SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-6187
BANTA CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-0148550
(State or other jurisdiction (IRS Employer
of incorporation or organization) I.D. Number)
225 Main Street, Menasha, Wisconsin 54952
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (920) 751-7777
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes /X/
No / /
The registrant had outstanding on September 27, 1997, 29,911,278
shares of $.10 par value common stock.
<PAGE>
BANTA CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Quarter Ended September 27, 1997
INDEX
PART I - FINANCIAL INFORMATION Page Number
Item 1 - Financial Statements:
Unaudited Consolidated Condensed Balance Sheets
September 27, 1997 and December 28, 1996 . . . . . . . . . 3
Unaudited Consolidated Condensed Statements of Earnings
for the Three Months and Nine Months Ended September 27,
1997 and September 28, 1996 . . . . . . . . . . . . . . . 4
Unaudited Consolidated Condensed Statements of Cash Flows
for the Nine Months Ended September 27, 1997 and
September 28, 1996 . . . . . . . . . . . . . . . . . . . . 5
Notes to Unaudited Consolidated Condensed
Financial Statements . . . . . . . . . . . . . . . . . . . 6-7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 8-10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . 11
Item 2 - Changes in Securities . . . . . . . . . . . . . . . . 11
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . 11
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
PART I FINANCIAL INFORMATION
Item 1 - Financial Statements
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
September 27, December 28,
1997 1996
ASSETS
Current Assets
Cash $ 12,793 $ 57,417
Receivables 238,550 206,245
Inventories 90,535 69,063
Other current assets 18,624 14,730
-------- ---------
Total Current Assets 360,502 347,455
-------- ---------
Plant and Equipment 694,712 650,243
Less: Accumulated Depreciation (368,580) (330,304)
-------- ---------
Plant and Equipment, net 326,132 319,939
-------- ---------
Other Assets 13,970 11,886
Cost in Excess of Net Assets of
Subsidiaries Acquired 60,430 39,938
-------- ---------
$ 761,034 $ 719,218
======== =========
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Current Liabilities
Short-term debt $ 29,078 $ 4,620
Accounts payable 98,562 75,428
Accrued salaries and wages 19,956 18,269
Other accrued liabilities 32,248 23,888
Current maturities of long-
term debt 5,124 5,620
-------- ---------
Total Current Liabilities 184,968 127,825
-------- ---------
Long-term Debt 128,960 133,696
Deferred Income Taxes 23,269 21,805
Other Non-Current Liabilities 16,930 15,300
Shareholders' Investment
Preferred stock-$10 par value;
authorized 300,000 shares;
none issued 0 0
Common stock-$.10 par
value; authorized 75,000,000
shares; 29,911,278 and
30,969,069 shares issued and
outstanding, respectively 2,991 3,097
Amount in excess of par value
of stock 38,844 66,119
Cumulative translation
adjustment (2,481) 1,473
Retained earnings 367,553 349,903
-------- ---------
Total Shareholders'
Investment 406,907 420,592
-------- ---------
$ 761,034 $ 719,218
======== =========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(Dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 298,322 $ 264,552 $ 849,902 $ 794,472
Cost of goods sold 238,615 207,902 679,827 636,128
--------- --------- --------- ---------
Gross earnings 59,707 56,650 170,075 158,344
Selling and
administrative expenses 34,976 30,239 104,471 92,497
Restructuring charge 13,500 0 13,500 0
--------- --------- --------- ---------
Earnings from
operations 11,231 26,411 52,104 65,847
Interest expense (2,456) (2,331) (7,673) (7,894)
Other, net 327 1,215 1,773 1,704
--------- --------- --------- ---------
Earnings before
income taxes 9,102 25,295 46,204 59,657
Provision for income
taxes 3,500 10,000 18,000 23,700
--------- --------- --------- --------
Net earnings $ 5,602 $ 15,295 $ 28,204 $ 35,957
========= ========= ========= ===========
Earnings per share of
common stock $ 0.19 $ 0.49 $ 0.94 $ 1.15
========= ========= ========== ===========
Average common shares
outstanding 29,977,369 31,260,177 30,163,102 31,310,216
========== ========== ========== ===========
Cash dividends per
common share $ .12 $ .11 $ .35 $ .32
========== ========= ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
BANTA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine Months Ended
September 27, September 28,
1997 1996
Cash Flow From Operating Activities
Net earnings $ 28,204 $ 35,957
Depreciation and amortization 44,160 43,338
Restructuring charge 13,500
Deferred income taxes (1,000) 448
Change in assets and liabilities
Increase in receivables (18,195) (7,028)
(Increase) decrease in
inventories (6,546) 4,438
Increase in other current
assets (2,613) (1,243)
Increase in accounts payable
and accrued liabilities 10,068 4,157
(Increase) decrease in other
non-current assets (1,989) 885
Other, net 75 (186)
-------- --------
Cash provided from operating
activities 65,664 80,766
-------- --------
Cash Flow From Investing Activities
Capital expenditures (38,774) (47,582)
Acquisition of businesses (50,666) 0
-------- --------
Cash used for investing
activities (89,440) (47,582)
-------- --------
Cash Flow From Financing
Activities
Proceeds from notes payable, net 24,458 0
Repayment of long-term debt (5,232) (6,450)
Dividends paid (10,554) (10,151)
Proceeds from exercise of stock
options 3,050 2,324
Repurchase of common stock (32,570) (5,466)
-------- --------
Cash used for financing
activities (20,848) (19,743)
-------- --------
Net (decrease) increase in cash (44,624) 13,441
Cash at beginning of period 57,417 27,130
-------- --------
Cash at end of period $ 12,793 $ 40,571
======== ========
Cash payments for:
Interest, net of amount
capitalized $ 7,269 $ 7,656
Income taxes 22,384 17,615
See accompanying notes to consolidated statements.
<PAGE>
BANTA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1) Basis of Presentation
The condensed financial statements included herein have been prepared
by the Corporation, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Corporation believes that the disclosures
are adequate to make the information presented not misleading. It is
suggested that these condensed financial statements be read in
conjunction with the financial statements and the notes thereto
included in the Corporation's latest Annual Report on Form 10-K.
In the opinion of Management, the aforementioned statements reflect
all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results for the interim
periods. Results for the period ended September 27, 1997 are not
necessarily indicative of results that may be expected for the year
ending January 3, 1998.
2) Acquisitions
In September of 1997, the Corporation acquired The Omnia Group
("Omnia") for approximately $50.7 million in cash. Omnia is a
supplier of single-use medical and dental products. Omnia reported
sales of approximately $65 million in 1996. This acquisition was
accounted for as a purchase and, accordingly, the accompanying
financial statements of the Corporation include the results of Omnia
beginning with the acquisition date.
In September of 1997, the Corporation acquired Bock West, Inc. ("Bock
West") for 75,715 shares of the Corporation's common stock. Bock
West provides mailing and fulfillment services. Bock West reported
1996 sales of approximately $12 million. This acquisition was
accounted for as a purchase and, accordingly, the accompanying
financial statements of the Corporation include the results of Bock
West beginning with the acquisition date.
3) Subsequent Event
In October of 1997, the Corporation acquired Greenfield Printing &
Publishing Company, ("Greenfield"), for approximately $21.3 million
in cash. Greenfield is a printer of special-interest and trade
magazines. Greenfield reported 1996 sales of approximately $22
million. This acquisition will be accounted for as a purchase and,
accordingly, Greenfield's results will be included in the
Corporation's financial statements beginning in the fourth quarter of
1997.
4) Restructuring Charge
During the third quarter of 1997 the Corporation took several actions
to restructure certain of its businesses. These actions included
entering into an agreement to sell its point-of-purchase sign and
display business, discontinuing its intaglio print-based security
products business, closing its interactive video operation in Boston,
Massachusetts, and closing three Global Turnkey facilities. These
actions resulted in a one-time pretax charge of $13.5 million. The
costs included in this charge consisted of asset write-offs, employee
separation costs and other costs related to the closure of the
facilities.
5) Inventories
The majority of the Corporation's inventories used in its printing
operations are accounted for at cost determined on a last-in, first-
out (LIFO) basis, which is not in excess of market. The remaining
inventories are stated at the lower of cost or market using the
first-in, first-out (FIFO) method. Inventories include material,
labor and manufacturing overhead.
Inventory amounts at September 27, 1997 and December 28, 1996 were as
follows:
(Dollars in thousands)
September 27, December 28,
1997 1996
Raw Materials and Supplies $ 50,389 $ 40,980
Work-In-Process and Finished Goods 45,219 32,456
------- --------
FIFO value (current cost of all
inventories) 95,608 73,436
Excess of current cost over
carrying value of LIFO
inventories (5,073) (4,373)
------- -------
Net Inventories $ 90,535 $ 69,063
======= =======
6) Accounting for Earnings per Share
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share." The new statement requires changes in the manner in which
earnings per share are calculated and is effective for fiscal years
ending after December 15, 1997. The Standard does not allow early
adoption. The Corporation intends to adopt this standard during the
fourth quarter of 1997. The adoption of this standard is not
expected to have a material effect on the Corporation's earnings per
share.
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Liquidity and Capital Resources
The Corporation's net working capital decreased by approximately $44
million during the first three quarters of 1997. This reduction was
primarily caused by the Corporation's repurchase of approximately 1.3
million shares of its common stock (at an aggregate cost of $32.6
million) during the first quarter of 1997 and by the acquisitions
completed during the third quarter of 1997. For a description of
third quarter acquisitions, see Note 2 to the Notes to Unaudited
Consolidated Condensed Financial Statements. The acquisitions were
financed with a combination of cash and increased short-term
borrowings. In April 1997, following the first quarter stock
repurchases, the Board of Directors of the Corporation authorized the
repurchase of up to an additional 1.5 million shares.
In addition to the acquisitions described above, in October 1997 the
Corporation completed its acquisition of Greenfield Printing and
Publishing for $21.3 million in cash. This acquisition, which was
completed after the end of the third quarter, was financed with a
combination of cash and short-term borrowings.
RESULTS OF OPERATIONS
Net Sales
Sales for the third quarter of 1997 were $33.8 million (13%) higher
than for third quarter of 1996. Operating activity levels during the
third quarter of 1997, in all of the Corporation's market
classifications, except for healthcare products, were above 1996
third quarter levels. Significant sales gains were made in the book
market where demand for educational products was strong and activity
levels were also strong in the magazine market as page counts have
increased from 1996 levels. The plants previously serving the
computer software documentation publishers are making progress in
refocusing their efforts toward serving more diverse markets. Sales
from the turnkey market increased due to the opening of a new
facility in France. There was no significant sales contribution from
the companies acquired in the third quarter of 1997 because such
acquisitions were completed late in the quarter.
Sales for the first three quarters of 1997 were $55.4 million (7%)
higher than for the first three quarters of 1996. The sales increase
was moderated by the impact of lower paper prices in the first half
of 1997. The cost of paper is generally passed on to the
Corporation's customers and, as a result, as paper prices decreased
from 1996 levels, the Corporation's sales were reduced. Comparable
paper prices to those in the first three quarters of 1996 would have
increased first three quarters of 1997 sales by approximately an
additional $36 million. Paper prices rose during the third quarter
of 1997 resulting in little impact on the comparison to 1996 third
quarter sales. Trends in operating activity levels for the first
three quarters of 1997 were similar to those described above for the
third quarter.
Cost of Goods Sold
Cost of goods sold as a percentage of sales increased from 78.6% for
the third quarter of 1996 to 80.0% for the third quarter of 1997.
The most significant factors contributing to the margin reduction
were pricing pressures in the catalog and direct marketing materials
markets, a higher proportion of turnkey sales (which generally
contain a higher material content, and therefore lower margins), one-
time costs associated with the start up of several new turnkey
facilities, and low margins prior to closure for the facilities
ultimately closed during the period. Also contributing to the margin
reduction was a $2.5 million increase in 1997 third quarter costs
compared to the third quarter of 1996 costs due to the impact rising
paper prices have on the LIFO inventory valuation adjustment. Since
paper prices have continued to increase, the Corporation expects a
larger LIFO impact in the fourth quarter of 1997.
Cost of goods sold as a percentage of sales decreased from 80.1% for
the first three quarters of 1996 to 80.0% for the first three
quarters of 1997. During the first half of 1997, most of the
Corporation's operations operated at higher levels of activity than
in the first half of 1996, which allowed them to return higher
margins. The lower paper prices in the first half of 1997 resulted
in margin improvement because paper sales have a lower margin than
manufacturing sales. These factors offset the impact of third
quarter factors mentioned above which reduced third quarter's
margins.
Selling and Administrative Expenses
Selling and administrative expenses were $4.7 million higher for the
third quarter of 1997 than for the third quarter of 1996 and $12.0
million higher for the first three quarters of 1997 than for the
first three quarters of 1996. The increase is primarily due to the
higher level of operating activity and the selling and administrative
expenses related to that higher level as well as the new turnkey
facilities opened during 1997. The increase also includes costs
associated with its new online catalog and digital content management
businesses.
Restructuring Charge
During the third quarter of 1997 the Corporation took several actions
to restructure certain of its businesses. These actions included
entering into an agreement to sell its point-of-purchase sign and
display business, discontinuing its intaglio print-based security
products business, closing its interactive video operation in Boston,
Massachusetts, and closing three Global Turnkey facilities. These
actions resulted in a one-time pretax charge of $13.5 million ($8.1
million after tax, or $.27 per share). The costs included in this
charge consisted of asset write-offs, employee separation costs and
other costs related to the closure of the facilities.
Interest Expense
Interest expense was $125,000 higher in the third quarter of 1997
than for the third quarter of 1996 and $228,000 lower for the first
three quarters of 1997 than for the first three quarters of 1996.
These changes were due to lower debt levels during the first half of
1997 than in 1996 and higher debt levels during the third quarter of
1997 than in 1996.
Income Taxes
The Corporation's effective income tax rates declined as indicated in
the table below due to an increase in tax-free interest income earned
in 1997 as compared to 1996.
Effective Tax Rate
1997 1996
Third Quarter 38.5% 39.5%
First Three Quarters 39.0% 39.7%
PART II: OTHER INFORMATION
Item 1 - Legal Proceedings
In September 1997, Banta Direct Marketing Group received a Notice
of Violation from the United States Environmental Protection
Agency ("US EPA"), Region V, relating to air emissions and
operating an air emission source without a permit from one of its
facilities located in Illinois. The US EPA has not yet
indicated what penalty, if any, it may seek in connection with
these allegations. Although the Company believes that its
operations are currently in compliance with applicable
regulations, it is currently working to resolve these issues with
the US EPA. At this date, Management is unable to predict the
specific outcome of the ongoing discussions. However, Management
believes that any such outcome will not have a material adverse
effect on the Corporation's results of operations or financial
condition.
Item 2 - Changes in Securities
On September 11, 1997, the Corporation issued 75,715 shares of its
Common Stock, $.10 par value ("Common Stock"), in connection with
its acquisition of Bock West, Inc. ("Bock West"). The acquisition
was structured as a statutory merger of Bock West, Inc. into Banta
Direct Marketing-Berkeley, Inc., ("BDMB") a wholly owned
subsidiary of the Corporation. In connection with such merger,
BDMB, as the surviving entity in the merger, acquired all the
outstanding capital stock of Bock West and the two shareholders of
Bock West received the 75,715 shares of Common Stock, certain of
which shares are subject to an escrow agreement. The offer and
sale of the Common Stock to such shareholders in the above-
referenced private placement were exempt from registration under
the Securities Act of 1933, as amended, pursuant to Section 4(2)
thereof.
Item 6 - Exhibits and Report on Form 8-K
(a) Exhibits - 27 - Financial Data Schedule (EDGAR version only)
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANTA CORPORATION
/S/ GERALD A. HENSELER
Gerald A. Henseler
Executive Vice President and Chief Financial Officer
Date November 10, 1997
<PAGE>
BANTA CORPORATION
EXHIBIT INDEX TO FORM 10-Q
For The Quarter Ended September 27, 1997
Exhibit Number
27 Financial Data Schedule (EDGAR version only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BANTA CORPORATION AS OF AND FOR THE NINE
MONTHS ENDED SEPTEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-30-1996
<PERIOD-END> SEP-27-1997
<CASH> 12,793
<SECURITIES> 0
<RECEIVABLES> 241,551
<ALLOWANCES> 3,001
<INVENTORY> 90,535
<CURRENT-ASSETS> 360,502
<PP&E> 694,712
<DEPRECIATION> 368,580
<TOTAL-ASSETS> 761,034
<CURRENT-LIABILITIES> 184,968
<BONDS> 128,960
0
0
<COMMON> 2,991
<OTHER-SE> 404,426
<TOTAL-LIABILITY-AND-EQUITY> 761,034
<SALES> 849,902
<TOTAL-REVENUES> 849,902
<CGS> 679,827
<TOTAL-COSTS> 679,827
<OTHER-EXPENSES> 104,471
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,673
<INCOME-PRETAX> 46,204
<INCOME-TAX> 18,000
<INCOME-CONTINUING> 28,204
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,204
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.94
</TABLE>
