-----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, saQ5XR/hsX++Yf4TNfmqdKu0fd/8K4HHutk7aZ+n8EwkXkRd2mUQwFnTIf+YY4UX QtdFx725+6Uywya1Zc4KgQ== 0000912057-94-003917.txt : 19941129 0000912057-94-003917.hdr.sgml : 19941129 ACCESSION NUMBER: 0000912057-94-003917 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941115 SROS: NYSE 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: 94560364 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 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 September 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 November 1, 1994 was 82,586,882. 1 ITEM I. FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION DELUXE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
September 31, 1994 December 31, (Unaudited) 1993 ------------------ ------------ CURRENT ASSETS Cash and cash equivalents $40,337 $114,103 Marketable securities 55,619 107,705 Trade accounts receivable 138,908 123,119 Inventories: Raw material 23,608 18,260 Semi-finished goods 27,886 21,155 Finished goods 39,873 29,989 Supplies 18,396 15,915 Deferred advertising 14,795 26,080 Deferred income taxes 29,633 28,914 Prepaid expenses and other current assets 56,916 37,123 ---------- ---------- Total current assets 445,971 522,363 LONG-TERM INVESTMENTS 43,439 34,815 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT Land 31,035 32,706 Buildings and improvements 270,223 261,974 Machinery and equipment 523,623 483,853 Construction in progress 3,955 1,360 ---------- ---------- Total 828,836 779,893 Less accumulated depreciation 401,954 378,252 ---------- ---------- Property, plant, and equipment - net 426,882 401,641 ---------- ---------- INTANGIBLES Cost in excess of net assets acquired - net 285,794 246,104 Other intangible assets - net 45,522 47,071 ---------- ---------- Total intangibles 331,316 293,175 ---------- ---------- TOTAL ASSETS $1,247,608 $1,251,994 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $61,281 $50,424 Accrued liabilities: Wages, including vacation pay 57,668 45,584 Employee profit sharing and pension 44,072 59,560 Restructuring costs 6,166 35,489 Accrued rebates 29,414 26,473 Income taxes 8,298 3,847 Other 60,070 69,527 Short term debt 18,000 Long-term debt due within one year 7,409 6,967 ---------- ---------- Total current liabilities 292,378 297,871 ---------- ---------- LONG-TERM DEBT 110,823 110,755 ---------- ---------- DEFERRED INCOME TAXES 40,298 42,119 ---------- ---------- SHAREHOLDERS' EQUITY Common shares - $1 par value (authorized 500,000,000 shares; issued: 82,319,595) 82,320 82,549 Additional paid in capital 341 Retained earnings 722,716 719,046 Cumulative translation adjustment 695 (687) Unearned compensation (165) Net unrealized change - marketable securities (1,457) ---------- ---------- Total shareholders' equity $804,109 $801,249 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,247,608 $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 SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30 --------------------------- ------------------------------ 1994 1993 1994 1993 ---------- ---------- ---------- ---------- NET SALES $426,654 $371,974 $1,268,986 $1,140,590 ---------- ---------- ---------- ---------- OPERATING EXPENSES Cost of sales 195,914 173,376 581,813 528,160 Selling, general, and administrative 160,601 116,148 457,935 342,638 Employee profit sharing and pension 15,383 14,660 45,826 45,697 Employee bonus and stock purchase discount 4,946 3,671 17,615 16,287 Restructuring (credit) charge (10,000) (10,000) 60,000 ---------- ---------- ---------- ---------- Total 366,844 307,855 1,093,189 992,782 ---------- ---------- ---------- ---------- INCOME FROM OPERATIONS 59,810 64,119 175,797 147,808 OTHER INCOME (EXPENSE) Investment and other income 1,593 2,796 7,261 10,737 Interest expense (2,592) (2,710) (8,891) (7,594) ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 58,811 64,205 174,167 150,951 ---------- ---------- ---------- PROVISION FOR INCOME TAXES Federal income tax 22,160 23,197 62,037 50,303 State income taxes 3,376 4,012 11,257 9,614 ---------- ---------- ---------- ---------- Total 25,536 27,209 73,294 59,917 ---------- ---------- ---------- ---------- NET INCOME $33,275 $36,996 $100,873 $91,034 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- AVERAGE COMMON SHARES OUTSTANDING 82,332,373 82,568,717 82,396,913 83,061,450 NET INCOME PER COMMON SHARE $ .40 $ .45 $ 1.22 $ 1.10 CASH DIVIDENDS PER COMMON SHARE $ .37 $ .36 $ 1.09 $ 1.06
See Notes to Consolidated Financial Statements 3 DELUXE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 1994 and 1993 (Dollars in Thousands) (Unaudited)
1994 1993 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $100,873 $91,034 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 43,717 41,001 Amortization of intangibles 19,551 11,323 Stock purchase discount 6,274 6,407 Deferred income taxes and investment credit (1,036) (21,431) Changes in assets and liabilities: Trade accounts receivable (10,337) (4,219) Inventories (21,139) (10,166) Accounts payable 8,531 35 Restructuring costs (29,323) 52,923 Other assets and liabilities (4,229) (16,675) ---------- ---------- Net cash provided by operating activities 112,882 150,232 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of marketable securities with maturities of more than 3 months (13,115) (116,832) Proceeds from sales of marketable securities with maturities of more than 3 months 43,500 125,294 Net change in marketable securities with maturities of 3 months or less 20,000 (6,100) Purchases of property, plant, and equipment (74,203) (51,416) Payments for acquisitions, net of cash acquired (52,196) (110,136) Other (21,816) (21,284) ---------- ---------- Net cash used in investing activities (97,830) (180,474) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Payments on long-term debt (2,632) (9,080) Payments to retire common stock (33,135) (80,742) Proceeds from issuing stock under employee plans 18,900 21,897 Increase in short term debt 18,000 Cash dividends paid to shareholders (89,951) (88,204) ---------- ---------- Net cash used in financing activities (88,818) (156,129) ---------- ---------- NET DECREASE IN CASH AND CASH EQUIVALENTS (73,766) (186,371) ---------- ---------- CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 114,103 275,172 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $40,337 $88,801 ---------- ---------- ---------- ----------
See Notes to Consolidated Financial Statements 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of September 30, 1994, the related consolidated statements of income for the three-month and nine-month periods ended September 30, 1994 and 1993 and the consolidated statements of cash flows for the nine-month periods ended September 30, 1994 and 1993 are unaudited; in the opinion of management, all adjustments necessary for a fair presentation of such financial statements are included. Such adjustments consist 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 $1,457,000 as of September 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." Under SFAS 112 the Company accrues 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 third quarter of 1994, the Company recorded a $10 million credit to reduce its restructuring reserve. The restructuring reserve was established in 1993 when the Company recorded a $60 million charge (reduced to $49 million in the 4th quarter of 1993) in connection with a formal restructuring plan for the closure of 16 of its check printing plants. As of September 30, 1994, the Company had closed 15 of the 16 plants. Certain costs included in the 1993 charge were not incurred. The $6.2 million balance of the reserve at September 30, 1994 represents specifically identified, incremental employee severance and asset impairment and disposal costs to be incurred as a result of the closings. 5. During the third quarter of 1994, the Company acquired all of the outstanding stock of Software Partnership Limited, which is included in the Electronic Payment Systems Division, for $15.8 million. The Company recorded the acquisition under the purchase method of accounting. The acquisition did not have a material proforma impact on operations. 6. The Company has uncommitted bank lines of credit of $155 million available at variable interest rates. As of September 30, 1994, $18 million was drawn on those lines at an interest rate of 5.13%. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1993 Net sales were $1,269.0 million for the first nine months of 1994, up 11.3% over the first nine months of 1993, when sales were $1,140.6 million. The Payment Systems segment revenue for the first nine months of 1994 decreased 0.3% from the first nine months of 1993 due to continued price competition in the financial institution (FI) market. This decline was offset by a 31.4% increase in revenue from the Company's Electronic Payment Systems division. Deluxe's Business Systems segment posted a 54.5% increase in revenue for the first nine months of 1994 over the first nine 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 of the Consumer Specialty Products segment increased 25.4% 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 $115.3 million or 33.7% for the first nine months of 1994 over the first nine months of 1993. The Business Systems segment's expenses increased approximately $58.1 million primarily due to the acquisition of PaperDirect, Inc. Also, the Consumer Specialty Products segment increased its selling expense by approximately $26.0 million, primarily due to increased advertising. The remaining increase is due to increases in costs associated with acquisitions, international operations and re-engineering projects. Net income was $100.9 million for the first nine months of 1994, or 8.0% of sales, compared to $91.0 million for the first nine months of 1993 or 8.0% 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. During the third quarter of 1994 the Company recorded a $10 million credit to reduce its 1993 restructuring charge, as certain of the costs included in the charge were not incurred. RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1993 Net sales were $426.7 million for the third quarter of 1994, up 14.7% over the third quarter of 1993, when sales were $372.0 million. The third quarter Payment Systems segment's revenue increased 5.1% over the third quarter of 1993. A 45.8% increase in revenue from the Company's Electronic Payment Systems division was partially offset by a decline in revenue due to continued price competition in the FI market. Deluxe's Business Systems segment posted a 60.6% increase in revenue in the third quarter of 1994 over third quarter 1993 primarily due to the contribution of PaperDirect, Inc., which the Company acquired in the third quarter of 1993, T-Maker Inc., which the company acquired in the second quarter of 1994, and the growth of the Company's Canadian and United Kingdom operations. Revenue for the Consumer Specialty Products segment increased 17.6% 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 $44.5 million or 38.3% in third quarter 1994 over third quarter 1993. The Business Systems segment's expenses increased approximately $20.2 million primarily due to the acquisition of PaperDirect, Inc. Also, the Consumer Specialty Products segment increased its selling expense by approximately $6.4 million, primarily due to increased advertising. The remaining increase is due to increases in costs associated with acquisitions, international operations and re-engineering projects. Net income was $33.3 million in the third quarter of 1994, or 7.8% of sales, compared to $37.0 million in 1993 or 10.0% of sales. FINANCIAL CONDITION - LIQUIDITY Cash provided by operations was $112.9 million for the first nine months of 1994, compared with $150.2 million for the first nine 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 September 30, 1994 was $153.6 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, T-Maker, Inc., and Software Partnership. The current ratio was 1.5 to 1 on September 30, 1994 and 1.8 to 1 on December 31, 1993. 6 FINANCIAL CONDITION - CAPITAL RESOURCES Purchases of property, plant, and equipment totaled $74.2 million for the first nine months of 1994, compared to $51.4 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 of notes, payable in 2001 under its 1989 shelf registration of debt securities. Additional long-term borrowings could be secured in the event the Company makes a significant acquisition. Such borrowings could include medium or long-term notes. In addition, the Company has uncommitted bank lines of credit of $155 million. As of September 30, 1994, $18 million was drawn on those lines. The Company may secure additional short-term financing to fund acquisitions. Such financings could include committed lines of credit and a commercial paper program. Borrowings under these financings would be dependent upon favorable short-term interest rates. Cash dividends totaled $90.0 million for the first nine months of 1994 compared to $88.2 million for the first nine months of 1993. 7 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. 8 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 November 15, 1994 /s/ H. V. Haverty --------------------------- -------------------------------------- H. V. Haverty, Chairman, President and Chief Executive Officer (Principal Executive Officer) Date November 15, 1994 /s/ C. M. Osborne --------------------------- -------------------------------------- C. M. Osborne, Senior Vice President and Chief Financial Officer (Principal Financial Officer) 9 EX-27 2 EXHIBIT 27
5 1,000 9-MOS DEC-31-1994 JAN-01-1994 SEP-30-1994 40,337 55,619 138,908 0 91,367 445,971 828,836 401,954 1,247,608 292,378 110,823 82,320 0 0 721,789 1,247,608 1,268,986 1,268,986 581,813 1,093,189 0 0 8,891 174,167 73,294 0 0 0 0 100,873 1.22 1.22
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