-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, R2yyKiuCJ+vg3HxtPZv48CSJILukLChSaDXFgB5m15poO6f0YJW9Lra4IrhWqM7h gFCx33y6C1UsDCvvFyJVBQ== 0000912057-94-002690.txt : 19940822 0000912057-94-002690.hdr.sgml : 19940822 ACCESSION NUMBER: 0000912057-94-002690 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELUXE CORP CENTRAL INDEX KEY: 0000027996 STANDARD INDUSTRIAL CLASSIFICATION: 2780 IRS NUMBER: 410216800 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07945 FILM NUMBER: 94544107 BUSINESS ADDRESS: STREET 1: 1080 W COUNTY RD F CITY: ST PAUL STATE: MN ZIP: 55126-8201 BUSINESS PHONE: 6124837111 FORMER COMPANY: FORMER CONFORMED NAME: DELUXE CHECK PRINTERS INC DATE OF NAME CHANGE: 19880608 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended June 30, 1994 -------------------------------------------- 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: 1-7945 --------------------------------- DELUXE CORPORATION - - ---------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) MINNESOTA 41-0216800 - - ---------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1080 West County Road "F", St. Paul, Minnesota 55126-8201 - - ---------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (612) 483-7111 - - ------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 number of shares outstanding of registrant's common stock, par value $1.00 per share, at August 1, 1994 was 82,551,699. 1 PART I. FINANCIAL INFORMATION Item 1. Financial Statements DELUXE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
June 30, 1994 December 31, (Unaudited) 1993 ------------- ------------ CURRENT ASSETS Cash and cash equivalents $39,779 $114,103 Marketable securities 66,421 107,705 Trade accounts receivable 132,223 123,119 Inventories: Raw material 22,132 18,260 Semi-finished goods 24,157 21,155 Finished goods 36,275 29,989 Supplies 15,614 15,915 Deferred advertising 15,851 26,080 Deferred income taxes 29,633 28,914 Prepaid expenses and other current assets 50,828 37,123 ---------- ---------- Total current assets 432,913 522,363 ---------- ---------- LONG-TERM INVESTMENTS 40,674 34,815 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT Land 30,706 32,706 Buildings and improvements 259,945 261,974 Machinery and equipment 513,468 483,853 Construction in progress 2,289 1,360 ---------- ---------- Total 806,408 779,893 Less accumulated depreciation 393,095 378,252 ---------- ---------- Property, plant, and equipment - net 413,313 401,641 ---------- ---------- INTANGIBLES Cost in excess of net assets acquired - net 275,533 246,104 Other intangible assets - net 46,038 47,071 ---------- ---------- Total intangibles 321,571 293,175 ---------- ---------- TOTAL ASSETS 1,208,471 $1,251,994 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $53,330 $50,424 Accrued liabilities: Wages, including vacation pay 59,314 45,584 Employee profit sharing and pension 32,361 59,560 Restructuring costs 17,871 35,489 Accrued rebates 29,900 26,473 Income taxes 3,847 Other 54,873 69,527 Long-term debt due within one year 7,387 6,967 ---------- ---------- Total current liabilities 255,036 297,871 ---------- ---------- LONG-TERM DEBT 110,187 110,755 ---------- ---------- DEFERRED INVESTMENT CREDIT 958 1,224 ---------- ---------- DEFERRED INCOME TAXES 40,209 40,895 ---------- ---------- SHAREHOLDERS' EQUITY Common shares - $1 par value (authorized 500,000,000 shares; issued: 82,360,810) 82,361 82,549 Additional paid in capital 341 Retained earnings 721,690 719,046 Cumulative translation adjustment (213) (687) Net unrealized change - marketable securities (1,757) ---------- ---------- Total shareholders' equity 802,081 801,249 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,208,471 $1,251,994 ---------- ---------- ---------- ----------
See Notes to Consolidated Financial Statements 2 DELUXE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands Except per Share Amounts) (Unaudited)
QUARTER ENDED JUNE 30 SIX MONTHS ENDED JUNE 30 -------------------------- --------------------------- 1994 1993 1994 1993 ------ ------ ------ ------ NET SALES $412,344 $362,868 $842,332 $768,616 -------- -------- -------- -------- OPERATING EXPENSES Cost of sales 189,225 168,908 385,899 354,785 Selling, general, and administrative 148,867 108,810 297,333 226,490 Employee profit sharing and pension 15,597 15,468 30,443 31,037 Employee bonus and stock purchase discount 6,506 5,912 12,670 12,616 Restructuring Charge 60,000 60,000 -------- -------- -------- -------- Total 360,195 359,098 726,345 684,928 -------- -------- -------- -------- INCOME FROM OPERATIONS 52,149 3,770 115,987 83,688 OTHER INCOME (EXPENSE) Investment and other income 943 3,690 5,669 7,941 Interest expense (2,522) (2,435) (6,300) (4,884) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 50,570 5,025 115,356 86,745 -------- -------- -------- -------- PROVISION FOR INCOME TAXES Federal income tax 17,373 2,472 39,876 27,105 State income taxes 3,641 307 7,883 5,602 -------- -------- -------- -------- Total 21,014 2,779 47,759 32,707 -------- -------- -------- -------- NET INCOME $29,556 $2,246 $67,597 $54,038 -------- -------- -------- -------- -------- -------- -------- -------- AVERAGE COMMON SHARES OUTSTANDING 82,324,840 82,984,424 82,428,636 83,274,796 NET INCOME PER COMMON SHARE $ .36 $ .03 $ .82 $ . 65 CASH DIVIDENDS PER COMMON SHARE $ .36 $ .35 $ .72 $ .70
See Notes to Consolidated Financial Statements 3 DELUXE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1994 and 1993 (Dollars in Thousands) (Unaudited)
1994 1993 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $67,597 $54,038 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 28,603 27,174 Amortization of intangibles 12,350 7,478 Stock purchase discount 4,175 4,236 Deferred income taxes and investment credit (167) (22,333) Changes in assets and liabilities: Trade accounts receivable (6,155) 19 Inventories (12,336) (3,554) Accounts payable 1,578 (3,372) Restructuring costs (17,618) 58,293 Other assets and liabilities (17,144) (21,393) ------- -------- Net cash provided by operating activities 60,883 100,586 ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of marketable securities with maturities of more than 3 months (13,115) (112,810) Proceeds from sales of marketable securities with maturities of more than 3 months 32,501 88,482 Net change in marketable securities with maturities of 3 months or less 20,000 (16,100) Purchases of property, plant, and equipment (47,646) (39,043) Payments for acquistions, net of cash acquired (36,993) Other (18,411) (4,872) ------- -------- Net cash used in investing activities (63,664) (84,343) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Payments on long-term debt (1,691) (7,616) Payments to retire common stock (23,047) (70,985) Proceeds from issuing stock under employee plans 12,646 15,279 Cash dividends paid to shareholders (59,451) (58,454) ------- -------- Net cash used in financing activities (71,543) (121,776) ------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (74,324) (105,533) ------- -------- CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 114,103 275,172 ------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $39,779 $169,639 ------- -------- ------- --------
See Notes to Consolidated Financial Statements 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of June 30, 1994, the related consolidated statements of income for the three-month and six-month periods ended June 30, 1994 and 1993 and the consolidated statements of cash flows for the six-month periods ended June 30, 1994 and 1993 are unaudited; in the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of normal recurring items. Interim results are not necessarily indicative of results for a full year. The financial statements and notes are presented in accordance with instructions for Form 10-Q, and do not contain certain information included in the Company's annual financial statements and notes. 2. Effective January 1, 1994 the Company adopted Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities." As a result, the carrying value of the Company's marketable securities was reduced to reflect market value. The Company classifies all marketable securities as available for sale. Accordingly, the reduction of $1,757,000 as of June 30, 1994 is recorded as a component of shareholders' equity. 3. Effective January 1, 1994 the Company adopted Statement of Financial Accounting Standards (SFAS) No. 112 "Employers' Accounting for Postemployment Benefits." SFAS 112 requires the Company to accrue the estimated cost of post employment benefit payments during the years in which employees provide services. The adoption of SFAS 112 did not have a material effect on the Company's financial position or results of operations. 4. During the second quarter of 1994, the Company acquired all of the outstanding stock of National Revenue Corporation, which is included in the Electronic Payment Systems Division, and T-Maker, Inc., which is included in the Business Systems Division, for a combined total of $37 million. The Company recorded these acquisitions under the purchase method of accounting. These acquisitions did not have a material proforma impact on operations. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO SIX MONTHS ENDED JUNE 30, 1993 Net sales were $842.3 million for the first six months of 1994, up 9.6% over the first six months of 1993, when sales were $768.6 million. The Payment Systems segment revenue for the first six months of 1994 decreased 2.8% from the first six months of 1993. A decline in revenue due to a slight decline in check printing orders from financial institutions (FIs) and continued price competition in the FI market was offset by a 23.8% increase in revenue from the Company's electronic payment systems subsidiaries. Deluxe's Business Systems segment posted a 51.6% increase in revenue for the first six months of 1994 over the first six months of 1993 primarily due to the contribution of PaperDirect, Inc., which the Company acquired in the third quarter of 1993, and the growth of the Company's Canadian and United Kingdom operations. Revenue for the Consumer Specialty Products segment increased 29.6% as a result of Current's strong sales in its social expressions and direct mail check printing product lines. Selling, general and administrative expenses increased $70.8 million or 31.3% for the first six months of 1994 over the first six months of 1993. The Business Systems segment's expenses increased approximately $37.9 million primarily due to the acquisition of PaperDirect, Inc. Also, the Consumer Specialty Products segment increased its selling expense by approximately $19.5 million, primarily due to increased advertising. Net income was $67.6 million for the first six months of 1994, or 8.0% of sales, compared to $54.0 million for the first six months of 1993 or 7.0% of sales. 1993 net income includes a one-time, pretax charge of $60 million for costs related to the restructuring of the Check Printing division taken in the second quarter of 1993. RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1994 COMPARED TO THREE MONTHS ENDED JUNE 30, 1993 Net sales were $412.3 million for the second quarter of 1994, up 13.6% over the second quarter of 1993, when sales were $362.9 million. The second quarter Payment Systems segment's revenue was approximately the same as the second quarter of 1993. A decline in revenue from financial institutions (FIs) due to continued price competition in the FI market was offset by a 29.1% increase in revenue from the Company's electronic payment systems subsidiaries. Deluxe's Business Systems segment posted a 65.1% increase in revenue in the second quarter of 1994 over second quarter 1993 primarily due to the contribution of PaperDirect, Inc., which the Company acquired in the third quarter of 1993, and the growth of the Company's Canadian and United Kingdom operations. Revenue for the Consumer Specialty Products segment increased 42.4% as a result of Current's strong sales in its social expressions and direct mail check printing product lines. Selling, general and administrative expenses increased $40.1 million or 36.8% in second quarter 1994 over second quarter 1993. The Business Systems segment's expenses increased approximately $21.8 million primarily due to the acquisition of PaperDirect, Inc. Also, the Consumer Specialty Products segment increased its selling expense by approximately $9.5 million, primarily due to increased advertising. Net income was $29.6 million in the second quarter of 1994, or 7.2% of sales, compared to $2.2 million in 1993 or 0.6% of sales. Second quarter 1993 net income includes a one-time, pretax charge of $60 million for costs related to the restructuring of the Check Printing division. FINANCIAL CONDITION - LIQUIDITY Cash provided by operations was $60.9 million for the first six months of 1994, compared with $100.6 million for the first six months of 1993. This represents the Company's primary source of working capital for financing capital expenditures, acquisitions, and paying cash dividends. The decline in 1994 is primarily the result of cash payments related to the 1993 restructuring of the Company's financial institution check printing operations. The Company's working capital on June 30, 1994 was $177.9 million, compared to $224.5 million on December 31, 1993. The decrease in 1994 is primarily the result of the acquisitions of National Revenue Corporation and T-Maker, Inc.. The current ratio was 1.7 to 1 on June 30, 1994 and 1.8 to 1 on December 31, 1993. 6 Financial Condition - Capital Resources Purchases of property, plant, and equipment totaled $47.6 million for the first six months of 1994, compared to $39.0 million one year ago. The Company anticipates total capital expenditures of approximately $85 million in 1994 for new electronic payment system investments, further enhancements to printing capabilities, and additional production facilities for the manufacturing of its new water-washable ink, Printwise. In February 1991, the Company issued $100 million in notes payable under its 1989 registration of $150 million in debt securities. The Company also has available unsecured bank lines of credit of $55 million should current cash resources and cash provided by operations prove to be inadequate. The Company may incur additional borrowings during the remainder of the year to finance acquisitions. Cash dividends totaled $59.5 million for the first six months of 1994 compared to $58.5 million for the first six months of 1993. 7 PART II. OTHER INFORMATION ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its annual shareholders' meeting on May 10, 1994: 72,929,858 shares were represented (88.38% of the 82,518,073 shares outstanding). 1. Election of Directors: The nominees listed in the proxy statement were: Haverty, Olson, Asplin, Schreiner, Twogood, MacMillan, Renier, Grogan and Jacobson. The results were as follows: For all nominees: 71,776,615 Withheld as to all nominees: 931,288 Withheld as to fewer than all nominees: 221,955 2. Approval of employee stock purchase plan: For: 63,316,099 Against: 4,645,156 Abstain: 526,393 Broker Non-Vote: 4,442,210 3. Approval of stock incentive plan: For: 58,305,807 Against: 9,227,955 Abstain: 953,886 Broker Non-Vote: 4,442,210 4. Approval of performance share plan: For: 60,225,750 Against: 7,248,900 Abstain: 1,012,998 Broker Non-Vote: 4,442,210 5. Approval of annual incentive plan: For: 66,253,089 Against: 5,683,558 Abstain: 993,211 Broker Non-Vote: 0 6. Ratification of appointment of Deloitte & Touche as independent auditors: For: 72,264,884 Against: 212,159 Abstain: 452,815 Broker Non-Vote: 0 8 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) None (b) The Company did not, and was not required to, file any reports on Form 8-K during the quarter for which this report is filed. 9 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. DELUXE CORPORATION (Registrant) Date August 11, 1994 /s/ H. V. Haverty ---------------------- ---------------------------------------- H. V. Haverty, Chairman, President and Chief Executive Officer (Principal Executive Officer) Date August 11, 1994 /s/ C. M. Osborne ---------------------- ----------------------------------------- C. M. Osborne, Senior Vice President and Chief Financial Officer (Principal Financial Officer) 10 -----END PRIVACY-ENHANCED MESSAGE-----