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Banta Reports Strong Performance in Q2

Press release from the issuing company

MENASHA, Wis., July 26 -- Banta Corporation today reported strong 2005 second quarter results from continuing operations, achieving an all-time high for the quarter in revenue, and increases in earnings and diluted earnings per share of 4 percent and 6 percent, respectively. Second quarter revenue reached $366 million, 7 percent higher than last year's $341 million. These numbers exclude results from Banta's healthcare business that was sold effective Apr. 12, 2005. Second quarter earnings from continuing operations were $14.0 million, 4 percent above the $13.4 million reported in the same period last year. Second quarter diluted earnings per share from continuing operations increased 6 percent to 56 cents compared with 53 cents in 2004. Results were favorably impacted by a lower tax rate in 2005 compared with 2004, and by share repurchase activity since the beginning of 2005. Including operating results from the discontinued healthcare products operation and an after-tax gain of $20.1 million from the sale of the business, second quarter net earnings were $33.8 million ($1.35 per diluted share) compared with last year's $15.2 million (60 cents per diluted share). "We made significant progress during the second quarter, both financially and operationally," said Banta Chairman, President and Chief Executive Officer Stephanie A. Streeter. "I'm pleased with our record results, but what's critically important is the tremendous successes our employees achieved operationally during the quarter. We completed major press rebuilds and relocations, and, in the process, met growing customer demand. Our focus on operational excellence and delighting customers is clearly paying off. As a result of everyone's efforts, I believe we are well positioned to achieve our aggressive growth targets in the second half of the year." For the six months ended July 2, 2005, revenue from continuing operations reached $752 million, 9 percent ahead of last year's $691 million. Earnings from continuing operations increased 6 percent to $27.7 million compared with the prior year's $26.3 million. First half 2005 diluted earnings per share from continuing operations were $1.10, which was 8 percent higher than the $1.02 reported in the comparable period last year. Including operating results from the discontinued operation and after-tax gains from the sale of assets in two separate transactions -- $20.1 million from the sale of the healthcare business and $1.3 million from the first quarter sale of a related warehouse -- net earnings for the first six months of 2005 were $49.8 million ($1.98 per diluted share) compared with the prior year's $29.3 million ($1.14 per diluted share). HIGHLIGHTS -- Second quarter Print Sector revenue reached $257 million, 8 percent above 2004's $238 million, as all print divisions reported revenue improvements compared with the same period last year. Approximately half of the increase was due to higher paper prices. Sector operating earnings were comparable to 2004's second quarter. Profitability was affected by the loss of productive capacity due to two press rebuilds and two press relocations completed during the quarter, the absence of two large promotional programs that printed last year, additional expenses related to the new literature management division, and the cost of launching new productivity programs. -- The book division's revenue increased 8 percent compared with last year's second quarter, primarily the result of higher paper prices and increased educational print activity from a more robust period of state curriculum adoptions. Revenue from education-related services increased 24 percent over 2004's second quarter. Operating earnings, however, declined 6 percent due to higher operating and repair costs associated with a press relocation and the rebuild of a highly productive press. The presses were off line nearly the entire quarter, which required the shifting of production to less efficient equipment. -- The direct marketing division benefited from strong demand and a healthy environment for product promotions, recording a 7 percent increase in revenue and a 38 percent increase in operating earnings compared with 2004's second quarter. Growth in sales of higher-margin personalized print materials drove the division's second quarter performance, as did improved activity in traditional direct mail products. -- Banta's literature management division made significant progress in the second quarter in establishing its go-to-market profile. While revenue increased modestly compared with the same period last year, operating earnings were below 2004's strong second quarter due to the absence of two large customer promotional programs, and the additional year-over-year expenses related to establishing the infrastructure for the new division. -- Banta's consumer catalog business reported a 5 percent increase in revenue and improved operating earnings, despite a major press rebuild that significantly reduced capacity during the entire second quarter. Even with the production disruption, customer retention continued to be very strong, and productivity efforts and an improved mix of business enhanced profitability. -- The corporation's publications division achieved a healthy 18 percent increase in revenue, led by market share gains, as well as higher paper prices. Earnings, however, declined 4 percent due to work mix changes and expenditures associated with the division's productivity improvement program. During the second quarter, the average number of pages printed per magazine declined. Offsetting the reduced pages per magazine was a significant gain in the number of magazines printed year over year. This increase resulted in total printed impressions growing nearly 9 percent. -- Banta's Supply-Chain Management Sector continued to deliver strong results in the second quarter. Revenue increased 6 percent to $109 million, compared with a very strong second quarter in 2004. Operating earnings of $11.1 million matched last year's second quarter. The modest decrease in operating margin was primarily due to one-time costs related to customer service requirements and personnel expenses. Second quarter activity remained strong across a wide range of customers, including the sector's major technology accounts. -- During the second quarter, Banta repurchased 724,600 shares at an average price of $44.40 per share. Through the first half of 2005, the corporation repurchased 1,084,100 shares, at a cost of $47.8 million. "We have strong momentum going into the final six months of the year," notes Streeter. "We expect the educational print market to remain healthy through the third quarter, and we believe business catalog production on our newly rebuilt book division press will be a solid contributor to performance for the remainder of the year. In addition, the other presses coming on line, especially in our direct marketing and consumer catalog divisions, will contribute to growth during the traditionally busier part of the year. We also like our prospects for gaining additional revenue in our supply-chain management business, as we take advantage of a healthy technology sector, pursue growth in other parts of the world, and expand within other vertical markets." Banta management reaffirms its previous 2005 guidance, which is for revenue to be in a range of $1.5 billion to $1.55 billion and diluted earnings per share from continuing operations to be in a range of $2.80 to $2.95, an increase over 2004's diluted earnings per share from continuing operations of 16 percent to 22 percent. In addition to results from continuing operations, 2005's net results will also include earnings from operations of the discontinued healthcare business through April 12, and the gains from both the sale of the healthcare business and a related warehouse, which contributes an additional diluted earnings per share of 88 cents.