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Banta Moves to Block Cenveo: $16.00 Dividend, Close 5 Plants, Buy China Firm, Cut 500 Jobs

Press release from the issuing company

MENASHA, Wis., Sept. 14 -- (EDITOR'S NOTE: WhatTheyThink.com will have more on this announcement next week.) -- Banta Corporation today announced strategic initiatives to strengthen its business, position the Company for future growth, and return additional value to shareholders. The steps announced today are expected to generate annualized cost savings of $35 million when fully implemented, position Banta for global expansion in both its print and supply-chain management businesses, and deliver cash to shareholders through a special dividend. These steps are the result of a thorough review of the Company's operations, financial strength and competitive conditions by management and the Board of Directors during the past several months. Banta also announced that it has executed a letter of intent with its largest customer, HP, for a new five-year relationship. This is subject to the parties entering into a definitive agreement, which is expected to occur prior to the end of this year. Stephanie A. Streeter, Banta Chairman, President and Chief Executive Officer, said, "When we announced the reorganization of our print sector in July, we said that we were evaluating other actions that would deliver additional cost savings. Today's announcement includes the next several steps in our plan. These are consistent with our ongoing focus on driving operating efficiencies and cost savings to enhance our competitive position, while at the same time positioning Banta for continued growth. As we've said in the past, we recognize that we are operating in an increasingly competitive environment, in both the commercial print and supply-chain management industries. As a result, we have taken, and will continue to take, decisive steps to respond to these market conditions and ensure continued strong and sustainable financial performance. We are also modifying our capital structure in a way that we believe enhances our ability to deliver both short- and long-term value to our shareholders, and still provides sufficient flexibility to support growth in our business." Cost Improvement and Competitive Positioning Initiatives Banta today announced further reorganization and cost-reduction activities throughout the Company. Actions include reducing expenses by further consolidating management infrastructure beyond the first step announced in July, which reorganized Banta's Print Sector from five divisions into two; centralizing administrative functions; and eliminating non-essential services. In addition, the Company will be recording a non-cash charge for the impairment of certain assets and will be closing or selling five print facilities that are either not meeting profitability expectations, or whose activities can be effectively consolidated into other Banta operations. The facilities will be publicly identified after the required notifications have been given, which will occur prior to the end of 2006. Through these actions, and those taken earlier in the year, the Company intends to eliminate more than 500 jobs, or approximately 6 percent of its work force. "In order to position the business for long-term sustained profitability, Banta is also initiating significant changes in its supply-chain management business," said Streeter. "We will be adding new facilities, which will enhance our ability to meet customers' stringent cost and service requirements. Due to changes in customer manufacturing profiles, the added investments required to appropriately configure the business, and the need to add capabilities for future growth, a decline in both revenue and margins are likely in 2007. However, both revenue and margins are expected to rise significantly in 2008 and beyond as these business model enhancements take hold." Total annual cost savings from today's announced actions are expected to be approximately $35 million in 2008, with $27 million in savings expected in 2007. These amounts include the $3 million in annual savings previously announced on July 25. In order to achieve these benefits, the Company will incur approximately $9 million of pre-tax charges in 2006 and $19 million of pre-tax charges in 2007. Included in this $28 million of total charges are cash costs of approximately $21.5 million, with the majority of the cash costs expected to be incurred in 2007. Global Growth Initiatives Banta's strategic business plan includes expanding the Company's global footprint by pursuing multiple activities to foster global growth in both the print and supply-chain businesses. The Company has reached an exclusive agreement in principle to acquire a book and commercial printing company in Southern China. Subject to the completion of customary steps, the transaction is expected to close by year-end. Anticipating industry changes in customer profiles, business mix and the competitive landscape, the Company plans to open a facility for its supply- chain management business in Shenzhen, China, during the fourth quarter of 2006. The Company is also planning to add several additional supply-chain management facilities during 2007 to better align its service delivery platform with customer demand. These new facilities will enable the Company to expand its ability to provide end-to-end global supply-chain solutions, while at the same time lowering its global cost profile. Payment of Special Dividend The Company also announced today that its Board of Directors has approved payment of a special cash dividend of $16.00 per share. The dividend is payable November 21, 2006, to shareholders of record on November 10, 2006. This dividend is in addition to the Company's regular quarterly dividend of 18 cents per common share payable November 1, 2006, to shareholders of record on October 20, 2006. Banta intends to finance the special cash dividend through a combination of cash on hand and committed debt financing. As part of the process, the Company has already secured financing commitments from UBS Securities LLC for $415 million of new debt financing. In connection with this financing, the Company expects to pay approximately $56 million to refinance existing long- term debt, including potential charges related to prepayment obligations. Streeter said, "We are pleased to be able to deliver significant cash to our shareholders in the form of this special dividend. Banta generates solid cash flows and has a strong balance sheet, and we are comfortable that this transaction will result in a prudent level of financial leverage, leaving the Company with adequate flexibility to support our growth initiatives. "Over the next several years, we expect to generate approximately $200 million of free cash flow after taking into account the new debt financing costs," notes Streeter. "In evaluating our cash deployment strategies for the future, in addition to debt repayment, we will remain focused on pursuing investment opportunities to accelerate organic revenue growth and on identifying potential acquisitions across our business units. Banta's Board will continue to review various means of returning cash to our shareholders, including potential future special dividends and share repurchases." The Company also intends to continue its policy of paying quarterly dividends, consistent with historic levels and practices. In addition, Banta has $71 million remaining of its $150 million share repurchase authorization, which provides the Company with flexibility to engage in share repurchases opportunistically over time. Full-Year 2006, 2007 and 2008 Guidance from Continuing Operations Based on new customer wins, higher-than-expected improvements from the Company's Operational Excellence efforts, and the impact of cost-reduction initiatives already underway, the Company has raised its full-year 2006 guidance for diluted earnings per share from continuing operations, before the impact of the special charges described above, financing costs related to the special dividend and the benefit of the reversal of a tax contingency reserve in the 2006 second quarter, to a range of $2.80 to $2.90, from the prior guidance of $2.75 to $2.85. On a generally accepted accounting principles (GAAP) basis, guidance is for diluted earnings per share to be approximately $2.58 to $2.68. At the same time, based on the impact of the initiatives announced today, the anticipated changes to current operations, and the special dividend and related financing, the Company is also initiating fiscal-year 2007 and 2008 guidance. For 2007, revenue is expected to be approximately $1.50 billion to $1.55 billion. Diluted earnings per share from continuing operations, before the impact of special charges described above, financing costs related to the special dividend, and an expected increase in the Company's effective tax rate from 30 percent to 36 percent, are expected to be in the range of $2.60 to 2.80. On a GAAP basis, guidance is for diluted earnings per share to be approximately $1.20 to $1.40. The Company expects full-year 2008 revenue to be in the range of $1.60 billion to $1.65 billion. Diluted earnings per share from continuing operations for 2008, before financing costs related to the special dividend and the increased effective tax rate of 36 percent, are expected to rise substantially to be in the range of $3.23 to $3.48. On a GAAP basis, guidance is $2.30 to $2.55.

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