Minnesota | 1-7945 | 41-0216800 |
(State or Other Jurisdiction | (Commission | (I.R.S. Employer |
of Incorporation) | File Number) | Identification No.) |
3680 Victoria St. North, Shoreview, Minnesota | 55126-2966 |
(Address of Principal Executive Offices) | (Zip Code) |
99.1 | Press Release, dated January 23, 2014, of Deluxe Corporation reporting results from fourth quarter 2013. |
DELUXE CORPORATION | ||
/s/ Anthony C. Scarfone | ||
Anthony C. Scarfone | ||
Senior Vice President, | ||
General Counsel and Secretary |
99.1 | Press Release, dated January 23, 2014, of Deluxe Corporation reporting results from fourth quarter 2013 |
Deluxe Corporation P.O. Box 64235 St. Paul, MN 55164-0235 (651) 483-7111 |
NEWS RELEASE | For additional information: Ed Merritt Treasurer and VP Investor Relations (651) 787-1068 | |
DELUXE REPORTS FOURTH QUARTER 2013 FINANCIAL RESULTS |
Revenue grows 7.8%; Q4 Marketing Solutions and Other Services represents 25% of total revenue |
Diluted EPS of $0.90 grows 8.4%; Adjusted EPS of $1.04 grows 9.5% exceeding high end of outlook |
Provides 2014 Outlook; projects growing revenue and EPS and strong cash flow |
Declares regular quarterly dividend |
Q4 2013 | Q4 2012 | % Change | ||||||||
Revenue | $417.8 million | $387.6 million | 7.8 | % | ||||||
Net Income | $45.7 million | $42.6 million | 7.3 | % | ||||||
Diluted EPS – GAAP | $0.90 | $0.83 | 8.4 | % | ||||||
Adjusted Diluted EPS – Non-GAAP | $1.04 | $0.95 | 9.5 | % |
• | Revenue increased 7.8% year-over-year, with the strongest performance in the Small Business Services segment which grew 11.8% followed by Financial Services which grew 5.5%. |
• | Revenue from marketing solutions and other services increased 19.8% year-over-year and accounted for 25% of total revenue in the quarter. |
• | Gross margin was 63.6% of revenue, down from 64.5% in the fourth quarter of 2012. The primary drivers of the decline were a shift in product and services mix and higher delivery and material costs. |
• | Selling, general and administrative (SG&A) expense increased 5.1% from last year primarily driven by additional SG&A expense from acquisitions and spending on other revenue-generating initiatives, partially offset by lower medical expenses. |
• | Operating income increased 0.3% year-over-year and includes restructuring and transaction-related costs and a non-cash asset impairment charge due to a write-down of a Small Business Services customer relationship intangible asset. Adjusted operating income, which excludes these items in both periods, increased 8.4% year-over-year from higher revenue per order, continued cost reductions and lower medical expenses. |
• | Diluted EPS increased 8.4% year-over-year driven primarily by stronger operating performance and lower interest expense, partially offset by a higher effective tax rate compared to 2012. The 2012 tax rate benefited from favorable discrete items. Results for 2012 also included a charge of $0.07 per diluted share related to the early retirement of debt. |
• | Revenue was $284.6 million and increased 11.8% year-over-year due to growth in marketing solutions and other services, including the results of VerticalResponse which we acquired in the second quarter of 2013, as well as growth in accessories and checks and the impact of price increases. Additionally, the Safeguard® distributor and dealer channels grew in the quarter. |
• | Operating income increased 2.5% from last year to $44.8 million. Adjusted operating income, which excludes the 2013 asset impairment charge and restructuring-related costs in both periods, increased 16.0% year-over-year due primarily to higher revenue and cost reductions. |
• | Revenue was $86.5 million and increased 5.5% year-over-year due to price increases and growth in non-check products and services, partially offset by check usage declines. |
• | Operating income increased 4.4% from last year to $19.0 million, reflecting the continued benefits of cost reductions and price increases. Adjusted operating income, which excludes restructuring-related costs in both periods and transaction-related costs in 2013, improved about 7.7% from 2012. |
• | Revenue of $46.7 million declined 8.6% year-over-year. The decline was in line with expectations and a result of lower check order volumes. |
• | Operating income declined 10.7% year-over-year as a result of lower revenue, partially offset by cost reductions. |
• | Cash provided by operating activities for 2013 was $261.5 million, an increase of $17.5 million compared to 2012. Higher payments for incentive compensation related to our 2012 performance and higher income tax payments were more than offset by lower VEBA contributions to fund future medical benefits and lower interest expense, as well as lower contract acquisition payments. |
• | During the fourth quarter, the Company repurchased $15.0 million of common stock in open market transactions. For the full year, the company repurchased $48.8 million of common stock. |
• | The Board of Directors of Deluxe Corporation declared a regular quarterly dividend of $0.25 per common share on all outstanding shares of the Company. The dividend will be payable on March 3, 2014 to shareholders of record at the close of business on February 14, 2014. |
• | In late December 2013, the Company acquired Destination Rewards in an all-cash transaction for $20.1 million, net of acquired cash. Destination Rewards, a leading customer rewards and loyalty program provider, employs 196 people and will continue to be based in Boca Raton, Florida. The acquisition is expected to generate at least $15 million of revenue in 2014 and be approximately $0.03 dilutive to EPS in 2014 after acquisition-related amortization expense. |
First Quarter 2014: | Current outlook (1/23/2014) | ||
Revenue | $397 to $405 million | ||
Diluted EPS – GAAP | $0.91 to $0.96 |
Full Year 2014: | |||
Revenue | $1.610 to $1.650 billion | ||
Marketing Solutions and Other Services Revenue | $400 to $410 million | ||
Diluted EPS – GAAP | $3.90 to $4.10 | ||
Operating Cash Flow | $260 to $275 million | ||
Capital Expenditures | approximately $40 million | ||
Depreciation and Amortization | approximately $64 million | ||
Effective Tax Rate | approximately 34% |
• | February 11th and 12th - UBS Small-Mid Cap Conference in Boston |
• | February 24th - JPMorgan Global High Yield conference in Miami Beach |
• | February 25th and 26th - R. W. Baird Business Solutions Conference in New York |
• | March 10th and 11th - Credit Suisse 16th Annual Global Services Conference in Phoenix |
• | March 18th and 19th - Bank of America/Merrill Lynch Small-Mid Cap Conference in Boston |
• | A live conference call will be held today at 11:00 a.m. ET (10:00 a.m. CT) to review the financial results. Listeners can access the call by dialing 1-617-597-5380 (access code 50437691). A presentation also will be available via a simultaneous webcast on our investor relations website at www.deluxe.com/investor. |
• | Alternatively, an audio replay of the call will be available through midnight on January 30th by calling 1-617-801-6888 (access code 50924853#). |
Actual | |||||||
Q4 2013 | Q4 2012 | ||||||
Adjusted Diluted EPS | $1.04 | $0.95 | |||||
Net loss on repurchases of debt | — | (0.07 | ) | ||||
Restructuring and related costs | (0.07 | ) | (0.05 | ) | |||
Asset impairment charge | (0.06 | ) | — | ||||
Transaction-related costs | (0.01 | ) | — | ||||
Reported Diluted EPS | $0.90 | $0.83 |
Actual | |||||||
Total Year | Total Year | ||||||
2013 | 2012 | ||||||
Adjusted Diluted EPS | $3.87 | $3.53 | |||||
Restructuring and related costs | (0.14 | ) | (0.13 | ) | |||
Net loss on repurchases of debt | — | (0.07 | ) | ||||
Asset impairment charge | (0.06 | ) | — | ||||
Transaction-related costs | (0.02 | ) | (0.01 | ) | |||
Reported Diluted EPS | $3.65 | $3.32 |
Quarter Ended December 31, | |||||||||||||
2013 | 2012 | ||||||||||||
Product revenue | $354.9 | $339.2 | |||||||||||
Service revenue | 62.9 | 48.4 | |||||||||||
Total revenue | 417.8 | 387.6 | |||||||||||
Cost of products sold | (123.1 | ) | (29.5 | %) | (115.7 | ) | (29.9 | %) | |||||
Cost of services | (29.0 | ) | (6.9 | %) | (21.9 | ) | (5.7 | %) | |||||
Total cost of revenue | (152.1 | ) | (36.4 | %) | (137.6 | ) | (35.5 | %) | |||||
Gross profit | 265.7 | 63.6 | % | 250.0 | 64.5 | % | |||||||
Selling, general and administrative expense | (178.3 | ) | (42.7 | %) | (169.7 | ) | (43.8 | %) | |||||
Net restructuring charges | (4.4 | ) | (1.1 | %) | (2.5 | ) | (0.6 | %) | |||||
Asset impairment charge | (5.0 | ) | 4.1 | % | — | — | |||||||
Operating income | 78.0 | 18.7 | % | 77.8 | 20.1 | % | |||||||
Loss on early extinguishment of debt | — | — | (5.3 | ) | (1.4 | %) | |||||||
Interest expense | (9.6 | ) | (2.3 | %) | (11.9 | ) | (3.1 | %) | |||||
Other income | 0.4 | 0.1 | % | 0.3 | 0.1 | % | |||||||
Income before income taxes | 68.8 | 16.5 | % | 60.9 | 15.7 | % | |||||||
Income tax provision | (23.1 | ) | (5.5 | %) | (18.3 | ) | (4.7 | %) | |||||
Net income | $45.7 | 10.9 | % | $42.6 | 11.0 | % | |||||||
Weighted average dilutive shares outstanding | 50.9 | 51.1 | |||||||||||
Diluted earnings per share | $0.90 | $0.83 | |||||||||||
Capital expenditures | $10.7 | $9.6 | |||||||||||
Depreciation and amortization expense | 16.2 | 16.0 | |||||||||||
Number of employees-end of period | 5,575 | 5,476 | |||||||||||
Non-GAAP financial measure - EBITDA(1) | $94.6 | $88.8 | |||||||||||
Non-GAAP financial measure - Adjusted EBITDA(1) | 105.3 | 98.1 |
Quarter Ended December 31, | |||||||
2013 | 2012 | ||||||
Adjusted EBITDA | $105.3 | $98.1 | |||||
Restructuring and related costs | (5.3 | ) | (4.0 | ) | |||
Loss on early extinguishment of debt | — | (5.3 | ) | ||||
Asset impairment charge | (5.0 | ) | — | ||||
Transaction-related costs | (0.4 | ) | — | ||||
EBITDA | 94.6 | 88.8 | |||||
Income tax provision | (23.1 | ) | (18.3 | ) | |||
Interest expense | (9.6 | ) | (11.9 | ) | |||
Depreciation and amortization expense | (16.2 | ) | (16.0 | ) | |||
Net income | $45.7 | $42.6 |
Year Ended December 31, | |||||||||||||
2013 | 2012 | ||||||||||||
Product revenue | $1,369.7 | $1,345.9 | |||||||||||
Service revenue | 215.1 | 169.0 | |||||||||||
Total revenue | 1,584.8 | 1,514.9 | |||||||||||
Cost of products sold | (463.5 | ) | (29.2 | %) | (447.0 | ) | (29.5 | %) | |||||
Cost of services | (97.6 | ) | (6.2 | %) | (77.4 | ) | (5.1 | %) | |||||
Total cost of revenue | (561.1 | ) | (35.4 | %) | (524.4 | ) | (34.6 | %) | |||||
Gross profit | 1,023.7 | 64.6 | % | 990.5 | 65.4 | % | |||||||
Selling, general and administrative expense | (691.4 | ) | (43.6 | %) | (680.6 | ) | (44.9 | %) | |||||
Net restructuring charges | (9.4 | ) | (0.6 | %) | (7.9 | ) | (0.5 | %) | |||||
Asset impairment charge | (5.0 | ) | (0.3 | %) | — | — | |||||||
Operating income | 317.9 | 20.1 | % | 302.0 | 19.9 | % | |||||||
Loss on early extinguishment of debt | — | — | (5.3 | ) | (0.3 | %) | |||||||
Interest expense | (38.3 | ) | (2.4 | %) | (46.8 | ) | (3.1 | %) | |||||
Other income | 1.5 | 0.1 | % | 0.9 | 0.1 | % | |||||||
Income before income taxes | 281.1 | 17.7 | % | 250.8 | 16.6 | % | |||||||
Income tax provision | (94.4 | ) | (6.0 | %) | (80.3 | ) | (5.3 | %) | |||||
Net income | $186.7 | 11.8 | % | $170.5 | 11.3 | % | |||||||
Weighted average dilutive shares outstanding | 51.0 | 51.1 | |||||||||||
Diluted earnings per share | $3.65 | $3.32 | |||||||||||
Capital expenditures | $37.4 | $35.2 | |||||||||||
Depreciation and amortization expense | 64.5 | 65.7 | |||||||||||
Number of employees-end of period | 5,575 | 5,476 | |||||||||||
Non-GAAP financial measure - EBITDA(1) | $383.9 | $363.3 | |||||||||||
Non-GAAP financial measure - Adjusted EBITDA(1) | 401.0 | 379.8 |
Year Ended December 31, | |||||||
2013 | 2012 | ||||||
Adjusted EBITDA | $401.0 | $379.8 | |||||
Restructuring and related costs | (10.9 | ) | (10.8 | ) | |||
Loss on early extinguishment of debt | — | (5.3 | ) | ||||
Asset impairment charge | (5.0 | ) | — | ||||
Transaction-related costs | (1.2 | ) | (0.4 | ) | |||
EBITDA | 383.9 | 363.3 | |||||
Income tax provision | (94.4 | ) | (80.3 | ) | |||
Interest expense | (38.3 | ) | (46.8 | ) | |||
Depreciation and amortization expense | (64.5 | ) | (65.7 | ) | |||
Net income | $186.7 | $170.5 |
December 31, 2013 | December 31, 2012 | ||||||
Cash and cash equivalents | $121.1 | $45.4 | |||||
Other current assets | 198.2 | 174.3 | |||||
Property, plant & equipment-net | 101.3 | 104.2 | |||||
Intangibles-net | 153.6 | 150.7 | |||||
Goodwill | 822.8 | 789.6 | |||||
Other non-current assets | 172.5 | 148.2 | |||||
Total assets | $1,569.5 | $1,412.4 | |||||
Current portion of long-term debt | $255.6 | $— | |||||
Other current liabilities | 240.6 | 220.1 | |||||
Long-term debt | 385.1 | 652.6 | |||||
Deferred income taxes | 82.8 | 75.1 | |||||
Other non-current liabilities | 54.9 | 31.7 | |||||
Shareholders' equity | 550.5 | 432.9 | |||||
Total liabilities and shareholders' equity | $1,569.5 | $1,412.4 | |||||
Shares outstanding | 50.3 | 50.6 |
Year Ended December 31, | |||||||
2013 | 2012 | ||||||
Cash provided (used) by: | |||||||
Operating activities: | |||||||
Net income | $186.7 | $170.5 | |||||
Depreciation and amortization of intangibles | 64.5 | 65.7 | |||||
Loss on early extinguishment of debt | — | 5.3 | |||||
Asset impairment charge | 5.0 | — | |||||
Contract acquisition payments | (12.1 | ) | (17.0 | ) | |||
Other | 17.4 | 19.5 | |||||
Total operating activities | 261.5 | 244.0 | |||||
Investing activities: | |||||||
Purchases of capital assets | (37.4 | ) | (35.2 | ) | |||
Payments for acquisitions | (69.7 | ) | (34.2 | ) | |||
Proceeds from company-owned life insurance policies | 4.6 | — | |||||
Other | 1.5 | 0.9 | |||||
Total investing activities | (101.0 | ) | (68.5 | ) | |||
Financing activities: | |||||||
Net change in debt | (1.5 | ) | (88.9 | ) | |||
Dividends | (50.7 | ) | (50.9 | ) | |||
Share repurchases | (48.8 | ) | (27.2 | ) | |||
Shares issued under employee plans | 15.9 | 12.3 | |||||
Other | 2.8 | (4.8 | ) | ||||
Total financing activities | (82.3 | ) | (159.5 | ) | |||
Effect of exchange rate change on cash | (2.5 | ) | 0.7 | ||||
Net change in cash and cash equivalents | 75.7 | 16.7 | |||||
Cash and cash equivalents: Beginning of period | 45.4 | 28.7 | |||||
Cash and cash equivalents: End of period | $121.1 | $45.4 |
Quarter Ended December 31, | |||||||
2013 | 2012 | ||||||
Revenue: | |||||||
Small Business Services | $284.6 | $254.5 | |||||
Financial Services | 86.5 | 82.0 | |||||
Direct Checks | 46.7 | 51.1 | |||||
Total | $417.8 | $387.6 | |||||
Operating income: (1) | |||||||
Small Business Services | $44.8 | $43.7 | |||||
Financial Services | 19.0 | 18.2 | |||||
Direct Checks | 14.2 | 15.9 | |||||
Total | $78.0 | $77.8 | |||||
Operating margin: (1) | |||||||
Small Business Services | 15.7 | % | 17.2 | % | |||
Financial Services | 22.0 | % | 22.2 | % | |||
Direct Checks | 30.4 | % | 31.1 | % | |||
Total | 18.7 | % | 20.1 | % |
Year Ended December 31, | |||||||
2013 | 2012 | ||||||
Revenue: | |||||||
Small Business Services | $1,050.2 | $961.6 | |||||
Financial Services | 343.2 | 341.1 | |||||
Direct Checks | 191.4 | 212.2 | |||||
Total | $1,584.8 | $1,514.9 | |||||
Operating income: (1) | |||||||
Small Business Services | $175.9 | $160.4 | |||||
Financial Services | 82.3 | 77.7 | |||||
Direct Checks | 59.7 | 63.9 | |||||
Total | $317.9 | $302.0 | |||||
Operating margin: (1) | |||||||
Small Business Services | 16.7 | % | 16.7 | % | |||
Financial Services | 24.0 | % | 22.8 | % | |||
Direct Checks | 31.2 | % | 30.1 | % | |||
Total | 20.1 | % | 19.9 | % |
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Small Business Services | $8.1 | $1.9 | $11.2 | $6.5 | |||||||||||
Financial Services | 2.0 | 1.3 | 4.7 | 2.0 | |||||||||||
Direct Checks | 0.6 | 0.8 | 1.2 | 2.7 | |||||||||||
Total | $10.7 | $4.0 | $17.1 | $11.2 |
Quarter Ended December 31, | |||||||
2013 | 2012 | ||||||
Adjusted operating income: (1) | |||||||
Small Business Services | $52.9 | $45.6 | |||||
Financial Services | 21.0 | 19.5 | |||||
Direct Checks | 14.8 | 16.7 | |||||
Total | $88.7 | $81.8 | |||||
Adjusted operating margin: (1) | |||||||
Small Business Services | 18.6 | % | 17.9 | % | |||
Financial Services | 24.3 | % | 23.8 | % | |||
Direct Checks | 31.7 | % | 32.7 | % | |||
Total | 21.2 | % | 21.1 | % |
Year Ended December 31, | |||||||
2013 | 2012 | ||||||
Adjusted operating income: (1) | |||||||
Small Business Services | $187.1 | $166.9 | |||||
Financial Services | 87.0 | 79.7 | |||||
Direct Checks | 60.9 | 66.6 | |||||
Total | $335.0 | $313.2 | |||||
Adjusted operating margin: (1) | |||||||
Small Business Services | 17.8 | % | 17.4 | % | |||
Financial Services | 25.3 | % | 23.4 | % | |||
Direct Checks | 31.8 | % | 31.4 | % | |||
Total | 21.1 | % | 20.7 | % |
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Adjusted operating income | $88.7 | $81.8 | $335.0 | $313.2 | |||||||||||
Restructuring and transaction-related costs and asset impairment charge: | |||||||||||||||
Small Business Services | (8.1 | ) | (1.9 | ) | (11.2 | ) | (6.5 | ) | |||||||
Financial Services | (2.0 | ) | (1.3 | ) | (4.7 | ) | (2.0 | ) | |||||||
Direct Checks | (0.6 | ) | (0.8 | ) | (1.2 | ) | (2.7 | ) | |||||||
Total | (10.7 | ) | (4.0 | ) | (17.1 | ) | (11.2 | ) | |||||||
Reported operating income | $78.0 | $77.8 | $317.9 | $302.0 |