UNITED STATES
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 March 29, 2003
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 1-14637
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 / /
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes /X/ No / /
Common stock outstanding as of April 18, 2003 - 25,259,889 shares.
1
BANTA CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Quarter Ended March 29, 2003
INDEX
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Page Number
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PART I FINANCIAL INFORMATION:
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
March 29, 2003 and December 28, 2002..................... 3
Condensed Consolidated Statements of Earnings
for the Three Months Ended March 29, 2003
and March 30, 2002 ..................................... 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 29, 2003
and March 30, 2002....................................... 5
Notes to Condensed Consolidated Financial Statements -
March 29, 2003......................................... 6-9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 10-13
Item 3 - Quantitative and Qualitative Disclosures
about Market Risk........................................ 13
Item 4 - Controls and Procedures.................................... 13
PART II OTHER INFORMATION
Item 1 - Legal Proceedings.......................................... 14
Item 6 - Exhibits and Reports on Form 8-K........................... 14
SIGNATURES .................................................................. 14
CERTIFICATIONS ........................................................... 15-16
2
Part 1 Item 1. Financial Statements
BANTA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS March 29, 2003 December 28, 2002
------ -------------- -----------------
(unaudited)
-----------
Current Assets
Cash and cash equivalents $ 183,774 $ 154,836
Receivables 207,854 212,988
Inventories 63,818 69,388
Other current assets 22,828 22,938
------------- -------------
Total Current Assets 478,274 460,150
------------- -------------
Plant and equipment 923,704 913,564
Less accumulated depreciation 646,427 635,593
------------- -------------
Plant and equipment, net 277,277 277,971
Goodwill 64,896 62,740
Other assets 5,189 4,403
------------- -------------
Total Assets $ 825,636 $ 805,264
============= =============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
Current Liabilities
Accounts payable $ 110,193 $ 102,635
Accured salaries and wages 29,188 36,258
Other accrued liabilities 33,958 27,512
Current maturities of long-term debt 18,202 19,377
------------- -------------
Total Current Liabilities 191,541 185,782
------------- -------------
Long-term debt 112,380 111,489
Deferred income taxes 16,010 13,679
Other non-current liabilities 43,933 41,201
------------- -------------
Total Liabilities 363,864 352,151
------------- -------------
Shareholders' Investment
Preferred stock-$10 par value;
authorized 300,000 shares; none issued - -
Common stock-$.10 par value, authorized
75,000,000 shares; 28,507,290 and
28,503,446 shares issued, respectively 2,851 2,850
Amount in excess of par value of stock 20,029 20,003
Accumulated other comprehensive loss (704) (2,126)
Treasury stock, at cost - 3,256,400 shares (70,175) (70,175)
Retained earnings 509,771 502,561
------------- ------------
Total Shareholders' Investment 461,772 453,113
------------- ------------
$ 825,636 $ 805,264
============= ============
See accompanying notes to unaudited 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
March 29, 2003 March 30, 2002
-------------- --------------
Net sales $ 336,430 $ 332,773
Cost of goods sold 265,459 263,881
--------------- ---------------
Gross earnings 70,971 68,892
Selling and administrative expenses 49,975 48,415
Restructuring charge 916 -
--------------- ---------------
Earnings from operations 20,080 20,477
Interest expense (2,621) (3,110)
Other income (expense), net 787 (61)
--------------- ---------------
Earnings before income taxes 18,246 17,306
Provision for income taxes 7,000 6,818
--------------- ---------------
Net earnings $ 11,246 $ 10,488
=============== ===============
Basic earnings per share of common stock $ 0.45 $ 0.42
=============== ===============
Diluted earnings per share of common stock $ 0.44 $ 0.41
=============== ===============
Cash dividends per share of common stock $ 0.16 $ 0.16
=============== ===============
See accompanying notes to condensed consolidated financial statements
4
BANTA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
Three Months Ended
March 29, 2003 March 30, 2002
-------------- --------------
Cash Flows from Operating Activities
Net earnings $ 11,246 $ 10,488
Depreciation and amortization 16,464 18,677
Deferred income taxes 2,000 201
Restructuring charge 916 -
Gain on sale of plant and equipment (436) (197)
Change in assets and liabilities
Decrease in receivables 5,180 30,213
Decrease in inventories 5,598 6,515
Increase (decrease) in accounts payable
and accrued liabilities 5,886 (9,303)
Net change in other current assets and liabilities 482 (651)
Net change in other non-current assets and liabilities 1,795 (24)
Tax benefit from exercise of stock options 51 1,188
--------------- ---------------
Cash provided from operating activities 49,182 57,107
--------------- ---------------
Cash Flows From Investing Activities
Capital expenditures (14,938) (6,526)
Business acquisition (2,379) -
Additions to long-term investments - (699)
--------------- ---------------
Cash used for investing activities (17,317) (7,225)
--------------- ---------------
Cash Flows From Financing Activities
Repayments of long-term debt, net (284) (6,506)
Dividends paid (4,040) (3,966)
Proceeds from exercise of stock options 309 8,118
Other (334) (1,351)
--------------- ---------------
Cash used for financing activities (4,349) (3,705)
--------------- ---------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents 1,422 (627)
--------------- ---------------
Net increase in cash 28,938 45,550
Cash and cash equivalents at the beginning of period 154,836 65,976
--------------- ---------------
Cash and cash equivalents at the end of the period $ 183,774 $ 111,526
=============== ===============
Cash payments for:
Interest, net of capitalized interest $ 2,200 $ 2,527
Income taxes 1,102 4,535
See accompanying notes to condensed consolidated financial statements
5
BANTA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 29, 2003
(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 months ended March 29, 2003 are not necessarily
indicative of results that may be expected for the year ending January 3,
2004. Certain prior year amounts have been reclassified to conform to the
2003 presentation.
2) Inventories
Inventories consist of the following (dollars in thousands):
March 29, 2003 December 28, 2002
-------------- -----------------
Raw materials and supplies $30,177 $30,477
Work-in-process and finished goods 33,641 38,911
------- -------
$63,818 $69,388
======= =======
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.
The weighted average shares used in the computation of earnings per share
consist of the following (in millions of shares):
Three Months Ended
March 29, 2003 March 30, 2002
-------------- --------------
Basic 25.3 25.0
Diluted 25.4 25.4
6
4) Comprehensive Earnings
Comprehensive earnings consist of the following (dollars in thousands):
Three Months Ended
March 29, 2003 March 30, 2002
-------------- --------------
Net earnings $11,246 $10,488
Other comprehensive earnings (loss):
Foreign currency translation
adjustments 1,422 (627)
------- -------
Comprehensive earnings 12,668 $ 9,861
======= =======
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 is no longer amortized but
is reviewed for impairment on an annual basis.
Changes in the carrying amount of goodwill by segment for the quarter ended
March 29, 2003 consist of the following (dollars in thousands):
Supply-chain
Print management Healthcare Total
----- ---------- ---------- -----
Balance at December 28, 2002 $35,502 $5,624 $21,614 $62,740
Translation adjustments for goodwill 156 156
denominated in foreign currencies
Acquisition of business (see Note 8) 2,000 2,000
------- ------ ------- -------
Balance at March 29, 2003 $37,502 $5,780 $21,614 $64,896
======= ====== ======= =======
6) Stock-Based Compensation
As of March 29, 2003, the Corporation's stock-based employee compensation
plans were accounted for under the recognition and measurement principles
of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. In compliance with
APB Opinion No. 25, no stock-based employee compensation cost is reflected
in net earnings. The following table illustrates the effect on net earnings
and earnings per share if the Corporation had applied the fair value
recognition provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," to stock-based employee compensation (dollars in thousands,
except per share amounts):
7
Three Months Ended
March 29, 2003 March 30, 2002
-------------- --------------
Net earnings, as reported $ 11,246 $ 10,488
Deduct:
Compensation expense determined
under SFAS No. 123, net of related taxes (639) (577)
---------- ----------
Pro forma net earnings $ 10,607 $ 9,911
========== ==========
Earnings per share
As reported:
Basic $ 0.45 $ 0.42
========== ==========
Diluted $ 0.44 $ 0.41
========== ==========
Pro forma:
Basic $ 0.42 $ 0.40
========== ==========
Diluted $ 0.42 $ 0.39
========== ==========
7) Restructuring Charge
Effective January 1, 2003, the Corporation adopted SFAS No 146, "Accounting
for Costs Associated with Exit or Disposal Activities." SFAS No. 146
addresses financial accounting and reporting for costs associated with exit
or disposal activities and nullifies the previous guidance on the subject.
It requires, among other things, that a liability for a cost associated
with an exit or disposal activity initiated after December 31, 2002 be
recognized at fair value when the liability is incurred rather than at the
commitment date to the exit or disposal plan.
On January 28, 2003, the Corporation announced a restructuring involving
its consumer catalog business and a realignment of operating activities
within its supply-chain management sector. The plan, which will be
implemented throughout 2003, is expected to consolidate certain operations,
leverage existing capacity, improve efficiencies and reduce costs.
Implementation of the plan will result in a pre-tax charge totaling $15
million to $18 million, the majority of which is expected to be incurred in
the second and third quarters of 2003. Approximately $13.4 million of these
restructuring costs are expected for the print segment, with the balance to
be incurred for the supply-chain management segment. Expenses expected to
be incurred (based on the high end of the range) are as follows: employees
severance and benefits, $8,800,000; facility costs including lease
terminations, $4,000,000; and impaired assets and other, $5,200,000;
totaling $18,000,000.
The reconciliation of the beginning and ending restructuring liability
balances during the first quarter of 2003 are as follows (dollars in
thousands):
Balance at Charges/ Payments/ Balance at
December 29, 2002 Additions Reductions March 29, 2003
----------------- --------- ---------- --------------
Employee severance and - $916 - $916
benefits
Facility costs - - - -
Impaired assets - - - -
Other - - - -
Total $ - $916 $ - $916
=== ==== === ====
8
8) Acquisition of Business
On February 24, 2003, the Corporation acquired Qualipak Incorporated
("Qualipak") for $2.379 million in cash. Qualipak is a provider of
secondary packaging, kit assembly, fulfillment and distribution services
for publishers, consumer healthcare markets and over-the-counter
pharmaceuticals. The purchase price plus the liabilities assumed exceeded
the fair value of the tangible and intangible assets acquired by $2
million, which has been recorded as goodwill in the first quarter of 2003.
The Corporation has included the results of Qualipak in the consolidated
financial statements since the acquisition date.
This purchase agreement includes a provision for contingent payments based
on incremental qualified sales, as defined, for calendar 2003 and 2004.
Should these provisions be met, the Corporation would record a
corresponding increase to goodwill.
9) 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 months ended March 29, 2003
and March 30, 2002 are as follows (dollars in thousands):
Three Months Ended
March 29, 2003 March 30,2002
-------------- -------------
Net sales
Print $232,255 $234,661
Supply-Chain Management 81,535 73,203
Healthcare 22,640 24,909
-------- --------
Total $336,430 $ 32,773
======== ========
Earnings from operations
Print $ 13,286 $ 18,666
Supply-Chain Management 9,021 4,705
Healthcare 2,662 2,585
-------- --------
Total $ 24,969 $ 25,956
======== ========
The following table presents a reconciliation of segment earnings from
operations to the totals contained in the consolidated condensed financial
statements for the three months ended March 29, 2003 and March 30, 2002
(dollars in thousands):
Three Months Ended
March 29, 2003 March 30, 2002
-------------- --------------
Reportable segment earnings from operations $24,969 $25,956
Corporate expenses (not allocated to segments) (4,889) (5,479)
Interest expense (2,621) (3,110)
Other income (expense) 787 (61)
-------- -------
Earnings before income taxes $18,246 $17,306
======== =======
9
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER 2003 COMPARED TO FIRST QUARTER 2002
Net Sales
---------
Net sales for the first quarter of 2003 totaled $336 million, approximately 1%
higher than the $333 million in the first quarter of 2002. Net sales for the
quarter by segment are shown below (dollars in thousands):
------------------------------------ -------------------- --------------------- -----------------------
Segment Quarter 1 Quarter 1 Increase
2003 2002 (Decrease)%
------------------------------------ -------------------- --------------------- -----------------------
Print $232,255 $234,661 (1%)
------------------------------------ -------------------- --------------------- -----------------------
Supply-Chain Management 81,535 73,203 11%
------------------------------------ -------------------- --------------------- -----------------------
Healthcare 22,640 24,909 (9%)
------------------------------------ -------------------- --------------------- -----------------------
Total $336,430 $332,773 1%
------------------------------------ -------------------- --------------------- -----------------------
Print sales for the first quarter were 1% lower than the comparable quarter in
the prior year, with lower than expected results in the Book and Direct
Marketing Groups offset, in part, by increased revenues in the Publications and
Catalog Groups. The key issues related to revenues in this segment were:
o Sales in the Book Group were down 12% from the prior year first quarter,
primarily the result of less activity in the educational market, reflecting
publishers concerns regarding large budget deficits facing state and local
governments. The group's literature management and packaging and
fulfillment activities continue to grow with the acquisition of a new
facility in Lancaster, PA. In addition to the acquisition, a new Wisconsin
distribution center will open in May and two facilities are planning
relocations to larger facilities. The business continues to expand its
services to a broader list of markets and customers, including the
healthcare, telecommunications, retail, financial services, and
pharmaceutical industries.
o The Catalog Group had strong volumes, with first quarter print production,
as measured by impressions, up 19% from the prior year. This is partially
the result of a large customer order produced in the last several days of
calendar 2002 being shipped in fiscal 2003 due to the Corporation's
December 28, 2002 year-end. The Group has also gained additional revenue
and customer satisfaction by introducing new services in pre-media and by
launching a new catalog delivery and reporting system. In January 2003, the
Corporation announced a restructuring in the Catalog Group (as described in
Note 7) that is expected to be completed by the end of the third quarter of
2003.
o Revenues for the Publications Group were up 9% from the first quarter last
year. The group continues to aggressively take market share. Print
impressions increased 11%, despite a 4.5% reduction in comparative page
counts versus the prior year. The Publications Group continues to grow by
targeting magazines that are less dependent on ad cycles, such as
association publications, and adding new value-added services such as
magazine issue reprints.
o In the Direct Marketing Group the continuing slowness in the economy and
recent world events have negatively impacted both the commercial and direct
mail segments. Retailers, consumer package goods companies and financial
service companies have become increasingly conservative relative to the
number and amount of pieces mailed. The result has been a very challenging
three months for the Direct Marketing Group, with revenues down 3% from the
prior year.
Consolidated net sales for the Supply-Chain Management segment were 11% higher
in the first quarter of 2003 compared to the first quarter of 2002. The improved
sales reflected excellent year-over-year
10
performance by a number of the Corporation's major customers. This revenue was
achieved despite an environment of weak technology sales overall.
Healthcare segment net sales in the first quarter were 9% lower versus the
comparable period in 2002, impacted by lower sales to a few large customers.
Earnings from operations
------------------------
Consolidated earnings from operations, including the restructuring (as described
in Note 7), of $20.1 million in the first quarter of 2003 were down slightly
from the $20.5 million in the prior year first quarter. Operating earnings as a
percentage of sales were 6.0%, down slightly from the prior year's 6.2%.
Segment operating margins were as follows for the first quarter:
Segment 2003 2002
------- ---- ----
Print 5.7% 7.9%
Supply-Chain Management 11.1% 6.4%
Healthcare 11.8% 10.4%
Operating margins for the Print segment in the first quarter of 2003 decreased
to 5.7% from 7.9% in the first quarter of 2002. This is largely a result of the
difficult pricing conditions within the industry, under-utilization at certain
facilities and reduced activity in the educational market.
Operating margins for the Supply-Chain Management segment in the first quarter
of 2003 of 11.1% were significantly higher than the prior year first quarter
margins of 6.4%. This improvement in operating margin was primarily due to
improved facility utilization, higher proportion of value-added content in the
product mix and aggressive cost control measures. These margins are considered
higher than would normally be expected in this segment, and will likely decrease
in the future based on the proportion of value-added content in the product mix
and continued pricing pressure.
The Healthcare segment improved operating margins in the first quarter of 2003
to 11.8%, as compared to 10.4% in the first quarter of 2002, the result of
operating performance improvements.
The principal raw material used by the Corporation in the Print segment is
paper. Paper prices in the first quarter of 2003 averaged a 1% increase.
Interest Expense
----------------
Interest expense for the first quarter of 2003 was $2.6 million, a reduction of
16% compared to interest expense of $3.1 million in the prior year first
quarter. Total debt at March 29, 2003 of $131 million was down from $150 million
at the end of first quarter 2002. The reduction in interest expense is the
result of the reduction in long-term debt. Essentially all of the Corporation's
long-term debt is at fixed interest rates. As a result, lower market interest
rates have not significantly impacted the Corporation's interest expense.
Income Taxes
------------
The Corporation's effective tax rate of 38.4% for the first quarter of 2003 was
lower than the 39.4% effective tax rate in the first quarter of 2002. The
reduction in the effective tax rate was due to lower tax rates on earnings of
the Corporation's European and Asian operations.
11
Liquidity and Capital Resources
-------------------------------
The Corporation's net working capital, excluding cash and current maturities of
long-term debt, decreased by $18 million during the first quarter of 2003. This
is primarily due to decreases in accounts receivable of $5 million and
inventories of $6 million, as compared to December 28, 2002 balances. Cash
balances increased by $28 million, primarily the result of increased cash flow
from operations.
The Corporation has in effect a stock repurchase program pursuant to which it
may repurchase shares of its common stock on the open market or in privately
negotiated transactions from time to time. During the quarter ended March 29,
2003, the Corporation did not repurchase any shares of its common stock.
Capital expenditures were $15 million during the first quarter of 2003, an
increase of $8.4 million from the amount expended during the prior year first
quarter. Capital expenditures for the full year are expected to be in the range
of $75 - $90 million and will be funded by cash provided from operations.
Total debt as a percentage of total capitalization at March 29, 2003 was 22.0%,
which was slightly lower than the 22.4% at December 28, 2002.
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.
For discussion of certain pending litigation see Part II Item 1.
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 28, 2002. The preparation of
financial statements in conformity with 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
and goodwill. Significant assumptions are also used in the determination of
liabilities related to pension and post-retirement benefits, income taxes and
environmental matters. 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, "Reporting Revenue Gross as a
Principal versus 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.
12
o 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 is no longer amortized, but
is reviewed for impairment on an annual basis. The Corporation's analysis,
which is performed in the fourth quarter of each fiscal year unless other
indicators of impairment exist, is based on the comparison of the fair
value of its reporting units to the carrying value of the net assets of the
respective reporting units.
o Retirement Benefits. The Corporation has significant pension and
post-retirement benefit costs that are developed from actuarial valuations.
The valuations reflect key assumptions regarding, among other things,
discount rates, expected return on plan assets, retirement ages and years
of service. Consideration is given to current market conditions, including
changes in interest rates and investment returns, in making these
assumptions. Changes in these assumptions will affect the amount of pension
and post-retirement expense recognized in future periods.
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; unanticipated changes in operating expenses; unanticipated
production difficulties; unexpected results relating to the Corporation's
ongoing litigation relating to Mentor Media Ltd. and XYAN.com; changes in the
pattern of outsourcing supply-chain management functions by customers including,
as a result of product re-engineering; unanticipated issues related to the
restructurings in the catalog and supply-chain management businesses and
expected cost savings related thereto; 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. As of March 29, 2003, 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.
Item 4. Controls and Procedures
a. Within the 90-day period prior to the filing of this report, an evaluation
was carried out under the supervision and with the participation of the
Corporation's management, including the Corporation's Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Corporation's disclosure controls and procedures (as
defined in Rule 13a-14(c) under the Securities Exchange Act of 1934). Based
upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the design and operation of these disclosure
controls and procedures were effective.
b. No significant changes were made in the Corporation's internal controls or
in other factors that could significantly affect these controls subsequent
to the date of their evaluation.
13
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The Corporation is a defendant in an action commenced by the creditors'
committee in the Xyan.com bankruptcy matter. The claim relates to
transactions that occurred in 2001 in which the Corporation acquired
certain assets from Xyan.com. The creditors' committee is currently seeking
recovery of approximately $4 million to $6 million. The Corporation is also
involved in litigation relating to its proposed acquisition of
Singapore-based Mentor Media Ltd. (Mentor). The Corporation in June 2002
entered into agreements to acquire Mentor for approximately $70 million.
The Corporation has filed an action in Singapore seeking to terminate these
agreements based on misrepresentations and failure of conditions precedent.
Mentor has counter-claimed seeking damages for the Corporation's alleged
unlawful failure to complete the transaction.
The Corporation believes that it has meritorious grounds in both cases to
obtain results that are favorable to the Corporation. However, in the event
that one or both cases were decided in a manner unfavorable to the
Corporation, such result could adversely impact the Corporation's results
of operations or financial condition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
99.1 - Written Statement of Chief Executive Officer
99.2 - Written Statement of Chief Financial Officer
(b) Reports on Form 8-K -
The Corporation filed a Current Report on Form 8-K, dated January 28, 2003,
furnishing under Item 9 the Corporation's press release dated January 28,
2003, with respect to financial results for the year ended December 28,
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/ Gerald A. Henseler
----------------------
Gerald A. Henseler
Executive Vice President and Chief Financial Officer
Date: May 5, 2003
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CERTIFICATIONS
I, Stephanie A. Streeter, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Banta Corporation;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 5, 2003
/s/ Stephanie A. Streeter
-------------------------
Stephanie A. Streeter
President and Chief Executive Officer
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I, Gerald A. Henseler, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Banta Corporation;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4) The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure
5) The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 5, 2003
/s/ Gerald A. Henseler
----------------------
Gerald A. Henseler
Executive Vice President and Chief Financial Officer
16
BANTA CORPORATION
EXHIBIT INDEX TO FORM 10-Q
For The Quarter Ended March 29, 2003
Exhibit Number
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99.1 Written Statement of Chief Executive Officer
99.2 Written Statement of Chief Financial Officer
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