MENASHA, Wis., July 27 -- Banta Corporation today reported improved results for 2004's second quarter and first half of the year. Revenue for the quarter ended July 3 was $368 million, 9 percent higher than last year's $337 million. Net earnings for the three- month period were $15.2 million, 12 percent above last year's $13.5 million, which exclude 2003's special charges relating to a restructuring and litigation settlement. Including the special charges, last year's net earnings were $7.3 million.
Second quarter diluted earnings per share reached 60 cents, 13 percent above 2003's 53 cents, excluding special charges. Including the special charges, 2003 second quarter diluted earnings per share were 28 cents.
"Our second quarter results reflect significantly improved performance in our Print Sector, particularly in our direct marketing and catalog businesses," notes Chairman and Chief Executive Officer Stephanie A. Streeter. "We experienced strong volume across most of our print businesses and catalog earnings rose significantly over the same period last year due to 2003's restructuring and modernization programs. Our Supply-Chain Management Sector continued to excel, delivering healthy revenue gains and improved operating profit compared with a strong second quarter in 2003."
For the six months ended July 3, 2004, revenue was $741 million, 10 percent ahead of last year's $673 million. Net earnings increased 15 percent to $29.3 million ($1.14 per diluted share) compared with the prior year's $25.4 million (99 cents per diluted share), which excludes 2003's special charges. Including the special charges, 2003's net earnings were $18.5 million (72 cents per share). There were no special charges incurred during the first six months of 2004.
The following table provides a reconciliation of net earnings and diluted earnings per share, reported in accordance with generally accepted accounting principles, to earnings and diluted earnings per share excluding special charges, for the three- and six-month periods ended July 3, 2004, and June 28, 2003:
-- Banta's Supply-Chain Management Sector continued to deliver strong results in the second quarter. Revenue increased 28 percent to $103 million, and operating earnings of $11.1 million rose 9 percent, before 2003's special charges. "Increased volumes and new business opportunities with existing customers combined to produce a substantial increase in revenue," notes Streeter. "Although, as we anticipated, our operating margins declined due to pricing pressures and revenue mix, they remained solid due to good facility utilization and the benefits from last year's restructuring activities. The sector's revenue and earnings gains are especially encouraging given that 2003's second quarter was also strong."
-- Print Sector revenue for the second quarter was above the same period last year, at $238 million compared with $231 million, primarily the result of improved commercial print activity. Sector operating earnings, before last year's special charges, increased more than 15 percent due to higher plant utilization in direct marketing and the benefits of last year's catalog division restructuring and modernization.
* Banta's direct marketing division benefited from a strong increase in demand, particularly for the division's print personalization services. Significant new business was secured during the quarter and the outlook for the third quarter remains promising.
* The catalog division delivered a healthy increase in operating earnings, benefiting from 2003's restructuring and the Minneapolis plant modernization. Revenue for the quarter declined primarily due to last year's St. Paul plant shutdown and the resulting planned decline in print capacity.
* Book division revenue was essentially flat while operating earnings declined compared with the same period last year. Educational print volumes increased over the prior year, but pricing pressures negatively affected revenue, margins and profitability. Trade book revenue and earnings both improved over the same period in 2003, while literature management services recorded improved revenue, and earnings were comparable to last year's strong second quarter.
* The corporation's publications division continued to gain market share and grew revenue in the second quarter. The division's internal measure of average page counts per publication for the quarter increased for the first time in more than three years. A modest decline in operating earnings was due to pricing pressures and significant new-equipment start-up expenses at the Kansas City publications plant.
-- Banta's single-use healthcare products division reported mixed results for the second quarter. While revenue increased 3 percent, operating earnings declined 24 percent due to higher raw material costs, specifically paper, tissue and resin.
"We remain optimistic about the second half of this year," says Streeter. "We should continue to benefit from healthy activity in direct marketing, while higher catalog volumes should boost plant utilization and profitability. We expect book printing to remain comparable to last year, while we await 2005's stronger educational material adoption schedule. Momentum for our supply-chain management business is encouraging. New project wins, our healthy sales pipeline and last year's restructuring activities have helped us counter the industry's ongoing pricing pressures. In addition, our healthcare products business remains a solid contributor."
In January 2004, Banta management issued guidance indicating that sales could grow at a rate in the low- to mid-single digit range compared with 2003, and that diluted earnings per share could grow at a rate in the high-single to low-double digits range compared with 2003, before last year's special charges. "Based on our results to date, we now anticipate a revenue growth rate in the mid-single digits for 2004," notes Streeter. "Although we're disappointed by the impact pricing has had on margins, our outlook for earnings from operations is tracking with our original expectations. The impact of our lower anticipated effective tax rate and first quarter share repurchase should be added to our diluted EPS guidance." The corporation expects to finish the year with a nearly 2 percentage point reduction in its income tax rate due to higher-than-expected non-U.S. earnings than in the prior year. Banta purchased 1 million shares in an accelerated share repurchase on March 19, 2004.
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