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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 June 29, 2002
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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
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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 June 29, 2002, 25,246,558 shares of $.10
par value common stock.
BANTA CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Quarter Ended June 29, 2002
INDEX
Page
Number
------
PART I FINANCIAL INFORMATION:
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
June 29, 2002 and December 29, 2001.................... 3
Condensed Consolidated Statements of Earnings for
the Three Months and Six Months Ended June 29, 2002
and June 30, 2001...................................... 4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 29, 2002 and June 30, 2001... 5
Notes to Condensed Consolidated Financial Statements
June 29, 2002 ......................................... 6-9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 10-14
Item 3 - Quantitative and Qualitative Disclosures about
Market Risk ........................................... 14
PART II OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders..... 15
Item 6 - Exhibits and Reports on Form 8-K........................ 15
SIGNATURES................................................................ 15
2
Part 1 Item 1. Financial Statements
BANTA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS June 29, 2002 December 29, 2001
- ------ ------------- -----------------
(unaudited)
Current Assets
Cash and cash equivalents $ 131,543 $ 65,976
Receivables 181,920 215,505
Inventories 72,384 71,079
Other current assets 21,666 21,056
--------- ---------
Total Current Assets 407,513 373,616
--------- ---------
Plant and equipment 921,662 908,525
Less accumulated depreciation 616,438 583,541
--------- ---------
Plant and equipment, net 305,224 324,984
Goodwill 64,727 63,801
Other assets 24,737 25,645
--------- ---------
$ 802,201 $ 788,046
========= =========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable $ 96,410 $ 98,391
Accured salaries and wages 31,908 32,218
Other accrued liabilities 31,603 28,226
Current maturities of long-term debt 20,402 25,915
--------- ---------
Total Current Liabilities 180,323 184,750
--------- ---------
Long-term debt 115,898 130,981
Deferred income taxes 21,436 21,080
Other non-current liabilities 41,775 43,957
--------- ---------
Total Liabilities 359,432 380,768
========= =========
Shareholders' Investment
Preferred stock-$10 par value;
authorized 300,000 shares; none issued - -
Common stock-$.10 par value, authorized
75,000,000 shares; 28,390,958 and
27,874,263 shares issued, respectively 2,839 2,787
Amount in excess of par value of stock 17,188 3,366
Accumulated other comprehensive loss (5,212) (10,914)
Treasury stock, at cost (3,144,400 shares) (66,814) (66,814)
Retained earnings 494,768 478,853
--------- ---------
Total Shareholders' Investment 442,769 407,278
--------- ---------
$ 802,201 $ 788,046
========= =========
See accompanying notes to condensed consolidated financial statements
3
BANTA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 29, 2002 June 30, 2001 June 29, 2002 June 30, 2001
------------- ------------- ------------- -------------
Net sales $ 333,457 $ 338,678 $ 666,230 $ 712,691
Cost of goods sold 259,837 266,738 523,718 573,355
--------- --------- --------- ---------
Gross earnings 73,620 71,940 142,512 139,336
Selling and administrative expenses 48,892 48,777 97,307 95,592
--------- --------- --------- ---------
Earnings from operations 24,728 23,163 45,205 43,744
Interest expense (2,943) (3,493) (6,053) (7,504)
Write-off of investment - - - (12,500)
Other income, net 155 801 94 963
--------- --------- --------- ---------
Earnings before income taxes 21,940 20,471 39,246 24,703
Provision for income taxes 8,560 8,000 15,378 9,600
--------- --------- --------- ---------
Net earnings $ 13,380 $ 12,471 $ 23,868 $ 15,103
========= ========= ========= =========
Basic earnings per share of common stock $ 0.53 $ 0.51 $ 0.95 $ 0.61
========= ========= ========= =========
Diluted earnings per share of common stock $ 0.52 $ 0.50 $ 0.93 $ 0.61
========= ========= ========= =========
Cash dividends per share of common stock $ 0.16 $ 0.15 $ 0.32 $ 0.30
========= ========= ========= =========
See accompanying notes to condensed consolidated financial statements
4
BANTA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
Six Months Ended
June 29, 2002 June 30, 2001
------------- -------------
Cash Flows from Operating Activities
Net earnings $ 23,868 $ 15,103
Depreciation and amoritization 37,081 37,571
Deferred income taxes 915 208
Write-off of investment - 12,500
Gain on sale of plant and equipment (95) (161)
Change in assets and liabilities
Decrease in receivables 33,585 33,451
Decrease (increase) in inventories (1,305) 13,436
Increase in other current assets (1,169) (3,296)
(Decrease) increase in accounts payable
and accrued liabilities 1,448 (36,065)
Increase in other non-current assets (928) (2,372)
Tax benefit from exercise of stock
options 2,313 61
Other, net 3,027 (232)
--------- ---------
Cash provided from operating activities 98,740 70,204
--------- ---------
Cash Flows From Investing Activities
Capital expenditures, net (14,891) (31,167)
Additions to long-term investments (1,261) (1,426)
--------- ---------
Cash used for investing activities (16,152) (32,593)
--------- ---------
Cash Flows From Financing Activities
Repayments of short-term debt, net - (24,762)
Repayments of long-term debt (20,596) (5,436)
Dividends paid (7,987) (7,374)
Proceeds from exercise of stock options 11,562 1,235
--------- ---------
Cash used for financing activities (17,021) (36,337)
--------- ---------
Net increase in cash 65,567 1,274
Cash and cash equivalents at the beginning
of period 65,976 27,660
--------- ---------
Cash and cash equivalents at the end of
the period $ 131,543 $ 28,934
========= =========
Cash payments for:
Interest, net of capitalized interest $ 5,758 $ 6,742
Income taxes 8,739 2,343
See accompanying notes to condensed consolidated financial statements
5
BANTA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 29, 2002
(UNAUDITED)
1) Basis of Presentation
The unaudited condensed consolidated financial statements of Banta
Corporation (the Corporation) included herein have been prepared in
accordance with accounting principles generally accepted in the United
States for interim financial information and 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 accounting principles generally accepted in the United
States 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 consolidated 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 financial statements
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results for the interim periods.
Results for the three and six months ended June 29, 2002 are not
necessarily indicative of results that may be expected for the year ending
December 28, 2002.
2) Inventories
Inventories consist of the following (dollars in thousands):
June 29, 2002 December 29, 2001
------------- -----------------
Raw materials and supplies $ 32,502 $ 38,432
Work-in-process and finished goods 39,882 32,647
-------- --------
$ 72,384 $ 71,079
======== ========
3) Earnings Per Share of Common Stock
Basic earnings per share of common stock is computed by dividing net
earnings by the weighted average number of common shares outstanding during
the period. Diluted earnings per share of common stock is computed by
dividing net earnings by the weighted average number of common shares and
common equivalent shares outstanding during the period. The common
equivalent shares relate entirely to the assumed exercise of stock options.
6
The weighted average shares used in the computation of earnings per share
consist of the following (in millions of shares):
Three Months Ended Six Months Ended
----------------------------- -----------------------------
June 29, 2002 June 30, 2001 June 29, 2002 June 30, 2001
------------- ------------- ------------- -------------
Basic 25.2 24.6 25.1 24.6
Diluted 25.6 24.8 25.5 24.8
4) Comprehensive Earnings
Comprehensive earnings consist of the following (dollars in thousands):
Three Months Ended Six Months Ended
-------------------- --------------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
-------- -------- -------- --------
Net earnings $ 13,380 $ 12,471 $ 23,868 $ 15,301
Other comprehensive
earnings (loss):
Foreign currency
translation adjustments 6,347 (1,357) 5,704 (3,805)
-------- -------- -------- --------
Comprehensive earnings $ 19,727 $ 11,114 $ 29,572 $ 11,496
======== ======== ======== ========
5) Goodwill
The Corporation adopted Statement of Financial Accounting Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets, effective December
30, 2001. Under SFAS No. 142, goodwill and certain other intangible assets
are no longer amortized but are reviewed annually for impairment. In
connection with the adoption of SFAS No. 142, the Corporation has completed
the first step of the transitional goodwill impairment test, which required
the Corporation to compare the fair value of its reporting units to the
carrying value of the net assets of the respective reporting units as of
December 30, 2001. Based on this analysis, the Corporation has concluded
that no impairment existed at the time of adoption, and, accordingly, the
Corporation has not recognized any transitional impairment loss.
Changes in the carrying amount of goodwill of $576,000 and $926,000 for the
three and six months periods ended June 29, 2002, respectively, consist
solely of translation adjustments for goodwill denominated in foreign
currencies.
As required by SFAS No. 142, the results of operations for periods prior to
its adoption have not been restated. The following table reconciles
reported net earnings and earnings per share to pro-forma net earnings and
earnings per share that would have resulted for the three and six months
ended June 29, 2002 if SFAS No. 142 had been adopted on December 31, 2000
(dollars in thousands, except per share amounts):
7
Three Months Ended Six Months Ended
-------------------- --------------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
-------- -------- -------- --------
Reported net earnings $ 13,380 $ 12,471 $ 23,868 $ 15,103
Goodwill amortization - 456 - 918
-------- -------- -------- --------
Adjusted net earnings $ 13,380 $ 12,927 $ 23,868 $ 16,021
======== ======== ======== ========
Basic earnings per share:
Reported net earnings $0.53 $0.51 $0.95 $0.61
Goodwill amortization - .02 - .04
-------- -------- -------- --------
Adjusted basic earnings
per share $0.53 $0.53 $0.95 $0.65
======== ======== ======== ========
Diluted earnings per share:
Reported net earnings $0.52 $0.50 $0.93 $0.61
Goodwill amortization - .02 - .04
-------- -------- -------- --------
Adjusted diluted earnings
per share $0.52 $0.52 $0.93 $0.65
======== ======== ======== ========
6) Restructuring Charge
In the second quarter of 1999, the Corporation recorded a restructuring
charge, including related asset writedowns, of $55.0 million ($38.5 million
after tax). The restructuring primarily involved the Corporation's print
segment and resulted in three facility closings and the elimination of
certain under-performing business assets. The restructuring also resulted
in workforce reductions of approximately 650 employees (350 employees at
the three facilities closed) and the writedown of certain long-lived
assets, including goodwill. With the exception of continued lease payments
for certain of the closed facilities, all restructuring actions were
substantially completed in 2000.
The restructuring charge consists of the following (dollars in thousands):
Original
Restructuring Used in Used in Used in Used through Balance
Charge 1999 2000 2001 June 29, 2002 June 29, 2002
- ---------------------------------------------------------------------------------------------------------------------
Writedown of intangible
assets, including goodwill $ 15,600 $ (15,600) $ - $ - $ - $ -
Writedown of tangible assets 15,300 (15,300) - - - -
Lease termination payments 11,500 (2,764) (1,940) (1,318) (362) 5,116
Employee severance and
termination benefits 8,300 (6,588) (1,712) - - -
Other facility exit costs 4,300 (2,799) (1,501) - - -
- ---------------------------------------------------------------------------------------------------------------------
Total $ 55,000 $ (43,051) $(5,153) $(1,318) $ (362) $ 5,116
- ---------------------------------------------------------------------------------------------------------------------
8
7) Segment Information
The Corporation operates in two primary business segments, print and
supply-chain management, with other business operations in healthcare
products. Summarized segment data for the three and six months ended
June 29, 2002 and June 30, 2001 are as follows (dollars in thousands):
Three Months Ended Six Months Ended
-------------------- --------------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
-------- -------- -------- --------
Net sales
Print $236,578 $227,008 $472,555 $482,797
Supply-Chain Management 69,424 85,230 142,627 177,245
Healthcare 27,455 26,440 51,048 52,649
-------- -------- -------- --------
Total $333,457 $338,678 $666,230 $712,691
======== ======== ======== ========
Earnings from operations
Print $ 20,847 $ 19,813 $ 39,513 $ 37,237
Supply-Chain Management 5,721 5,392 10,426 11,225
Healthcare 2,530 2,529 5,115 5,066
-------- -------- -------- --------
Total $ 29,098 $ 27,734 $ 55,054 $ 53,528
======== ======== ======== ========
The following table presents a reconciliation of segment earnings from
operations to the totals contained in the consolidated condensed financial
statements for the three and six months ended June 29, 2002 and June 30,
2001 (dollars in thousands):
Three Months Ended Six Months Ended
-------------------- --------------------
June 29, June 30, June 29, June 30,
2002 2001 2002 2001
-------- -------- -------- --------
Reportable segment
earnings from operations $ 29,098 $ 27,734 $ 55,054 $ 53,528
Corporate expenses (not
allocated to segments) (4,370) (4,571) (9,849) (9,784)
Interest expense (2,943) (3,493) (6,053) (7,504)
Write-off of investment - - - (12,500)
Other income (expense) 155 801 94 963
-------- -------- -------- --------
Earnings before income
taxes $ 21,940 $ 20,471 $ 39,246 $ 24,703
======== ======== ======== ========
9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER AND FIRST SIX MONTHS OF 2002 COMPARED TO 2001
Net Sales
Net sales of Banta Corporation (the Corporation) for the second quarter of 2002
were $333 million, 2% less than the $339 million for the second quarter of 2001.
Revenue for the quarter by segment is shown below:
- ----------------------- --------- --------- ---------------------
Quarter 2 Quarter 2
Segment 2002 2001 Increase (Decrease) %
- ----------------------- --------- --------- ---------------------
Print $ 236,578 $ 227,008 4%
- ----------------------- --------- --------- ---------------------
Supply-chain management 69,424 85,230 (19%)
- ----------------------- --------- --------- ---------------------
Healthcare 27,455 26,440 4%
- ----------------------- --------- --------- ---------------------
Total $ 333,457 $ 338,678 (2%)
- ----------------------- --------- --------- ---------------------
Print sales in the second quarter of 2002 were 4% higher than the prior year
period, with strong gains in the Catalog and the Book Groups. This gain in
revenue was achieved despite the impact of 14% lower paper prices compared to
the second quarter of 2001. The Corporation's revenues are directly impacted by
paper prices since the Corporation generally passes the cost of paper on to its
customers.
The primary factors affecting print segment sales in the second quarter of 2002
were:
>> Book Group sales in the second quarter of 2002 were 10% above the
prior year period. In the educational market, publishers have returned
to a normal purchasing pattern, after depleting inventories early in
2001. In addition, several key states are purchasing state specific
educational programs adopted in 2001.
>> The Catalog Group had strong sales volume, with second quarter 2002
revenues up 17% from the prior year period and year-to-date
impressions (product produced on our press equipment) were 16% ahead
of the same period in 2001. The increase in sales is the result of
market share gains, the addition of several new niche catalogs, and a
limited number of longer run publications.
>> Publication Group sales in the 2002 second quarter are comparable to
the same period in 2001. Page counts for the Corporation's special
interest trade and business-to-business publications were down 15-20%
from the prior year period.
>> The Direct Marketing Group had a difficult second quarter in 2002,
with revenues down 9% from the prior year period. Key customers in the
retail, consumer products and financial services industries continued
to cut back their mailing programs. In addition, increased industry
capacity in the imaging business and commercial print markets led to
pricing pressures.
Softness within the technology sector, especially telecommunications and
communications infrastructure companies, continued to put downward pressure on
revenues in the supply-chain management segment. Second quarter 2002 revenues in
this segment were down 19% from the second quarter of 2001.
Healthcare revenues were up 4% in the second quarter of 2002 as compared to the
prior year period. Primary products for this segment are one-time use disposable
paper and film based products.
Net sales for the Corporation for the first half of 2002 were $666 million, a
decrease of 6.5% from the first half of 2001. Print segment sales for the
six-month period were $472.5 million compared to $482.8 million in the first
half of 2001, a decrease of 2%. Print sales for the first half of 2002 were
10
below the prior year period as the result of paper prices that were 15% below
the prior year first half and reduced advertising spending. Sales for the
supply-chain management segment in the first six months of 2002 were $142.6
million, down 20% from the prior year first half sales of $177.2 million.
Factors primarily affecting operating activity levels for the supply-chain
management segment for the first two quarters were similar to those described
above for the second quarter. Healthcare sales in the first half of 2002 were
slightly lower than the prior year, at $51.0 million compared to $52.6 million
in the first half of 2001.
Earnings from operations
Earnings from operations for the second quarter of 2002 were $24.7 million, an
increase of 7% compared to $23.2 million for the second quarter of 2001. Margins
strengthened to 7.4% for the second quarter of 2002 compared to 6.8% for the
same period last year. Operating margins for the second quarters of 2002 and
2001 were as follows:
Segment Quarter 2 2002 Quarter 2 2001
------- -------------- --------------
Print 8.8% 8.7%
Supply-Chain Management 8.2% 6.3%
Healthcare 9.2% 9.6%
Despite reduced revenue in the Corporation's supply-chain management segment,
operating performance, cost controls and product mix generated improved margins
in the second quarter of 2002. Margins exceeded what the Corporation believes
are sustainable for the supply-chain management business over the long term. The
Corporation generally expects operating margins for this business to be in the
range of 5.5% to 6.5%. The reduction in Healthcare margins in the 2002 second
quarter resulted from manufacturing realignment costs of approximately $450,000
at the Corporation's Rialto and Neenah facilities recorded in the second quarter
of 2002. The elimination of goodwill amortization effective December 30, 2001
with the adoption of SFAS No. 142 will benefit the Corporation by approximately
$3.0 million annually. This amount will be spread evenly over the four quarters.
Amortization for the second quarter of 2001 was approximately $750,000, which
reduced diluted earnings per share by two cents.
Earnings from operations for the first half of 2002 increased to $45.2 million,
3% higher than the $43.7 million for the prior year period. Operating margins of
6.8% for the first half of 2002 were higher than the 6.1% for the same period in
2001. Print segment earnings from operations for the first six-months of 2002
were 6% higher than the prior year period, the result of cost controls,
utilization and favorable product mix. Earnings from operations for the
supply-chain management segment were 7% lower for the current six-month period
compared to the prior year period primarily due to reduced sales volumes.
However, earnings from operations as a percentage of sales for this segment
increased to 7.3% in the first half of 2002 from 6.3% in the prior year period.
Healthcare earnings from operations as a percentage of sales were consistent at
approximately 10% for both the first half of 2002 and 2001.
Interest Expense
Interest expense for the second quarter of 2002 was $2.9 million, a reduction of
16% compared to interest expense of $3.5 million in the prior year second
quarter. Interest expense for the first half of 2002 was $6.1 million, a
reduction of 19% compared to the first half of 2001. The Corporation's improved
balance sheet has resulted in no short-term debt outstanding at the end of the
second quarter of 2002, compared to $22.1 million in short-term debt outstanding
at the end of second quarter 2001. The reduction in interest expense is the
result of the reduction in long-term and short-term debt.
11
Income Taxes
As indicated below, the Corporation's effective second quarter tax rates for
2002 were slightly lower than the second quarter 2001 rates. Tax rates for the
first half of 2002 were slightly higher than those of the prior year.
Effective Tax Rate
2002 2001
------- -------
Second Quarter 39.0% 39.1%
First Half 39.2% 38.9%
Liquidity and Capital Resources
The Corporation's net working capital (current assets less current liabilities)
increased by approximately $38 million at the end of the first half of 2002
compared to the end of fiscal 2001. Cash balances increased by approximately $65
million, which is primarily the result of reduced capital expenditures and
reductions in accounts receivable. The Corporation intends to utilize excess
cash to continue investing in the business through capital expenditures and
acquisitions. This increase in working capital was offset by decreases in
accounts receivable, as measured by days sales outstanding, which resulted in a
$33 million reduction from the end of fiscal 2001. Inventories on June 29, 2002
were comparable to the balance at the end of 2001.
Capital expenditures were $15 million during the first half of 2002; a decrease
of $16 million from the amount expended during the first half of 2001. Capital
requirements for the full year are expected to be approximately $50 - $55
million and will be funded by a combination of cash provided from operations and
borrowings. During the first half of 2002, the Corporation repurchased no shares
of common stock.
Total debt as a percentage of total capitalization at June 29, 2002 was 24%,
compared to 28% at December 29, 2001.
Given cash and cash equivalents on hand as well as borrowing capacity currently
in place, the Corporation believes it has sufficient liquidity to fund its
operations for the foreseeable future.
Proposed Acquisition of Mentor Media
On June 20, 2002, the Corporation announced that it had reached an agreement to
purchase Mentor Media Ltd., a supply-chain management leader in Asia for a
purchase price of US $70 million. The acquisition of Mentor Media Ltd. is
intended to strengthen the Corporation's global position as well as support the
Corporation's customers as they migrate their manufacturing activities to Asia.
On August 13, 2002, Mentor Media Ltd. announced that the results of its first
fiscal quarter ended June 30, 2002 are expected to be materially lower than for
the previous quarter and the corresponding first quarter in 2001. In light of
Mentor's expected financial performance for its first fiscal quarter of 2002,
the Corporation has entered into discussions regarding, among other things, the
manner and the terms under which the consideration to be paid to Mentor's
principal shareholder will be paid to him as well as the minimum net tangible
asset value Mentor Media Ltd. must have in connection with the closing of the
transaction. Assuming that terms acceptable to the Corporation can be
negotiated, the Corporation believes the transaction will close in the fourth
quarter of 2002. Mentor Media Ltd. currently has operations in Singapore,
Taiwan, South Korea and China.
FUTURE OUTLOOK
Given Banta's solid first half performance, management continues to expect the
corporation to achieve mid-single digit growth in 2002 diluted EPS. Full-year
earnings per share are projected to be in the range of $2.40 to $2.45 versus
2001's $2.31, before last year's investment write-off. However, given the
continuing sluggish economy, lower paper prices, competitive pricing and ad
spending reductions, Banta now expects 2002 revenues will be flat to slightly
down compared to last year.
CRITICAL ACCOUNTING POLICIES
The Corporation's accounting policies are more fully described in Note 1 to the
consolidated financial statements included in the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 29, 2001. As disclosed in Note 1,
the preparation of financial statements in conformity with
12
accounting principles generally accepted in the United States requires
management to make estimates and assumptions about future events that affect the
amounts reported in the financial statements and footnotes. Future events and
their effects cannot be determined with absolute certainty. Therefore, the
determination of estimates requires the exercise of judgment. Actual results
inevitably will differ from those estimates, and such differences may be
material to the financial statements.
The most significant accounting estimates inherent in the preparation of the
Corporation's consolidated financial statements include estimates as to the
recovery of receivables and the realization of inventories, plant and equipment,
capitalized software development costs and goodwill. Significant assumptions are
also used in the determination of liabilities related to pension and
post-retirement benefits. The process of determining significant estimates is
fact specific and takes into account factors such as historical experience,
current and expected economic conditions, product mix, and in some cases,
actuarial assumptions. The Corporation re-evaluates these significant factors as
facts and circumstances dictate. Historically, actual results have not differed
significantly from those determined using the estimates described above.
The Corporation believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements:
o Revenue Recognition. Revenues are recognized on products shipped to
unaffiliated customers when the risk of loss transfers or when services are
performed. The Securities and Exchange Commission's Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition" provides guidance on the
application of accounting principles generally accepted in the United
States to selected revenue recognition issues. In addition, revenues in the
supply-chain management segment are recognized in accordance with Emerging
Issues Task Force (EITF) Issue No. 99-19, which provides guidance on
whether revenue should be recorded gross as a principal or net as an agent.
Each major contract is evaluated based on various criteria, with management
judgment required to assess the importance of each criterion in reaching
the final decision.
o The Company adopted Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Other Intangible Assets," effective December 30, 2001.
Under SFAS No. 142, goodwill and certain other intangible assets are no
longer amortized but are reviewed for impairment. In connection with the
adoption of SFAS No. 142, the Company has completed the first step of the
transitional goodwill impairment test, which requires the Company to
compare the fair value of its reporting units to the carrying value of the
net assets of the respective reporting units as of December 30, 2001. Based
on this analysis, the Company has concluded that no impairment existed at
the time of adoption, and, accordingly, the Company has not recognized any
transitional impairment loss. At December 29, 2001, the Corporation had
$63.8 million in goodwill and recognized $3 million of amortization expense
for the year ended December 29, 2001.
o Inventories. The Corporation's 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.
13
CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION
This document includes forward-looking statements. Statements that describe
future expectations, including revenue and earnings projections, plans, results,
or strategies, are considered forward-looking. Such statements are subject to
certain risks and uncertainties, which could cause actual results to differ
materially from those currently anticipated. Factors that could affect actual
results include, among others, changes in customers' order patterns or demand
for the Corporation's products and services, changes in raw material costs and
availability (particularly paper), unanticipated changes in operation expenses,
unanticipated production difficulties, changes in demand for products and
services in the technology sector, the impact of increased competition resulting
from industry consolidation, and any unanticipated delay in the economic
recovery. These factors should be considered in evaluating the forward-looking
statements, and undue reliance should not be placed on such statements. The
forward-looking statements included herein are made as of the date hereof, and
the Corporation undertakes no obligation to update publicly such statements to
reflect subsequent events or circumstances.
Item 3. Qualitative and Quantitative Disclosures About Market Risk
The Corporation is exposed to market risk from changes in interest rates and
foreign exchange rates. At June 29, 2002, the Corporation had no notes payable
outstanding against lines of credit with banks. Since essentially all the
Corporation's long-term debt is at fixed interest rates, exposure to interest
rate fluctuations is minimal.
Exposure to adverse changes in foreign exchange rates is not considered
material. Potential market risk associated with changes in foreign exchange is
considered in contractual arrangements with customers.
14
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders held on April 23, 2002, the only
matters submitted to a vote of the Corporation's shareholders was the
election of nine directors. All of the persons nominated as directors
were elected for terms expiring at the 2003 annual meeting. The
following table sets forth certain information with respect to such
election:
Shares
Shares Withholding
Name Voted For Authority
---- ---------- -----------
Jameson A. Baxter 19,893,856 1,158,594
Donald D. Belcher 19,887,751 1,164,699
John F. Bergstrom 19,904,132 1,148,318
Ursula M. Burns 19,914,569 1,137,881
Henry T. DeNero 19,904,995 1,147,455
Richard L. Gunderson 19,625,187 1,427,263
Raymond C. Richelsen 19,632,283 1,420,167
Stephanie A. Streeter 19,917,915 1,134,535
Michael J. Winkler 18,382,790 2,669,660
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
3.1 - Amendment to By-laws
3.2 - By-laws as amended
99.1 - Written Statement of the Chief Executive Officer
99.2 - Written Statement of the Chief Financial Officer
(b) Reports on Form 8-K -
The Company filed a Current Report on Form 8-K, dated May 17,
2002, reporting (under Item 4) the dismissal of Arthur Andersen
LLP as the Company's independent accountants and engagement of
Ernst & Young LLP as the Company's independent accountants for
2002.
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/ Daniel W. Kiener
------------------------------------------
Daniel W. Kiener
Vice President and Chief Financial Officer
Date August 13, 2002
15
BANTA CORPORATION
EXHIBIT INDEX TO FORM 10-Q
For The Quarter Ended June 29, 2002
Exhibit Number
- --------------
3.1 Amendment to By-laws
3.2 By-laws, as amended
99.1 Written Statement of Chief Executive Officer
99.2 Written Statement of Chief Financial Officer
16