effects of the economic slowdown and additional energy costs. "We experienced lower-than-expected demand for educational print products, negatively affecting utilization rates for our book operations," says Belcher. "Major state educational adoption processes are underway, however our customers' inventories are higher than at this time last year, thus we have not yet benefited from the normal uptick in demand. We remain confident that 2001 will be another good year for educational print production, although volume will be below last year's record levels." The corporation's direct marketing operations showed continued improvement, benefiting from numerous productivity improvement initiatives and increased demand for personalized print materials produced on Banta's in-line imaging systems. Although sales for direct marketing increased only marginally from last year's first quarter, the Group achieved strong double-digit gains in operating profit. "Our special-interest magazine units continued their growth in sales and earnings during the quarter," he said. "However, reductions in advertising page counts during the first three months of the year lowered the Publications Group's quarterly growth rate to the mid-single digits from its recent history of double-digit increases." A steep rise in natural gas and electricity costs, and higher employee healthcare expenses reduced profitability for all print groups. Utility costs alone increased first quarter expenses by $1.3 million or 3 cents per share. The performance of Banta's Healthcare unit improved during the first quarter as product sourcing and productivity initiatives instituted in 2000 benefited results. The 2001 outlook for Banta Healthcare is much improved compared to last year. "We are encouraged by our first quarter performance, but remain cautious due to the continuing soft economy," explains Belcher. "Our print operations achieved solid results and while we are positioned to capitalize on opportunities when the economy strengthens, and particularly when the expected increase in demand for educational products occurs, we are carefully managing our costs and capital structure. We remain confident that our supply-chain sector will continue its aggressive growth as outsourcing services remain an essential and growing part of our customers' manufacturing strategies, and we continue to gain a greater share of their business. "Our dual business platform of print and supply-chain outsourcing services provides us with a predictably strong cash engine coupled with a strong growth sector. The benefits of that combination were apparent during the first quarter and will continue to differentiate Banta in the months and years ahead." Projections for Banta's 2001 second quarter are for revenues and earnings to be comparable with the same period last year. Supply-chain management results should be above last year's second quarter, while print revenues and earnings are expected to be lower. For the full year, in view of the continuing economic sluggishness and the sharp rise in energy costs, Banta management has reduced its 2001 earnings per share expectation from a range of $2.53 to $2.58, to a range of $2.40 to $2.48, before the one-time charge for XYAN.com. Despite the adjustment, Banta continues to be pleased with the performance and competitive positioning of its various businesses, and expects to achieve record 2001 sales and earnings per share.