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 22, 2015, of Deluxe Corporation reporting results from fourth quarter 2014. |
DELUXE CORPORATION | ||
/s/ Anthony C. Scarfone | ||
Anthony C. Scarfone | ||
Senior Vice President, | ||
General Counsel and Secretary |
99.1 | Press Release, dated January 22, 2015, of Deluxe Corporation reporting results from fourth quarter 2014 |
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) 787-1370 | |
DELUXE REPORTS FOURTH QUARTER 2014 FINANCIAL RESULTS |
Revenue increases 7.3% over last year -- exceeds high end of outlook |
Diluted EPS $1.16; Adjusted EPS of $1.19 increases 14.4% -- exceeds high end of outlook |
Declares regular quarterly dividend |
Announces plan to redeem $200 Million 7.00% Senior Notes Due 2019 |
Q4 2014 | Q4 2013 | % Change | ||||||||
Revenue | $448.5 million | $417.8 million | 7.3 | % | ||||||
Net Income | $58.0 million | $45.7 million | 26.9 | % | ||||||
Diluted EPS – GAAP | $1.16 | $0.90 | 28.9 | % | ||||||
Adjusted Diluted EPS – Non-GAAP | $1.19 | $1.04 | 14.4 | % |
• | Revenue increased 7.3% year-over-year due to the Financial Services segment which included the results of Wausau Financial Systems, acquired in October 2014, and Destination Rewards, acquired in December 2013, and the Small Business Services segment which grew 5.8%. |
• | Revenue from marketing solutions and other services increased 30.5% year-over-year and accounted for 30.4% of total revenue in the quarter. |
• | Gross margin was 63.1% of revenue, down from 63.6% in the fourth quarter of 2013. The decline was primarily driven by an unfavorable product revenue mix and higher delivery and material costs, partially offset by a favorable services revenue mix. |
• | Selling, general and administrative (SG&A) expense increased 7.7% from last year primarily due to additional SG&A expense from acquisitions and higher performance-based compensation. SG&A as a percent of revenue was 42.8% in the quarter compared to 42.7% of revenue last year. |
• | Operating income increased 15.5% year-over-year and includes restructuring, transaction-related costs and impairment charges/loss on sale-leaseback in both periods. Adjusted operating income, which excludes these items, increased 4.3% year-over-year from higher revenue per order and continued cost reductions partially offset by higher performance-based compensation. |
• | Diluted EPS increased 28.9% year-over-year. Excluding restructuring, transaction-related costs and asset impairment charges/loss on sale-leaseback in both periods, adjusted diluted EPS increased 14.4% year-over-year driven by stronger operating performance, a favorable effective tax rate, and lower interest expense and shares outstanding. |
• | Revenue was $301.0 million and increased 5.8% year-over-year due to growth in marketing solutions and other services, growth in the Safeguard® distributor channel and the impact of previous price increases. |
• | Operating income increased 17.6% from last year to $52.7 million. Adjusted operating income, which excludes restructuring and transaction-related costs in both periods and an asset impairment charge in 2013, increased 1.1% year-over-year due primarily to higher revenue and cost reductions. |
• | Revenue was $105.1 million and increased 21.5% year-over-year due to growth in marketing solutions and other services and includes the results of Wausau Financial Systems and Destination Rewards, as well as the impact of previous price increases. The secular decline in check usage and the impact on pricing from a large financial institution contract renewal early in the second quarter partially offset these benefits. |
• | Operating income increased 26.3% from last year to $24.0 million. Adjusted operating income, which excludes restructuring and transaction-related costs in both periods, increased 18.1% year-over-year, reflecting previous price increases, higher margin marketing solutions and other services revenue and the continued benefits of cost reductions, partially offset by the secular declines in check usage and the large customer contract renewal. |
• | Revenue of $42.4 million declined 9.2% year-over-year due primarily to the secular decline in check usage and the elimination of marketing investments that no longer met the Company’s return criteria. |
• | Operating income decreased 5.6% year-over-year to $13.4 million. Adjusted operating income, which excludes restructuring costs in both periods and a loss on the sale-leaseback of a facility in 2014, decreased 4.1% as a result of lower revenue, partially offset by cost reductions. |
• | Cash provided by operating activities for 2014 was $280.4 million, an increase of $18.9 million compared to 2013, driven primarily by improved earnings, lower medical and performance-based compensation payments, and changes in working capital, partially offset by higher income tax payments and contract acquisition costs. |
• | The Company did not repurchase any common stock in open market transactions in the fourth quarter. For the full year, the Company repurchased $60.1 million of common stock. |
• | On January 20, 2015, the Board of Directors of Deluxe Corporation declared a regular quarterly dividend of $0.30 per common share on all outstanding shares of the Company. The dividend will be payable on March 2, 2015 to all shareholders of record at the close of business on February 17, 2015. |
• | The Company also announced its plan to redeem all of its $200 million 7.00% Senior Notes Due 2019 which are callable on March 15, 2015. The early debt retirement will generate a first quarter charge to EPS of approximately $0.12 per share related to a contractual call premium and associated fees. The early debt retirement is expected to be financed primarily with the existing credit facility and the issuance of a short-term bank loan. |
First Quarter 2015: | Current Outlook (1/22/2015) | ||
Revenue | $426 to $434 million | ||
Diluted EPS – GAAP | $0.87 to $0.92 | ||
Adjusted Diluted EPS – Non-GAAP | $0.99 to $1.04 |
Full Year 2015: | |||
Revenue | $1.74 to $1.78 billion | ||
Marketing Solutions & Other Services Revenue | approx. $520 to $535 million | ||
Diluted EPS – GAAP | $4.23 to $4.43 | ||
Adjusted Diluted EPS – Non-GAAP | $4.35 to $4.55 | ||
Operating Cash Flow | $290 to $305 million | ||
Capital Expenditures | approx. $40 million | ||
Depreciation and Amortization | approx. $76 million | ||
Cost Expense Reductions | approx. $50 million | ||
Effective Tax Rate | approx. 33.5% |
• | 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 1-857-244-7308 (access code 36936572). 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 on the investor relations website or by calling 1-617-801-6888 (access code 77993519). |
• | February 23 & 24 - J.P. Morgan Global High Yield & Leveraged Finance Conference in Miami |
• | February 25 - Robert W. Baird & Company 2015 Business Solutions Conference in New York |
• | March 11 - Credit Suisse Global Services Conference in New York |
• | March 17 - Sidoti & Company Conference in New York |
• | March 18 - Northland Capital Growth Conference in New York |
• | March 25 - Telsey Advisory Group (TAG) Spring Consumer Conference in New York |
Actual | |||||||||||||||
Q4 2014 | Q4 2013 | Total Year 2014 | Total Year 2013 | ||||||||||||
Adjusted Diluted EPS | $1.19 | $1.04 | $4.20 | $3.87 | |||||||||||
Restructuring-related costs | (0.01 | ) | (0.07 | ) | (0.12 | ) | (0.14 | ) | |||||||
Asset impairment charges/loss on sale-leaseback | (0.01 | ) | (0.06 | ) | (0.10 | ) | (0.06 | ) | |||||||
Transaction-related costs | (0.01 | ) | (0.01 | ) | (0.02 | ) | (0.02 | ) | |||||||
Reported Diluted EPS | $1.16 | $0.90 | $3.96 | $3.65 |
Outlook | |||||
Q1 2015 | Total Year 2015 | ||||
Adjusted Diluted EPS | $0.99 to $1.04 | $4.35 to $4.55 | |||
Net loss on repurchase of debt | (0.12 | ) | (0.12 | ) | |
Reported Diluted EPS | $0.87 to $0.92 | $4.23 to $4.43 |
Quarter Ended December 31, | |||||||||||||
2014 | 2013 | ||||||||||||
Product revenue | $370.1 | $354.9 | |||||||||||
Service revenue | 78.4 | 62.9 | |||||||||||
Total revenue | 448.5 | 417.8 | |||||||||||
Cost of products | (138.0 | ) | (30.8 | %) | (123.1 | ) | (29.5 | %) | |||||
Cost of services | (27.3 | ) | (6.1 | %) | (29.0 | ) | (6.9 | %) | |||||
Total cost of revenue | (165.3 | ) | (36.9 | %) | (152.1 | ) | (36.4 | %) | |||||
Gross profit | 283.2 | 63.1 | % | 265.7 | 63.6 | % | |||||||
Selling, general and administrative expense | (192.1 | ) | (42.8 | %) | (178.3 | ) | (42.7 | %) | |||||
Net restructuring charges | (0.3 | ) | (0.1 | %) | (4.4 | ) | (1.1 | %) | |||||
Asset impairment charge | — | — | (5.0 | ) | (1.2 | %) | |||||||
Net loss on sale-leaseback of facility | (0.7 | ) | (0.2 | %) | — | — | |||||||
Operating income | 90.1 | 20.1 | % | 78.0 | 18.7 | % | |||||||
Interest expense | (7.8 | ) | (1.7 | %) | (9.6 | ) | (2.3 | %) | |||||
Other income | 0.3 | 0.1 | % | 0.4 | 0.1 | % | |||||||
Income before income taxes | 82.6 | 18.4 | % | 68.8 | 16.5 | % | |||||||
Income tax provision | (24.6 | ) | (5.5 | %) | (23.1 | ) | (5.5 | %) | |||||
Net income | $58.0 | 12.9 | % | $45.7 | 10.9 | % | |||||||
Weighted average dilutive shares outstanding | 50.0 | 50.9 | |||||||||||
Diluted earnings per share | $1.16 | $0.90 | |||||||||||
Capital expenditures | $11.5 | $10.7 | |||||||||||
Depreciation and amortization expense | 17.3 | 16.2 | |||||||||||
Number of employees-end of period | 5,830 | 5,575 | |||||||||||
Non-GAAP financial measure - EBITDA(1) | $107.7 | $94.6 | |||||||||||
Non-GAAP financial measure - Adjusted EBITDA(1) | 110.1 | 105.3 |
Quarter Ended December 31, | |||||||
2014 | 2013 | ||||||
Adjusted EBITDA | $110.1 | $105.3 | |||||
Restructuring-related costs | (0.9 | ) | (5.3 | ) | |||
Transaction-related costs | (0.8 | ) | (0.4 | ) | |||
Asset impairment charges/loss on sale-leaseback | (0.7 | ) | (5.0 | ) | |||
EBITDA | 107.7 | 94.6 | |||||
Income tax provision | (24.6 | ) | (23.1 | ) | |||
Interest expense | (7.8 | ) | (9.6 | ) | |||
Depreciation and amortization expense | (17.3 | ) | (16.2 | ) | |||
Net income | $58.0 | $45.7 |
Year Ended December 31, | |||||||||||||
2014 | 2013 | ||||||||||||
Product revenue | $1,410.9 | $1,369.7 | |||||||||||
Service revenue | 263.2 | 215.1 | |||||||||||
Total revenue | 1,674.1 | 1,584.8 | |||||||||||
Cost of products | (501.9 | ) | (30.0 | %) | (463.5 | ) | (29.2 | %) | |||||
Cost of services | (104.4 | ) | (6.2 | %) | (97.6 | ) | (6.2 | %) | |||||
Total cost of revenue | (606.3 | ) | (36.2 | %) | (561.1 | ) | (35.4 | %) | |||||
Gross profit | 1,067.8 | 63.8 | % | 1,023.7 | 64.6 | % | |||||||
Selling, general and administrative expense | (719.2 | ) | (43.0 | %) | (691.4 | ) | (43.6 | %) | |||||
Net restructuring charges | (8.8 | ) | (0.5 | %) | (9.4 | ) | (0.6 | %) | |||||
Asset impairment charges | (6.5 | ) | (0.4 | %) | (5.0 | ) | (0.3 | %) | |||||
Net loss on sale-leaseback of facility | (0.7 | ) | — | — | — | ||||||||
Operating income | 332.6 | 19.9 | % | 317.9 | 20.1 | % | |||||||
Interest expense | (36.5 | ) | (2.2 | %) | (38.3 | ) | (2.4 | %) | |||||
Other income | 1.1 | 0.1 | % | 1.5 | 0.1 | % | |||||||
Income before income taxes | 297.2 | 17.8 | % | 281.1 | 17.7 | % | |||||||
Income tax provision | (97.4 | ) | (5.8 | %) | (94.4 | ) | (6.0 | %) | |||||
Net income | $199.8 | 11.9 | % | $186.7 | 11.8 | % | |||||||
Weighted average dilutive shares outstanding | 50.3 | 51.0 | |||||||||||
Diluted earnings per share | $3.96 | $3.65 | |||||||||||
Capital expenditures | $41.1 | $37.4 | |||||||||||
Depreciation and amortization expense | 65.8 | 64.5 | |||||||||||
Number of employees-end of period | 5,830 | 5,575 | |||||||||||
Non-GAAP financial measure - EBITDA(1) | $399.5 | $383.9 | |||||||||||
Non-GAAP financial measure - Adjusted EBITDA(1) | 418.0 | 401.0 |
Year Ended December 31, | |||||||
2014 | 2013 | ||||||
Adjusted EBITDA | $418.0 | $401.0 | |||||
Restructuring-related costs | (9.7 | ) | (10.9 | ) | |||
Transaction-related costs | (1.3 | ) | (1.2 | ) | |||
Asset impairment charges/loss on sale-leaseback | (7.5 | ) | (5.0 | ) | |||
EBITDA | 399.5 | 383.9 | |||||
Income tax provision | (97.4 | ) | (94.4 | ) | |||
Interest expense | (36.5 | ) | (38.3 | ) | |||
Depreciation and amortization expense | (65.8 | ) | (64.5 | ) | |||
Net income | $199.8 | $186.7 |
December 31, 2014 | December 31, 2013 | ||||||
Cash and cash equivalents | $61.5 | $121.1 | |||||
Other current assets | 257.4 | 198.2 | |||||
Property, plant & equipment-net | 87.6 | 101.3 | |||||
Intangibles-net | 207.2 | 153.6 | |||||
Goodwill | 868.4 | 822.8 | |||||
Other non-current assets | 206.3 | 172.5 | |||||
Total assets | $1,688.4 | $1,569.5 | |||||
Short-term debt and current portion of long-term debt | $160.9 | $255.6 | |||||
Other current liabilities | 306.4 | 234.4 | |||||
Long-term debt | 393.4 | 385.1 | |||||
Deferred income taxes | 95.8 | 82.8 | |||||
Other non-current liabilities | 84.4 | 61.1 | |||||
Shareholders' equity | 647.5 | 550.5 | |||||
Total liabilities and shareholders' equity | $1,688.4 | $1,569.5 | |||||
Shares outstanding | 49.7 | 50.3 |
Year Ended December 31, | |||||||
2014 | 2013 | ||||||
Cash provided (used) by: | |||||||
Operating activities: | |||||||
Net income | $199.8 | $186.7 | |||||
Depreciation and amortization of intangibles | 65.8 | 64.5 | |||||
Asset impairment charges | 6.5 | 5.0 | |||||
Contract acquisition payments | (16.6 | ) | (12.1 | ) | |||
Other | 24.9 | 17.4 | |||||
Total operating activities | 280.4 | 261.5 | |||||
Investing activities: | |||||||
Purchases of capital assets | (41.1 | ) | (37.4 | ) | |||
Payments for acquisitions | (105.0 | ) | (69.7 | ) | |||
Proceeds from sale of facility | 8.5 | — | |||||
Proceeds from company-owned life insurance policies | 0.9 | 4.6 | |||||
Other | 0.7 | 1.5 | |||||
Total investing activities | (136.0 | ) | (101.0 | ) | |||
Financing activities: | |||||||
Net change in debt | (94.5 | ) | (1.5 | ) | |||
Dividends | (57.6 | ) | (50.7 | ) | |||
Share repurchases | (60.1 | ) | (48.8 | ) | |||
Shares issued under employee plans | 9.1 | 15.9 | |||||
Other | 3.7 | 2.8 | |||||
Total financing activities | (199.4 | ) | (82.3 | ) | |||
Effect of exchange rate change on cash | (4.6 | ) | (2.5 | ) | |||
Net change in cash and cash equivalents | (59.6 | ) | 75.7 | ||||
Cash and cash equivalents: Beginning of period | 121.1 | 45.4 | |||||
Cash and cash equivalents: End of period | $61.5 | $121.1 |
Quarter Ended December 31, | |||||||
2014 | 2013 | ||||||
Revenue: | |||||||
Small Business Services | $301.0 | $284.6 | |||||
Financial Services | 105.1 | 86.5 | |||||
Direct Checks | 42.4 | 46.7 | |||||
Total | $448.5 | $417.8 | |||||
Operating income: (1) | |||||||
Small Business Services | $52.7 | $44.8 | |||||
Financial Services | 24.0 | 19.0 | |||||
Direct Checks | 13.4 | 14.2 | |||||
Total | $90.1 | $78.0 | |||||
Operating margin: (1) | |||||||
Small Business Services | 17.5 | % | 15.7 | % | |||
Financial Services | 22.8 | % | 22.0 | % | |||
Direct Checks | 31.6 | % | 30.4 | % | |||
Total | 20.1 | % | 18.7 | % |
Year Ended December 31, | |||||||
2014 | 2013 | ||||||
Revenue: | |||||||
Small Business Services | $1,129.3 | $1,050.2 | |||||
Financial Services | 368.4 | 343.2 | |||||
Direct Checks | 176.4 | 191.4 | |||||
Total | $1,674.1 | $1,584.8 | |||||
Operating income: (1) | |||||||
Small Business Services | $188.3 | $175.9 | |||||
Financial Services | 86.8 | 82.3 | |||||
Direct Checks | 57.5 | 59.7 | |||||
Total | $332.6 | $317.9 | |||||
Operating margin: (1) | |||||||
Small Business Services | 16.7 | % | 16.7 | % | |||
Financial Services | 23.6 | % | 24.0 | % | |||
Direct Checks | 32.6 | % | 31.2 | % | |||
Total | 19.9 | % | 20.1 | % |
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Small Business Services | $0.8 | $8.1 | $13.0 | $11.2 | |||||||||||
Financial Services | 0.8 | 2.0 | 4.1 | 4.7 | |||||||||||
Direct Checks | 0.8 | 0.6 | 1.1 | 1.2 | |||||||||||
Total | $2.4 | $10.7 | $18.2 | $17.1 |
Quarter Ended December 31, | |||||||
2014 | 2013 | ||||||
Adjusted operating income: (1) | |||||||
Small Business Services | $53.5 | $52.9 | |||||
Financial Services | 24.8 | 21.0 | |||||
Direct Checks | 14.2 | 14.8 | |||||
Total | $92.5 | $88.7 | |||||
Adjusted operating margin: (1) | |||||||
Small Business Services | 17.8 | % | 18.6 | % | |||
Financial Services | 23.6 | % | 24.3 | % | |||
Direct Checks | 33.5 | % | 31.7 | % | |||
Total | 20.6 | % | 21.2 | % |
Year Ended December 31, | |||||||
2014 | 2013 | ||||||
Adjusted operating income: (1) | |||||||
Small Business Services | $201.3 | $187.1 | |||||
Financial Services | 90.9 | 87.0 | |||||
Direct Checks | 58.6 | 60.9 | |||||
Total | $350.8 | $335.0 | |||||
Adjusted operating margin: (1) | |||||||
Small Business Services | 17.8 | % | 17.8 | % | |||
Financial Services | 24.7 | % | 25.3 | % | |||
Direct Checks | 33.2 | % | 31.8 | % | |||
Total | 21.0 | % | 21.1 | % |
Quarter Ended December 31, | Year Ended December 31, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Adjusted operating income | $92.5 | $88.7 | $350.8 | $335.0 | |||||||||||
Asset impairment charges/loss on sale-leaseback, restructuring and transaction-related costs: | |||||||||||||||
Small Business Services | (0.8 | ) | (8.1 | ) | (13.0 | ) | (11.2 | ) | |||||||
Financial Services | (0.8 | ) | (2.0 | ) | (4.1 | ) | (4.7 | ) | |||||||
Direct Checks | (0.8 | ) | (0.6 | ) | (1.1 | ) | (1.2 | ) | |||||||
Total | (2.4 | ) | (10.7 | ) | (18.2 | ) | (17.1 | ) | |||||||
Reported operating income | $90.1 | $78.0 | $332.6 | $317.9 |