Banta Reports Challenging Q2: Productivity in catalog division affected by permit delays
Press release from the issuing company
MENASHA, Wis., July 29 -- Banta today reported results for 2003's second quarter and first half of the year. Sales for the quarter ended June 28 were $337 million compared with last year's $332 million. Net earnings for the three-month period, including restructuring and acquisition-related charges, were $7.3 million versus 2002's $13.4 million. Second quarter diluted earnings per share were 28 cents, based on weighted average diluted shares outstanding of 25.6 million shares. Diluted earnings per share for the second quarter of 2002 were 52 cents.
Special charges affecting second quarter results on a pretax basis totaled $10.2 million ($6.2 million after tax, or 25 cents per diluted share). The charges relate to the previously announced restructuring and realignment of Banta's consumer catalog and global supply-chain management operations, and a litigation settlement for a terminated acquisition effort concluded in the second quarter. There were no special charges incurred during the second quarter of 2002.
Excluding charges, second quarter net earnings were $13.5 million versus the prior year's $13.4 million. Diluted earnings per share before the charges were 53 cents compared with last year's 52 cents. The Corporation believes that providing earnings and diluted earnings per share excluding special charges allows investors to meaningfully analyze, trend and benchmark the performance of its core operations and provides another useful comparison of its operational performance in 2003 to the comparable periods in 2002.
"We are pleased with our performance in a very difficult economy," said President and Chief Executive Officer Stephanie A. Streeter. "Our second quarter results demonstrate the positive influence of our business diversity, especially the value of our supply-chain management sector. Our special-interest magazine and healthcare operations also continued to deliver strong performance. Their solid results, along with the supply-chain sector, helped counter the effects of a continuing sluggish advertising and promotional environment, which reduced volume for our commercial print businesses.
“Results were also significantly affected by delays in the issuance of environmental permits as part of the restructuring and modernization of our consumer catalog print platform. This altered the staged and orderly transfer of existing equipment to alternate facilities from our St. Paul plant and postponed the installation of new equipment at our Minneapolis plant, thus constraining our print capacity.
“While these issues have been substantially resolved, productivity in our catalog division remains negatively affected, which will reduce the company's diluted EPS in the third quarter of 2003. This unanticipated short-term loss of catalog production capacity is expected to reduce our third quarter earnings per share by 10 cents to 12 cents versus prior year, before special charges. Recovery of this shortfall is unlikely given the continued weak market conditions, thus our prior full-year guidance will be similarly affected," explains Streeter.
"Customer satisfaction and retention is our number one priority. For that reason, our response to this temporary production constraint has been to utilize less efficient and more costly capacity to insure we continue to seamlessly serve our customers.
"In this tough environment, all of our operations maintained their focus on maximizing productivity, excelling in customer service and generating strong cash flow," notes Streeter. "We are adding capacity in value-added fulfillment services and magazine print production, and are in the final stages of our catalog expansion project, which will be completed by the fall catalog season. With the completion of these projects -- and with the continuing benefits of our strong operating discipline -- Banta is very well positioned to capitalize on an upturn in demand across our entire print platform."
For the six months ended June 28, 2003, sales were $673 million compared with last year's $666 million. Net earnings, including special charges, were $18.5 million (72 cents per diluted share) compared with the prior year's $23.9 million (93 cents per diluted share). Special charges recorded in the first half of 2003 totaled $11.1 million pretax ($6.9 million after tax, or 27 cents per diluted share). There were no special charges incurred during the first six months of 2002. Excluding the charges, earnings for the first half of 2003 were $25.4 million compared with $23.9 million for the same period in 2002. Average diluted shares outstanding for the first six-month periods were 25.5 million in 2003 and 25.5 million in 2002.
"Banta experienced a very challenging second quarter, but our business diversity, efficient execution and continued focus on controlling costs allowed us to deliver improved sales and profitability, before special charges," says Streeter. "In addition, both our cash flow and balance sheet remain exceptionally strong, providing us with important financial flexibility to aggressively invest in operational expansion and acquisitions, which will accelerate our future growth."
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