Banta Reports Q3 Results: Profit Slips on Flat Revenue
Press release from the issuing company
MENASHA, Wis., Oct. 28 -- Banta Corporation today reported results for 2003's third quarter and first nine months. Sales for the quarter ended September 27 were $352 million, equal to sales reported in the same period last year. Net earnings for the three-month period, including restructuring charges, were $16.0 million compared with 2002's $19.5 million. Third quarter diluted earnings per share were 62 cents, based on 25.8 million diluted shares outstanding. Diluted earnings per share for the third quarter of 2002 were 76 cents.
Special charges affecting third quarter pretax results totaled $2.0 million ($1.2 million, or 5 cents per diluted share, after tax). The charges primarily relate to the previously announced restructuring and realignment of Banta's consumer catalog and global supply-chain management operations. There were no special charges incurred during the third quarter of 2002.
Excluding special charges, third quarter net earnings were $17.2 million compared with the prior year's $19.5 million. Diluted earnings per share before the charges were 67 cents compared with last year's 76 cents. The corporation believes that providing earnings and diluted earnings per share excluding special charges allows investors to more meaningfully analyze and benchmark ongoing operating performance.
"Our third quarter results demonstrate the importance of our business diversity, especially the value of our supply-chain management sector, which has gained sales momentum and has made significant operational progress," says President and Chief Executive Officer Stephanie A. Streeter. "Our special- interest magazine and healthcare operations also continued to deliver strong performance. Their solid results, along with supply chain, helped counter the effects of pricing pressures and a continuing sluggish advertising and promotions environment in our commercial print business."
Banta's Print Sector reported lower sales and operating earnings in the third quarter than during the same period in 2002. Half of the decline in Print Sector earnings was attributable to the consumer catalog division's delayed consolidation and modernization project, which was discussed in the corporation's second quarter earnings announcement. "During the catalog division's transition period we placed our highest priority on customer service and retention, which negatively impacted profitability in the quarter," explains Streeter. "I am pleased that through these efforts during this difficult period we successfully met the delivery requirements of our customers and continued to win new customers.
"Our supply-chain management business again turned in an excellent performance, with both sales and earnings significantly higher than during the same period last year," notes Streeter. "We are encouraged by the outlook for this business, with the economy showing signs of growth and prospects for increased technology spending improving."
For the nine months ended September 27, 2003, consolidated sales for the corporation were $1.02 billion, comparable to the same period last year. Net earnings, including special charges, were $34.5 million ($1.34 per diluted share) compared with the prior year's $43.4 million ($1.70 per diluted share). Special charges recorded during the first nine months of 2003 totaled $13.1 million pretax ($8.1 million, or 32 cents per diluted share, after tax). There were no special charges incurred during the first nine months of 2002. Excluding the charges, earnings for the first nine months of 2003 were $42.6 million ($1.66 per diluted share) compared with $43.4 million ($1.70 per diluted share) for the same period in 2002. Average diluted shares outstanding for the first nine-month periods were 25.6 million in both 2003 and 2002.
-- Banta's Supply-Chain Management Sector continued its strong momentum, delivering significant gains in sales and operating earnings in the third quarter. Sales were 33 percent above 2002's third quarter sales as Banta gained additional opportunities with both existing and new customers. Operating earnings increased 35 percent over the year-ago level due to a favorable product mix, cost reductions and increased volumes at most locations.
-- Print Sector sales of $244 million for the third quarter were 9 percent below the $267 million reported during the same period last year. Impacting revenues and earnings were a continued weakness in direct marketing activity, lower capacity availability in the consumer catalog division, decreased educational product volume and reduced paper sales. Print Sector operating earnings were also below last year's third quarter due to continued competitive pricing, restructuring charges and costs associated with the catalog division's consolidation project.
-- Banta's publications division delivered both improved sales and earnings in the third quarter, despite the continued industry trend toward lower magazine page counts. Total print impressions for the division, a measure of actual print activity, increased 9 percent over the comparable 2002 period due to market share gains.
-- Sales and earnings for the book division were below last year's third quarter, the result of decreased activity in both the educational and trade book markets, and lower paper sales. Banta's literature management services continue to expand, as the demand for print-related outsourcing services grows and the division leverages the significant capacity additions brought on line earlier this year.
-- Sales and earnings in the catalog division were lower in the third quarter than in the same period last year due both to the effects of its major consolidation and modernization project, and to difficult industry pricing. Environmental permitting delays altered the staged and orderly transfer of equipment from the division's closed St. Paul plant to its Minneapolis plant, and
postponed the installation of new equipment. This both constrained print capacity and required more costly production solutions. The added costs reduced third quarter diluted earnings per share by approximately 9 cents, an improvement over the 10-cent to 12-cent reduction projected in the corporation's 2003 second quarter earnings release.
-- The direct marketing division reported lower sales and earnings due to a reluctance by direct marketers to launch major promotional and direct mail campaigns. Although competitive pricing remains an issue for the business, an encouraging sign is that print estimating activity increased during September.
-- Banta's single-use healthcare products business recorded an 11 percent increase in third quarter revenue, reflecting the division's success in driving revenue growth by gaining new business opportunities with existing customers. Operating earnings decreased modestly, the result of a sales force reorganization.
"We made significant progress on several important initiatives in the third quarter that position us for future growth," says Streeter. "In our print sector, both our catalog and literature management production platforms have been expanded and modernized. Our supply-chain management business has good momentum going into the fourth quarter and is solidly positioned with a number of major customers who we expect will lead the tech sector recovery.
"We continue to believe our fourth quarter operating results will be comparable to the same period last year, before special charges," notes Streeter. "The restructuring that was announced in January of this year is proceeding as planned. We will conclude these projects in the fourth quarter and expect total charges to be at the lower end of the previously announced range of $15 million to $18 million. I am encouraged by the prospects for an improved economy in the coming year and our ability to benefit from a more favorable environment. Our balance sheet remains solid with low debt and a strong cash position, giving us important financial flexibility to aggressively pursue opportunities to further build and expand our businesses."
Banta will host a conference call to discuss its third quarter results on Tuesday, Oct. 28 at 2:45 p.m. CST (3:45 p.m. EST). This call will be simultaneously broadcast in the Investor Information area of Banta's Website at www.banta.com, and a replay of the call will be available.
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