Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 14 60K
2: EX-3.B Articles of Incorporation/Organization or By-Laws 4 19K
3: EX-10.A Material Contract 5 23K
4: EX-10.B Material Contract 1 6K
5: EX-10.E Material Contract 6 34K
6: EX-10.F Material Contract 9 39K
7: EX-13 Annual or Quarterly Report to Security Holders 26 123K
8: EX-21 Subsidiaries of the Registrant 1 6K
9: EX-24 Power of Attorney 2± 10K
10: EX-27 Financial Data Schedule (Pre-XBRL) 2 8K
EX-13 — Annual or Quarterly Report to Security Holders
| EX-13 | 1st Page of 26 | TOC | ↑Top | Previous | Next | ↓Bottom | Just 1st |
|---|
EXHIBIT 13
DOCUMENTS INCORPORATED BY REFERENCE
1994 ANNUAL REPORT TO SHAREHOLDERS
FINANCIAL HIGHLIGHTS
[Download Table]
(Dollars in Thousands Except per
Share Amounts) 1994 1993 Change
-------------------------------------------------------------------------------
Net sales $1,747,920 $1,581,767 10.5%
Net income 140,866 141,861 (.7%)
Return on sales 8.1% 9.0%
Per share 1.71 1.71
Return on average shareholders' equity 17.4% 17.4%
Cash dividends paid 120,503 117,945 2.2%
Per share 1.46 1.42 2.8%
Shareholders' equity 814,393 801,249 1.6%
Book value per share 9.89 9.66 2.4%
Average common shares outstanding (thousands) 82,400 82,936
Number of shareholders 22,436 23,084
Number of employees 18,903 17,748 6.5%
Graph Data
[Download Table]
Net Sales Net Income Cash Dividends
(Dollars in Millions) per Share per Share
(Dollars) (Dollars)
1994 $1,748 1994 $1.71 1994 $1.46
1993 $1,582 1993 $1.71 1993 $1.42
1992 $1,534 1992 $2.42 1992 $1.34
1991 $1,474 1991 $2.18 1991 $1.22
1990 $1,414 1990 $2.03 1990 $1.10
13-1
FINANCIAL REVIEW
This section reports on Deluxe's financial condition for the past two fiscal
years and its operating results for the past three fiscal years. During the past
decade, the Company has had a compound annual growth rate of 9.9% in sales, 7.4%
in cash flow, 4.8% in net income, 5.5% in net income per share, 10.5% in book
value, and 14.1% in cash dividends per share.
In 1994, sales increased 10.5%, while net income decreased .7%. The return on
sales was 8.1%, down from last year's 9.0%, and the return on average assets was
11.2%, compared to last year's 11.6%. Return on average shareholders' equity was
17.4% in 1994 and 1993.
Deluxe's financial condition continues to be strong. The current ratio on
December 31, 1994, decreased to 1.4 to 1, from 1.8 to 1 on December 31, 1993,
due primarily to acquisitions. The percentage of long-term debt to shareholders'
equity at year end was 13.6%, compared to 13.8% on December 31, 1993, with
shareholders' equity increasing to $814.4 million from $801.2 million.
Contents
Eleven-Year Summary, 22
Management's Discussion and Analysis, 24
Management's Responsibility for Financial Reporting, 27
Consolidated Balance Sheets, 28
Consolidated Statements of Income, 30
Consolidated Statements of Cash Flows, 31
Notes to Consolidated Financial Statements, 32
Independent Auditors' Report, 39
Summarized Quarterly Financial Data, 39
13-2
ELEVEN-YEAR SUMMARY
[Enlarge/Download Table]
(Dollars in Thousands Except per Share Amounts) 1994 1993 1992 1991
-----------------------------------------------------------------------------------------------------------------------------
Net sales $1,747,920 $1,581,767 $1,534,351 $1,474,482
Salaries and wages 522,654 491,868 456,893 444,987
Employee profit sharing and pension plan expense 59,668 61,162 60,307 55,410
Employee bonus and stock purchase discount expense 22,178 20,215 25,494 22,417
Provision for income taxes 100,020 94,052 121,999 112,591
Net income 140,866 141,861 202,784 182,902
Return on sales 8.06% 8.97% 13.22% 12.40%
Per share 1.71 1.71 2.42 2.18
Return on average shareholders' equity 17.44% 17.40% 25.70% 25.69%
Cash dividends paid 120,503 117,945 112,483 102,512
Per share 1.46 1.42 1.34 1.22
Shareholders' equity 814,393 801,249 829,808 747,976
Book value per share 9.89 9.66 9.90 8.91
Additions to machinery and equipment 86,411 45,675 52,598 48,605
Additions to realty and leaseholds 39,815 16,435 19,013 23,896
Depreciation and amortization expense 86,416 72,320 66,615 75,976
Working capital increase (decrease) (94,086) (162,387) 55,975 185,879
Total assets 1,256,272 1,251,994 1,199,556 1,099,059
Return on average assets 11.23% 11.57% 17.64% 18.08%
Long-term debt 110,867 110,755 115,522 110,575
Average common shares outstanding (thousands) 82,400 82,936 83,861 84,005
Number of employees 18,903 17,748 17,400 17,563
Number of production and service facilities 74 73 85 82
Facility area--square feet (thousands) 4,813 4,623 5,454 5,238
Graph Data
[Download Table]
Return on Average Return on Average
Net Income Assets Shareholders' Equity
(Dollars in Millions) (Percent) (Percent)
----------------------------------------------------------------------
1994 $140.9 1994 11.23 1994 17.44
1993 $141.9 1993 11.57 1993 17.40
1992 $202.8 1992 17.64 1992 25.70
1991 $182.9 1991 18.08 1991 25.69
1990 $172.2 1990 19.44 1990 26.36
1989 $152.6 1989 18.69 1989 25.47
1988 $143.4 1988 17.35 1988 27.08
1987 $148.5 1987 19.45 1987 32.86
1986 $121.1 1986 20.50 1986 31.57
1985 $104.2 1985 21.73 1985 31.91
1984 $87.8 1984 20.87 1984 30.07
13-3
[Enlarge/Download Table]
1990 1989 1988 1987 1986 1985 1984
---------------------------------------------------------------------------------------------------------
$1,413,553 $1,315,828 $1,195,971 $948,010 $866,829 $764,421 $682,823
417,193 393,339 367,302 300,225 272,526 246,735 222,586
52,314 48,423 44,398 39,567 36,630 33,369 31,086
20,598 17,876 13,698 13,686 12,702 10,802 9,304
110,345 93,691 83,288 88,137 101,891 87,692 75,219
172,161 152,631 143,354 148,512 121,109 104,215 87,816
12.18% 11.60% 11.99% 15.67% 13.97% 13.63% 12.86%
2.03 1.79 1.68 1.74 1.42 1.22 1.00
26.36% 25.47% 27.08% 32.86% 31.57% 31.91% 30.07%
93,109 83,679 73,392 64,849 49,630 42,055 34,130
1.10 .98 .86 .76 .58 .49 .39
675,792 630,643 567,731 490,820 413,132 354,083 299,106
8.04 7.40 6.65 5.77 4.85 4.14 3.48
49,233 55,658 59,252 45,868 27,733 34,285 23,262
14,722 32,764 19,634 15,841 9,529 3,759 7,279
74,050 67,340 59,846 45,462 32,079 25,953 23,479
50,176 42,063 30,601 (121,582) (23,066) 25,556 8,793
923,902 847,002 786,110 866,270 660,969 520,740 438,430
19.44% 18.69% 17.35% 19.45% 20.50% 21.73% 20.87%
11,911 10,169 10,933 12,886 14,152 13,036 8,634
84,638 85,346 85,255 85,242 85,487 85,769 87,565
17,174 16,948 16,628 15,346 13,502 12,669 10,945
81 79 77 74 70 68 65
5,060 4,980 4,650 4,180 3,450 3,216 3,050
Graph Data
[Download Table]
Shareholders' Equity Working Capital Facility Area
(Dollars in Millions) (Dollars in (Millions of
Millions) Square Feet)
----------------------------------------------------------------------
1994 $814 1994 $130.4 1994 4.81
1993 $801 1993 $224.5 1993 4.62
1992 $830 1992 $386.9 1992 5.45
1991 $748 1991 $330.9 1991 5.24
1990 $676 1990 $145.0 1990 5.06
1989 $631 1989 $94.8 1989 4.98
1988 $568 1988 $52.8 1988 4.65
1987 $491 1987 $22.2 1987 4.18
1986 $413 1986 $143.8 1986 3.45
1985 $354 1985 $166.8 1985 3.22
1984 $299 1984 $141.3 1984 3.05
13-4
MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERALL SUMMARY
1994 was the 56th consecutive year of increased sales for Deluxe. The sales
growth of 10.5% was the result of rapid growth in the Company's newer
businesses, offset partially by a decline in financial institution check
printing revenue. As a result of the growth in the newer businesses, 1994 was
the first year in the Company's history that financial institution check
printing accounted for less than half of consolidated revenues. 1994 net income
was $140.9 million, compared to net income of $141.9 million in 1993. The
results for 1993 included a $49 million restructuring charge. $10 million of
that charge was reversed in 1994. Earnings per share were $1.71 in both 1994 and
1993. Return on average assets for 1994 was 11.2%, compared to 11.6% for 1993.
Return on average shareholders' equity was 17.4% in both 1994 and 1993.
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, the percentage
relationship to revenue of certain items in the Company's consolidated
statements of operations and the percentage changes of such items in comparison
to the prior year.
[Download Table]
PERCENTAGE OF DOLLAR
PERCENTAGE OF REVENUE INCREASE/(DECREASE)
1994 1993
VS VS
1994 1993 1992 1993 1992
-------------------------------------------------------------------------------
100% 100% 100% Net sales 10.5% 3.1%
54.1 53.8 54.2 Gross margin 11.1 2.4
36.1 30.9 27.7 Selling, general, and administrative 28.9 15.5
4.7 5.1 5.6 Employee sharing 0.6 (5.2)
(0.2) 0.3 0.2 Other expense/income (net) (167.9) 59.4
5.7 6.0 8.0 Provision for income taxes 6.3 (22.9)
8.1 9.0 13.2 Net income (0.7) (30.0)
NET SALES Net sales for the Payment Systems segment increased 1.3% to $1,082.6
million in 1994. Order counts for financial institution check printing
increased slightly over 1993; however, continued discounting resulted in a
reduction in revenues of 4.7%. The decline was more than offset by the 35.0%
growth of the Electronic Payments division. A portion of the growth was
attributable to the acquisitions of National Revenue Corporation in the second
quarter and The Software Partnership Ltd. in the third quarter. The Business
Systems segment recorded revenue of $335.5 million, an increase of 41.0% in
1994. The majority of this growth was the result of PaperDirect, Inc., which
the Company acquired late in the third quarter of 1993, and the growth of the
United Kingdom and Canadian operations. The Consumer Specialty segment's
revenue increased 20.0% to $329.8 million in 1994. A large portion of this
increase was due to the continued growth in the direct mail check printing
market.
Net sales for the Payment Systems segment decreased from $1,096.6 million in
1992 to $1,068.9 million in 1993, or (2.5%), primarily due to continued
industrywide price discounting in the financial institution check market and
rapid growth of the direct marketing channel for checks. Offsetting the decline
in financial institution check printing sales was a combined increase of 14.7%
in revenues from the Company's three Electronic Payment Systems subsidiaries:
Deluxe Data Systems, Inc., ChexSystems, Inc., and Electronic Transaction
Corporation. The Business Systems segment experienced a growth in sales from
$196.0 million in 1992 to $237.9 million in 1993, or 21.3%. A portion of the
growth was attributable to the acquisitions of Nelco, Inc. (December 1992),
PaperDirect (September 1993), and Stockforms Ltd. (September 1993). Sales
increased from $241.7 million in 1992 to $275.0 million in
13-5
1993, or 13.8%, in the Consumer Specialty Products segment, due to the growth in
the direct market for checks combined with strong performance in the social
expression market.
GROSS MARGIN Payment Systems gross margins increased to 55.5% in 1994, compared
to 54.5% in 1993. This improvement was the result of the Company's 1993 plant
closings, and occurred despite continued discounting in the financial
institution check printing market. Margin percentages for the Business Systems
Division suffered slightly, due primarily to the lower economies of scale for
the start-up businesses in the United Kingdom and Canada. Margins for the
Consumer Specialty segment improved to 53.4% from 51.5%, due to increased sales
for higher margin products.
1993 gross margins for Payment Systems were negatively impacted by the
industrywide price discounting in the financial institution check printing
market. Offsetting this trend were production efficiencies that resulted from
the Company's restructuring efforts initiated during the second quarter of 1993.
Gross margins for Business Systems and Consumer Specialty Products increased
modestly from 1992, due primarily to decreases in paper prices.
SELLING, GENERAL, AND ADMINISTRATIVE Selling, general, and administrative
expenses increased $141.4 million, or 28.9%, in 1994. The Business Systems
segment's expenses increased approximately $66.7 million, primarily due to the
acquisition of PaperDirect, Inc. The Consumer Specialty Products segment
increased its selling expense by approximately $32.2 million, primarily due to
increased advertising. The remaining increase is primarily related to increased
costs associated with acquisitions, international operations, and re-engineering
projects.
1993 selling, general, and administrative expenses increased $65.8 million, or
15.5%, from 1992. The largest portion of the increase in these expenses was due
to an increase in marketing and advertising costs of approximately $24.5
million. Such amounts were expended to increase or maintain market share in
each of the three business segments. In addition, research and development costs
increased $10.2 million over 1992 as the Company made investments to develop
printing efficiencies, including its new water-washable lithographic ink.
EMPLOYEE SHARING A portion of employee sharing includes benefits paid to
employees that are based on the Company's profitability. Other components
fluctuate with the number of Company employees. The slight increase to $81.8
million in 1994 from $81.4 million in 1993 resulted from an increase in
employees. The decrease in 1993 from $85.8 million in 1992 was the result of
the decline in earnings from 1992 to 1993.
OTHER EXPENSE/INCOME (NET) Other expense was $2.8 million in 1994, compared to
other income of $4.1 million in 1993. The decline is due primarily to an
increase in interest expense and a decrease in investment and other income.
Interest expense increased as the Company incurred short-term borrowing during
the second half of 1994. Investment and other income decreased due to the
liquidation of many of the Company's short-term investments and the absence of
insurance gains that were realized in 1993. The short-term borrowing and the
marketable security liquidation financed the Company's 1994 acquisitions.
Other income of $4.1 million in 1993 increased from $2.6 million in 1992,
primarily due to insurance gains on flood damaged property. These were offset
partially by a decrease in investment income due to the decrease in marketable
securities and lower interest rates in 1993.
13-6
PROVISION FOR INCOME TAXES The Company's effective tax rate increased to 41.5%
in 1994, due primarily to an increase in non-deductible amortization of
intangibles resulting from acquisitions and foreign losses for which no current
tax benefit is available.
The Company experienced lower income tax expense in 1993 than it did in 1992,
due to lower taxable income. However, the effective tax rate increased from
37.6% in 1992 to 39.9% in 1993. In August 1993, the U.S. government increased
the corporate income tax rate to 35%, retroactive to January 1, 1993. The change
in the Federal statutory tax rate and an increase in non-deductible amortization
of intangibles related to acquisitions were the principal causes for the higher
1993 effective tax rate.
RESTRUCTURING During the second quarter of 1993, the Company announced a
formal restructuring plan to close 16 of its check printing plants. The
closings resulted from the absence of growth in the financial institution check
market and production efficiencies gained from the Company's improved check
printing technology. As part of the restructuring, the Company recorded a one-
time charge of $49 million. By the end of 1994, the Company had substantially
completed the plant closings. During the third quarter of 1994, the Company
reduced the restructuring accrual by $10 million, as several costs included in
the 1993 charge were not incurred.
The balance of the reserve at December 31, 1994, represents specifically
identified, incremental employee severance and asset impairment and disposal
costs to be incurred in 1995 as a result of the closings. The production
efficiencies gained by the restructuring have positively impacted the gross
margins of the Company's Paper Payment division.
NET INCOME 1994 net income decreased slightly from 1993. The restructuring of
the Company's check printing operations affected both year's net income. The
efficiencies gained from the 1993 restructuring have positively impacted the
Company's earnings. However, the benefits from the restructuring have been
offset by continued industrywide discounts to financial institution customers.
In addition, selling, general, and administrative expenses have increased
disproportionally to sales as the Company incurs expenses related to
acquisitions, start-up businesses, and re-engineering projects.
In addition to the factors discussed above, the principal reason for lower
earnings from 1992 to 1993 is the $49 million restructuring charge the Company
recorded during 1993.
FINANCIAL CONDITION
LIQUIDITY Cash provided by operations was $193.8 million in 1994, compared to
$223.7 million in 1993 and $281.0 million in 1992. This represents the Company's
primary source of working capital for financing capital expenditures and
acquisitions and for paying cash dividends. The 1994 decline is primarily the
result of the Company's cash expenditures related to the check printing
restructuring. The decline in 1993 is primarily the result of lower net income
in 1993 than in the preceding two years. Working capital was $130.4 million as
of December 31, 1994, compared to $224.5 million and $386.9 million on that date
in 1993 and 1992, respectively. The year-end current ratio for 1994 was 1.4 to
1, compared to 1.8 to 1 and 2.7 to 1 for 1993 and 1992, respectively. The
declines in working capital and current ratio resulted from the Company's
acquisitions and 1993 restructuring charge.
CAPITAL RESOURCES In 1994, the Company made several acquisitions at an
aggregate cost of $53.8 million. The companies acquired are rapidly growing
small and medium companies in the Business Systems and Electronic Payment
Systems divisions.
13-7
In 1993, the Company acquired all of the capital stock of PaperDirect, Inc., a
direct mail marketer of specialty papers and related products to the desktop
publishing industry, for $90 million in cash. In addition, the Company agreed to
pay $9 million over three years for a covenant not to compete. The Company also
agreed to make payments of up to $16 million per year over the four-year period
ending December 31, 1996, contingent upon the results of PaperDirect's
operations over the course of that period. On September 30, 1993, the Company
completed its acquisition of Stockforms Ltd., a supplier of accounting software
forms based in the United Kingdom, by purchasing the remaining 75% of its assets
for approximately $11.7 million. (The Company had purchased the initial 25%
during the third quarter of 1992 for approximately $3 million.)
Purchases of property, plant, and equipment required cash outlays of $126.2
million in 1994, compared to $61.0 million in 1993 and $64.1 million in 1992.
The Company anticipates capital expenditures of $125 million in 1995 for new
electronic payment systems opportunities and further enhancements to printing
capabilities.
The Company has uncommitted bank lines of credit for $130 million. Beginning in
June 1994, the Company began borrowing from those lines. The average amount
drawn from June through the end of the year was $12.5 million at a weighted
average interest rate of 5.13%. The maximum daily borrowing was $35.0 million.
In addition, the Company has in place a $150 million committed line of credit as
support for commercial paper, which will be available for issue in 1995. These
varying credit facilities are in place to provide short-term financing for
acquisitions. It is not the Company's intention to utilize all sources
concurrently.
Cash dividends totaled $120.5 million in 1994, compared to $117.9 million in
1993 and $112.5 million in 1992. The payout of earnings was 85.5% in 1994,
83.1% in 1993, and 55.5% in 1992. In August 1989, the Company's Board of
Directors authorized repurchases of up to approximately 10 million shares of its
currently outstanding stock, providing that such repurchases do not reduce
outstanding shares below 75 million.
OUTLOOK The past two years have not resulted in profits at levels consistent
with the Company's historical profitability. During this period, the Company
has initiated a fundamental repositioning of its business. Efficient new
printing technologies, new sales and product strategies, and permanent and
ongoing cost reductions have been implemented, affecting the traditional
financial institution (FI) check printing business. This business has been
negatively affected in recent years by industrywide price discounting and a
shift to direct mail checks. Management expects FI check printing to continue
to generate strong profitability and cash flows. The Company has also
strengthened the profitability of newer businesses. These businesses include
direct mail checks, electronic payment services, and business forms. 1994
resulted in double-digit revenue growth in each of the Company's newer
divisions: Electronic Payment Systems, Business Systems, and Consumer Specialty
Products. These businesses accounted for 51.4% of consolidated revenue in 1994,
up from 43.6% in 1993. The Company's objective in making acquisitions has been
to acquire newer companies in fast-growing markets, in order to increase
revenues and provide additional products and services to its existing customers
and customers in new markets.
13-8
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements and related information are
the responsibility of management. They have been prepared in conformity with
generally accepted accounting principles and include amounts that are based on
our best estimates and judgments under the existing circumstances. The
financial information contained elsewhere in this Annual Report is consistent
with that in the consolidated financial statements.
The Company maintains internal accounting control systems that are adequate to
provide reasonable assurance that the assets are safeguarded from loss or
unauthorized use. These systems produce records adequate for preparation of
financial information. We believe the Company's systems are effective, and the
cost of the systems does not exceed the benefits obtained.
The Audit Committee has reviewed all financial data included in this report. The
Audit Committee is composed entirely of outside directors and meets periodically
with the internal auditors, management, and the independent public accountants
on financial reporting matters. The independent public accountants have free
access to meet with the Audit Committee, without the presence of management, to
discuss their audit results and opinions on the quality of financial reporting.
The role of independent public accountants is to render an independent,
professional opinion on management's consolidated financial statements to the
extent required by generally accepted auditing standards.
Deluxe recognizes its responsibility for conducting its affairs according to the
highest standards of personal and corporate conduct. It has distributed to all
employees a statement of its commitment to conducting all Company business in
accordance with the highest ethical standards.
/s/ Harold V. Haverty /s/ Charles M. Osborne
Harold V. Haverty Charles M. Osborne
Chairman, President, and Senior Vice President and
Chief Executive Officer Chief Financial Officer
February 10, 1995
CONSOLIDATED BALANCE SHEETS
ASSETS
[Download Table]
December 31 (Dollars in Thousands) 1994 1993
------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $29,139 $114,103
Marketable securities 49,109 107,705
Trade accounts receivable 142,087 123,119
Inventories:
Raw material 25,198 18,260
Semi-finished goods 26,046 21,155
Finished goods 36,976 29,989
Supplies 15,749 15,915
Deferred advertising 27,770 26,080
Deferred income taxes 25,647 28,914
Prepaid expenses and other current assets 43,145 37,123
------------------------------------------------------------------------
Total current assets 420,866 522,363
LONG-TERM INVESTMENTS 45,091 34,815
PROPERTY, PLANT, AND EQUIPMENT
Land 38,286 32,706
Buildings and improvements 284,131 261,974
Machinery and equipment 544,092 483,853
Construction in progress 3,225 1,360
------------------------------------------------------------------------
Total 869,734 779,893
Less accumulated depreciation 407,916 378,252
------------------------------------------------------------------------
Property, plant, and equipment--net 461,818 401,641
INTANGIBLES
Cost in excess of net assets acquired--net 284,420 246,104
Other intangible assets--net 44,077 47,071
------------------------------------------------------------------------
Total intangibles 328,497 293,175
------------------------------------------------------------------------
Total assets $1,256,272 $1,251,994
------------------------------------------------------------------------
------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
13-10
[Download Table]
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31 (Dollars in Thousands) 1994 1993
------------------------------------------------------------------------
CURRENT LIABILITIES
Accounts payable $65,033 $50,424
Accrued liabilities:
Wages, including vacation pay 50,366 45,584
Employee profit sharing and pension 57,915 59,560
Restructuring costs 5,420 35,489
Accrued rebates 28,741 26,473
Income taxes 5,394 3,847
Other 61,893 69,527
Short-term debt 11,219
Long-term debt due within one year 4,479 6,967
------------------------------------------------------------------------
Total current liabilities 290,460 297,871
LONG-TERM DEBT 110,867 110,755
DEFERRED INCOME TAXES 40,552 42,119
SHAREHOLDERS' EQUITY
Common shares $1 par value
(authorized: 500,000,000 shares;
issued: 1994--82,374,771 shares
1993--82,548,627 shares) 82,375 82,549
Additional paid-in capital 1,694 341
Retained earnings 732,158 719,046
Unearned compensation (149)
Net unrealized change--marketable securities (2,054)
Cumulative translation adjustment 369 (687)
------------------------------------------------------------------------
Shareholders' equity 814,393 801,249
------------------------------------------------------------------------
Total liabilities and shareholders'
equity $1,256,272 $1,251,994
------------------------------------------------------------------------
------------------------------------------------------------------------
13-11
CONSOLIDATED STATEMENTS OF INCOME
[Download Table]
(Dollars in Thousands Except per Share Amounts)
-----------------------------------------------
Years Ended December 31 1994 1993 1992
-----------------------------------------------------------------------------
NET SALES $1,747,920 $1,581,767 $1,534,351
-----------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales 801,884 730,436 702,969
Selling, general, and administrative 630,531 489,127 423,362
Employee profit sharing and pension 59,668 61,162 60,307
Employee bonus and stock purchase discount 22,178 20,215 25,494
Restructuring charge (credit) (10,000) 49,000
-----------------------------------------------------------------------------
Total 1,504,261 1,349,940 1,212,132
-----------------------------------------------------------------------------
Income from operations 243,659 231,827 322,219
OTHER INCOME (EXPENSE)
Investment and other income 8,532 14,362 17,935
Interest expense (11,305) (10,276) (15,371)
-----------------------------------------------------------------------------
Income before income taxes 240,886 235,913 324,783
-----------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 100,020 94,052 121,999
-----------------------------------------------------------------------------
NET INCOME $140,866 $141,861 $202,784
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
NET INCOME PER COMMON SHARE--Based on
average number of shares outstanding $1.71 $1.71 $2.42
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
CASH DIVIDENDS PER COMMON SHARE $1.46 $1.42 $1.34
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
13-12
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Enlarge/Download Table]
Dollars in Thousands
Years Ended December 31 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $140,866 $141,861 $202,784
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 59,864 55,145 54,000
Amortization of intangibles 26,552 17,175 12,615
Stock purchase discount 8,369 8,537 7,975
Deferred income taxes 4,689 (16,111) (2,677)
Changes in assets and liabilities, net of effects from acquisitions:
Restructuring costs (30,068) 35,489
Trade accounts receivable (13,516) (160) (6,816)
Inventories (17,993) (11,696) 1,990
Accounts payable 12,283 (6,885) 5,633
Other assets and liabilities 2,772 327 5,499
----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 193,818 223,682 281,003
----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities with maturities of more than 3 months (13,115) (119,339) (114,619)
Proceeds from sales of marketable securities with maturities of more than 3 months 49,326 149,805 99,454
Net reductions of (additions to) marketable securities with maturities of 3 months or less 20,000 (32,100) 3,000
Purchases of long-term investments (5,000) (14,060) (5,809)
Purchases of property, plant, and equipment (126,226) (60,990) (64,114)
Payments for acquisitions, net of cash acquired (53,796) (110,136)
Other (17,933) (9,044) (9,254)
----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (146,744) (195,864) (91,342)
----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (8,230) (10,260) (1,586)
Payments to retire common stock (39,638) (89,172) (57,025)
Proceeds from issuing stock under employee plans 25,114 28,490 32,208
Cash dividends paid to shareholders (120,503) (117,945) (112,483)
Proceeds from short-term debt 11,219
----------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (132,038) (188,887) (138,886)
----------------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (84,964) (161,069) 50,775
----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $114,103 $275,172 $224,397
----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $29,139 $114,103 $275,172
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
Supplementary cash flow disclosure:
Interest paid $10,446 $11,772 $15,682
Income taxes paid 94,395 119,859 130,041
----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
13-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of the Company and
all wholly owned subsidiaries.
MARKETABLE SECURITIES - Marketable securities consist of debt and equity
securities. All securities on December 31, 1994, are classified as available
for sale and are carried at fair value, with the unrealized gains and losses,
net of tax, reported as a separate component of shareholders' equity. Realized
gains and losses and permanent declines in value are included in investment
income. The cost of securities sold is determined using the specific
identification method.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." Prior to adopting SFAS No. 115, securities were carried
at cost. The fair value of such securities, based on quoted market prices at
December 31, 1993, was $107,705,000. The effect of adopting SFAS No. 115 was
immaterial to the financial statements.
INVENTORY - Substantially all inventory is included at the lower of cost, on the
last-in, first-out (LIFO) method, or market. LIFO inventories at December 31,
1994 and 1993, were approximately $8,923,000 and $9,380,000, respectively, less
than replacement cost.
PROPERTY, PLANT, AND EQUIPMENT - Property, plant, and equipment are stated at
cost. Buildings with 40-year lives and machinery and equipment with lives of
five to 11 years are generally depreciated using accelerated methods. Leasehold
and building improvements are depreciated on a straight-line basis over the
estimated useful life of the property or the life of the lease, whichever is
shorter.
INTANGIBLES - Intangibles are shown in the balance sheet net of amortization
determined on the straight-line basis. Amortization periods range from five to
30 years for cost in excess of net assets acquired, and three to 16 years for
other intangibles. Total intangibles are as follows at December 31 (dollars in
thousands):
[Download Table]
1994 1993
-----------------------------------------------------------------
Cost in excess of net assets acquired $329,512 $279 467
Other intangible assets 86,821 76 924
-------------------------
Total $416,333 $356 391
Less accumulated amortization (87,836) (63,216)
-------------------------
Intangibles - net $328,497 $293,175
-----------------------------------------------------------------
-----------------------------------------------------------------
The Company continually evaluates the recoverability of intangible assets by
measuring the unamortized balance of intangibles against expected future cash
flows or an estimate of fair value, if applicable. Based on these evaluations,
there were no adjustments to the carrying value of intangible assets in 1994 or
1993.
LONG-TERM INVESTMENTS - Long-term investments consist principally of cash
surrender values of insurance contracts, investments with maturities in excess
of one year, and notes receivable. Such investments are carried at cost or
amortized cost which approximate their fair value. Fair values are
13-14
estimated using discounted cash flow analyses based on current market interest
rates for similar types of investments.
INCOME TAXES - Deferred income taxes result from temporary differences between
the bases of assets and liabilities recognized for financial reporting purposes
and such bases recognized for tax purposes.
ACCRUED REBATES - The Company enters into contractual agreements for rebates on
certain products with its customers. Such amounts are recorded as a reduction to
arrive at net sales, and accrued on the balance sheet as incurred.
DEFERRED ADVERTISING - The Company defers certain costs related to direct-
response advertising of its products. Such costs are amortized over periods
(generally less than 12 months) that correspond to the estimated revenue stream
of the individual advertising activity. The total amount charged to expense for
1994, 1993, and 1992 was $130,512,000, $74,882,000, and $51,037,000,
respectively.
TRANSLATION ADJUSTMENT - Financial position and results of operations of the
Company's international subsidiaries are measured using local currencies as the
functional currency. Assets and liabilities of these operations were translated
at the exchange rate in effect at the balance sheet date. Income statement
accounts were translated at the average exchange rate during the year.
Translation adjustments arising from the use of differing exchange rates from
period to period are included in the cumulative translation adjustment line in
the shareholders' equity section of the balance sheet. Gains and losses that
result from foreign currency transactions are included in earnings.
CONSOLIDATED STATEMENTS OF CASH FLOWS - The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents. The carrying amount reported in the balance sheet for cash and
cash equivalents approximates fair value.
2. RESTRUCTURING CHARGE
In June 1993, the Company announced its plans to consolidate its financial
institution check printing operations by closing 16 underutilized check printing
plants. These closings resulted from the absence of growth in the financial
institution check market and production efficiencies gained from the Company's
improved check printing technology. In conjunction with the consolidation, the
Company recorded a one-time pretax restructuring charge of $60 million (reduced
to $49 million in the fourth quarter 1993). The majority of the charge consisted
of estimated costs for employee severance and relocation ($36.3 million), and
the disposition of assets affected by the consolidation ($9.1 million).
During 1994, the Company substantially completed its restructuring plan without
incurring certain costs that were included in the 1993 charge. As a result, the
Company recorded a $10 million credit to reduce its restructuring accrual. The
balance of the reserve at December 31, 1994, represents specifically identified,
incremental employee severance and asset impairment and disposal costs to be
incurred as a result of the closings. The cash payments relating to these costs
are expected to be made in 1995.
13-15
3. ACQUISITIONS
During 1994, the Company acquired all of the outstanding stock of National
Revenue Corporation, a collection services company; T/Maker Company, a developer
and publisher of image content software; The Software Partnership Ltd., a United
Kingdom-based developer of open systems architecture for large financial
institutions; and the assets of Pacific Medsoft, a developer of software for
medical professionals. The total paid for all of these acquisitions was $53.8
million. Each acquisition was accounted for using the purchase method.
Accordingly, the purchase price was allocated to assets acquired based on their
fair values. The total cost in excess of net assets acquired for all of these
acquisitions of $48.6 million is being amortized over periods ranging from 10 to
25 years. The combined effect of these acquisitions did not have a material pro
forma impact on operations.
On September 24, 1993, the Company acquired all of the outstanding capital stock
of PaperDirect, Inc., a direct mail marketer of specialty papers and related
products to the desktop publishing industry, for $90 million in cash. In
addition, the Company agreed to pay $9 million over three years for a covenant
not to compete. The Company may be required to make additional payments of up to
$16 million per year over a period ending December 31, 1996, contingent upon the
results of PaperDirect's operations over the course of that period. Based on
PaperDirect's 1993 operating results, the Company paid $16 million to
PaperDirect's former shareholders in 1994. The acquisition was accounted for
using the purchase method. Accordingly, the purchase price was allocated to
assets acquired based on their estimated fair values. This treatment resulted in
approximately $100 million of cost in excess of net assets acquired. Such excess
(which will increase for any future contingent cash payment) is being amortized
on a straight-line basis over 30 years. 1993 consolidated results include
PaperDirect's results of operations from the date of acquisition through the end
of the year.
The following summarized, unaudited pro forma results of operations for the
years ended December 31, 1993 and 1992, assume the acquisition occurred as of
the beginning of the respective periods (dollars in thousands except per share
amounts):
[Download Table]
-------------------------------------------------------
1993 1992
-------------------------------------------------------
Net sales $1,624,868 $1,561,192
-------------------------------------------------------
Net income 141,193 196,112
-------------------------------------------------------
Net income per common share $1.70 $2.34
-------------------------------------------------------
On September 30, 1993, the Company completed its acquisition of Stockforms Ltd.,
a supplier of accounting software forms based in the United Kingdom, by
purchasing the remaining 75% of its assets for approximately $11.7 million. (The
Company had purchased the initial 25% during 1992 for approximately $3 million.)
The acquisition was accounted for using the purchase method. Accordingly, the
purchase price was allocated to assets acquired based on their fair values. The
total cost in excess of net assets acquired of $13.9 million is being amortized
on a straight-line basis over 20 years.
13-16
4. MARKETABLE SECURITIES
On December 31, 1994, marketable securities available for sale consist of the
following (dollars in thousands):
[Download Table]
Unrealized
Cost Holding Loss Fair Value
-----------------------------------------
Debt securities issued by the U.S. $30,560 $1,859 $28,701
Treasury and other government
agencies
Debt securities issued by states of 20,638 230 20,408
the U.S. and political subdivisions
of the states
-----------------------------------------
Total marketable securities 51,198 2,089 49,109
Other debt securities (included 25,795 1,072 24,723
in cash equivalents)
-----------------------------------------
Total $76,993 $3,161 $73,832
-----------------------------------------
-----------------------------------------
Debt securities with a cost of $45,184,000 and a December 31, 1994, market value
of $43,917,000 mature in 1995. All other securities with a total cost of
$31,809,000 and a December 31, 1994, market value of $29,915,000 mature by 1999.
Proceeds from sales of securities available for sale were $73,326,000 during
1994. The Company realized losses of $502,000 on these sales.
5. PROVISION FOR INCOME TAXES
The components of the provision for income taxes are as follows (dollars in
thousands):
[Download Table]
1994 1993 1992
------------------------------
Current tax provision:
Federal $80,215 $89,650 $106,818
State 13,445 17,477 20,377
------------------------------
Total 93,660 107,127 127,195
Deferred tax provision (benefit):
Federal 5,472 (11,092) (3,987)
State 888 (1,983) (1,209)
------------------------------
Total $100,020 $94,052 $121,999
------------------------------
------------------------------
In August 1993, the U.S. government increased the corporate income tax rate to
35%, retroactive to January 1, 1993. The effect of the new tax law on the
Company increased the provision for income taxes by $2.9 million or $.03 per
share for the year ended December 31, 1993.
13-17
The Company's effective tax rate on pretax income differs from the U.S. Federal
statutory regular tax rates of 35% in 1994 and 1993, and 34% in 1992 as follows
(dollars in thousands):
[Download Table]
1994 1993 1992
---------------------------------
Income tax at Federal statutory rate $84,310 $82,570 $110,426
State income taxes net of Federal
income tax benefit 8,955 10,207 12,689
Amortization of non-deductible
intangibles 3,666 2,379 1,896
Foreign losses for which no current
tax benefit is available 4,346 1,115
Other (1,257) (2,219) (3,012)
---------------------------------
Provision for income taxes $100,020 $94,052 $121,999
---------------------------------
---------------------------------
Tax effected temporary differences which give rise to a significant portion of
deferred tax assets and liabilities at December 31, 1994, are as follows
(dollars in thousands):
[Enlarge/Download Table]
1994 1993
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
------------------------------------------------------------------------
Property, plant, and equipment $32,889 $33,155
Deferred advertising 7,932 6,895
Employee benefit plans $16,097 $13,656
Inventory 5,414 3,218
Intangibles 5,845 6,138
Foreign net operating loss
carry forwards 4,605 1,291
Miscellaneous reserves and accruals 10,017 19,394
All other 7,818 6,583 3,073 5,247
------------------------------------------------------------------------
Subtotal 43,951 53,249 40,632 51,435
--------------------------------------------------------------------------------------------------------------
Valuation allowance (4,915) (1,178) 0
--------------------------------------------------------------------------------------------------------------
Total deferred taxes $39,036 $53,249 $39,454 $51,435
------------------------------------------------------------------------
------------------------------------------------------------------------
The major component of the valuation allowance relates to the uncertainty of
realizing foreign deferred tax assets that existed at December 31, 1994 and
1993.
6. EMPLOYEE BENEFIT PLANS
PROFIT SHARING AND PENSION PLANS - The Company has profit sharing plans and a
defined contribution pension plan to provide retirement income to certain of its
employees. The plans cover substantially all full-time employees with at least
15 months of service. Contributions are made solely by the Company to trustees,
and benefits provided by the plans are paid from accumulated funds by the
trustees. Contributions to the pension plan equal 6% of eligible compensation.
Contributions to the profit sharing plans vary but are generally limited to 15%
of eligible compensation less the amount contributed to the pension plan.
Pension expense for 1994, 1993, and 1992 was $21,126,000, $21,802,000, and
$21,652,000, respectively.
13-18
STOCK PURCHASE PLAN - The Company has an employee stock purchase plan that
enables eligible employees to purchase the Company's common stock at 75% of its
fair market value on the first business day following each three-month purchase
period. Under the plan, 1,152,687, 855,242, and 755,840 shares were issued at
prices ranging from $19.60 to $26.35, $26.92 to $33.67, and $28.60 to $33.38 in
1994, 1993, and 1992, respectively.
STOCK OPTION PLAN - In 1994, the shareholders adopted a stock option plan to
replace the plan adopted by the shareholders in 1984. Under the 1994 plan, the
Company may grant either non-qualified or incentive stock options to purchase up
to 3,000,000 shares of common stock. All options allow for the purchase of
common stock at prices equal to market value at the date of grant. Options
become exercisable in varying amounts beginning generally one year after grant.
Information regarding this option plan and the remaining options outstanding
under the former plan adopted in 1984 is as follows:
[Download Table]
1994 1993 1992
------------------------------------------------
Outstanding, January 1 1,567,140 1,285,328 1,231,038
Granted 716,369 396,900 325,056
Exercised (7,865) (93,661) (266,491)
Canceled (63,495) (21,427) (4,275)
------------------------------------------------
Outstanding, December 31 2,212,149 1,567,140 1,285,328
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exercisable, December 31 1,256,885 969,690 748,374
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Options were granted at prices ranging from $27.125 to $37.25 per share in 1994,
$34.625 to $44.75 per share in 1993, and $43.375 per share in 1992. Options were
exercised in 1994, 1993, and 1992 at average prices per share of $21.39, $30.07,
and $31.07, respectively. Options were outstanding at December 31, 1994, 1993,
1992, at average prices per share of $35.04, $37.34, and $37.11, respectively.
At December 31, 1994, options for 2,291,131 shares remain available for issuance
under the 1994 plan.
7. POSTEMPLOYMENT BENEFITS
In addition to providing retirement income benefits, the Company provides
certain health care benefits for a large number of its retired employees.
Employees included in the plan may become eligible for such benefits if they
reach normal retirement age while working for the Company. Effective January 1,
1994, cost sharing provisions of the plan were amended to require retirees to
pay a larger portion of their medical insurance premiums.
The following table summarizes the funded status of the plan at December 31
(dollars in thousands):
[Download Table]
1994 1993
---------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $50,784 $52,150
Fully eligible plan participants 2,373 1,672
Other active participants 3,470 6,146
---------------------
Total 56,627 59,968
Less:
Fair value of plan assets (debt and equity securities) 33,092 32,443
Unrecognized net loss 4,034 5,425
Unrecognized transition obligation 20,526 21,667
---------------------
Portion of transition obligation accrued in the
balance sheet $(1,025) $433
---------------------
---------------------
13-19
Net postretirement benefit cost for the year ended December 31 consisted of the
following components (in thousands):
[Download Table]
1994 1993
Service cost--benefits earned during the year $785 $978
Interest cost on the accumulated postretirement
benefit obligation 4,219 4,525
Actual loss (return) on plan assets 402 (2,568)
Amortization of transition obligation 1,140 1,218
Net amortization and deferral of gains and losses (3,559)
---------------------
Total $2,987 $4,153
---------------------
---------------------
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 106, "Employers Accounting for Postretirement Benefits Other
Than Pensions." Prior to adoption, the Company expensed the cost of these
benefits as incurred. The Company has elected to amortize its transition
obligation of $22,885,000 over 20 years.
Postretirement health care benefit expense under the former method of accounting
was $7,085,000 for 1992. These expenses included the cost of retiree medical
coverage for the respective year as well as funding for future obligations.
In measuring the accumulated postretirement benefit obligation as of December
31, 1994, the Company's health care inflation rate for 1995 was assumed to be
11.0% for employees enrolled in an indemnity plan and 8.5% for employees
enrolled in health maintenance organizations. Inflation rates for both plans are
assumed to trend downward gradually over a 10-year period to 5.0% for the years
2004 and beyond. A 1 percentage point increase in the health care inflation rate
for each year would increase the accumulated postretirement benefit obligation
by approximately $9,200,000, and the service and interest cost components of the
net postretirement benefit cost by approximately $930,000. The discount rates
used in determining the accumulated postretirement benefit obligation as of
December 31, 1994 and 1993, were 8.0% and 7.25%, respectively. The expected
long-term rate of return on plan assets used to determine the net periodic
postretirement benefit costs was 9.5% in 1994 and 8.6% in 1993.
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits."
The effect of adopting SFAS No. 112 was immaterial to the financial statements.
8. LEASE AND DEBT COMMITMENTS
Long-term debt was as follows at December 31 (dollars in thousands):
[Download Table]
1994 1993
---------------------------------------------------------------------------
8.55% unsecured and unsubordinated notes due
February 15, 2001 $100,000 $100,000
Other 15,346 17,722
------------------
Total long-term debt 115,346 117,722
Less amount due within one year 4,479 6,967
------------------
Total $110,867 $110,755
------------------
------------------
13-20
In February 1991, the Company issued $100 million of 8.55% unsecured and
unsubordinated notes due February 15, 2001. The notes are not redeemable prior
to maturity. The fair values of these notes were estimated to be $101 million
and $115 million at December 31, 1994 and 1993, respectively, based on quoted
market prices for similar issuances.
Other long-term debt consists principally of equipment notes and payments due
under non-compete agreements. The obligations bear interest rates of 8.1% to
13.0% and are due through the year 2011. Carrying value approximates fair value
for these obligations based on estimates using current market interest rates and
discounted cash flow analyses.
Maturities of long-term debt for the five years ending December 31, 1999, are
$4,479,000, $6,888,000 $2,143,000, $912,000, and $156,000. Land and buildings
with a cost of $26,041,000 at December 31, 1994, are pledged as collateral.
The Company has uncommitted lines of credit for $130,000,000. Beginning in June
1994, the Company began borrowing from those lines. The average amount drawn
from June through the end of the year was $12,500,000 at a weighted average
interest rate of 5.13%. At December 31, 1994, $11,219,000 was outstanding at an
interest rate of 6.2%. The Company also has in place a $150 million committed
line of credit as support for commercial paper, which will be available for
issue in 1995.
Minimum future rental payments for leased facilities and equipment for the five
years ending December 31, 1999, are $27,955,000, $19,477,000, $13,269,000,
$7,443,000 and $5,003,000, respectively. Rental expense was $40,662,523,
$39,778,000, and $38,768,000 for 1994, 1993, and 1992, respectively.
9. COMMON STOCK PURCHASE RIGHTS
On February 5, 1988, the Company declared a distribution to shareholders of
record on February 22, 1988, of one common stock purchase right for each
outstanding share of common stock. Upon the occurrence of certain events, each
right will entitle the holder to purchase one share of common stock at an
exercise price of $100. The rights become exercisable if a person acquires 20%
or more of the Company's common stock or announces a tender offer for 30% or
more of the Company's common stock. The rights may be redeemed by the Company at
a price of $.01 per right at any time prior to the 30th day after a 20% position
has been acquired.
If the Company is acquired in a merger or other business combination, each right
will entitle its holder to purchase common shares of the acquiring company
having a market value of twice the exercise price of each right (i.e., at a 50%
discount). If an acquirer purchases 35% of the Company's common stock or obtains
working control of the Company and engages in certain self-dealing transactions,
each right will entitle its holder to purchase a number of the Company's common
shares having a market value of twice the right's exercise price. Each right
will also entitle its holder to purchase the Company's common stock at a similar
50% discount in the event an acquirer merges into the Company and leaves the
Company's stock unchanged.
13-21
10. SHAREHOLDERS' EQUITY
[Enlarge/Download Table]
(Dollars in Thousands)
Unrealized
Additional Change Cumulative
Common Paid-in Retained Marketable Unearned Translation
Shares Capital Earnings Securities Compensation Adjustment
-----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1991 $83,938 $ $664,038 $ $ $
Net income 202,784
Cash dividends (112,483)
Common stock issued 1,187 47,369
Common stock retired (1,328) (46,161) (9,536)
-------------------------------------------------------------------------------------
Balance, December 31, 1992 83,797 1,208 744,803
Net income 141,861
Cash dividends (117,945)
Common stock issued 949 36,435
Common stock retired (2,197) (37,302) (49,673)
Translation adjustment (687)
-------------------------------------------------------------------------------------
Balance, December 31, 1993 82,549 341 719,046 (687)
Net income 140,866
Cash dividends (120,503)
Common stock issued 1,167 32,399
Common stock retired (1,341) (31,046) (7,251)
Unearned compensation (149)
Unrealized losses, net of
taxes of $1,107 (2,054)
Translation adjustment 1,056
-------------------------------------------------------------------------------------
Balance, December 31, 1994 $82,375 $1,694 $732,158 $(2,054) $(149) $369
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
11. BUSINESS SEGMENT INFORMATION
The Company has classified its operations into three business segments. Payment
Systems manufactures and supplies checks, through the financial institution
market, and provides electronic funds transfer, account verification, check
authorization and collection services. Business Systems manufactures forms,
record-keeping systems, desktop publishing supplies, and related products to
small businesses. Consumer Specialty Products manufactures and distributes
greeting cards, stationery, direct mail checks, and other products for
households.
13-22
For the three years ended December 31, 1994, the Company's segment information
is as follows (dollars in thousands):
[Download Table]
Consumer
Payment Business Specialty
1994 Systems Systems Products Total
------------------------------------------------------------------------------
Net sales $1,082,648 $335,466 $329,806 $1,747,920
Income from operations 219,159 15 24,485 243,659
Identifiable assets 691,097 256,774 308,401 1,256,272
Depreciation and amortization 57,811 16,440 12,165 86,416
Capital expenditures 65,481 29,816 32,016 127,313
------------------------------------------------------------------------------
1993
Net sales $1,068,932 $237,883 $274,952 $1,581,767
Income from operations 181,802 25,196 24,829 231,827
Identifiable assets 725,968 232,389 293,637 1,251,994
Depreciation and amortization 53,203 7,351 11,766 72,320
Capital expenditures 46,313 7,261 8,536 62,110
------------------------------------------------------------------------------
1992
Net sales $1,096,638 $196,034 $241,679 $1,534,351
Income from operations 271,828 24,757 25,634 322,219
Identifiable assets 841,822 85,306 272,428 1,199,556
Depreciation and amortization 50,779 5,123 10,713 66,615
Capital expenditures 60,312 3,061 8,238 71,611
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Certain corporate related assets (principally cash, cash equivalents, and
marketable securities) are reported in the Payment Systems identifiable assets.
Likewise, corporate costs are reflected in Payment Systems income from
operations. Payment Systems income from operations for 1993 includes the impact
of the $49 million restructuring charge and a $10 million 1994 credit related to
the restructuring.
In 1994, the Company acquired National Revenue Corporation and The Software
Partnership Ltd. (Payment Systems), and T/Maker Company and Pacific Medsoft
(Business Systems).
During 1993, the Company acquired PaperDirect, Inc., and Stockforms Ltd. Both
acquisitions were added to the Business Systems segment.
In 1992, the Company acquired Nelco, Inc., which was included in the Business
Systems segment.
13-23
INDEPENDENT AUDITORS' REPORT
To the Shareholders of Deluxe Corporation:
We have audited the accompanying consolidated balance sheets of Deluxe
Corporation and its subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Deluxe Corporation and its subsidiaries at
December 31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Minneapolis, Minnesota
February 10, 1995
SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
[Download Table]
(Dollars in Thousands Except per Share Amounts)
1994 Quarter Ended March 31 June 30 September 30 December 31
------------------------------------------------------------------------------
Net sales $429,988 $412,344 $426,654 $478,934
Cost of sales 196,674 189,225 195,914 220,071
Net income 38,041 29,556 33,275(2) 39,994
Per share of common stock
Net income 0.46 0.36 0.40 0.49
Cash dividends 0.36 0.36 0.37 0.37
------------------------------------------------------------------------------
1993 Quarter Ended March 31 June 30 September 30 December 31
------------------------------------------------------------------------------
Net sales $405,747 $362,868 $371,974 $441,178
Cost of sales 185,876 168,908 173,376 202,276
Net income 51,791 2,246(1) 36,996 50,828(1)
Per share of common stock
Net income 0.62 0.03 0.45 0.61
Cash dividends 0.35 0.35 0.36 0.36
------------------------------------------------------------------------------
<FN>
(1) In June 1993, the Company recorded a pretax charge of $60 million to
consolidate its financial institution check printing operations. In
December 1993, an $11 million credit was recorded to reduce the total
charge to $49 million. See Note 2 to consolidated financial statements.
(2) In September 1994, a $10 million credit was recorded to further reduce the
1993 restructuring charge. See Note 2 to consolidated financial statements.
13-24
SHAREHOLDER INFORMATION
QUARTERLY STOCK DATA
The chart below shows the per-share price range of the Company's common stock
for the past two fiscal years as quoted on the New York Stock Exchange.
[Download Table]
1994 1993
------------------------------------ ----------------------------------
Quarter High Low Close Quarter High Low Close
------------------------------------ ----------------------------------
1st 38 30 3/8 30 7/8 1st 47 1/2 40 1/2 43 1/8
2nd 31 26 1/8 26 3/8 2nd 47 3/4 37 1/4 38 1/4
3rd 31 3/8 25 3/4 29 3/8 3rd 38 5/8 35 1/8 35 1/2
4th 30 3/8 26 26 1/2 4th 36 1/2 31 7/8 36 1/4
STOCK EXCHANGE
Deluxe Corporation common stock is traded on the New York Stock Exchange under
the symbol DLX.
ANNUAL MEETING
The annual meeting of the shareholders of Deluxe Corporation will be held
Monday, May 8, 1995, at the Westin Hotel, O'Hare, Rosemont, Illinois, at 6:30
p.m.
FORM 10-K AVAILABLE
A copy of the Form 10-K (Annual Report) filed with the Securities and Exchange
Commission by the Company may be obtained without charge by written request to
Stuart Alexander, Deluxe Corporation, P.O. Box 64399, St. Paul, Minnesota
55164-0399.
SHAREHOLDER INQUIRIES
Requests for additional information should be sent to corporate headquarters to
the attention of the following:
General Information:
Stuart Alexander (612) 483-7358
Vice President, Corporate Public Relations
Financial Information:
Charles M. Osborne (612) 483-7355
Senior Vice President and Chief Financial Officer
STOCK OWNERSHIP AND RECORD KEEPING
Norwest Bank Minnesota, N.A.
Stock Transfer Department
161 N. Concord Exchange
P.O. Box 738
South St. Paul, MN 55075
(800) 468-9716
(612) 450-4064
EXECUTIVE OFFICES
Street Address:
1080 W. County Rd. F,
St. Paul, Minnesota 55126-8201
Mailing Address:
P.O. Box 64399,
St. Paul, Minnesota 55164-0399
612) 483-7111
13-25
TOLL-FREE SHAREHOLDER INFORMATION LINE
Beginning in May, you may dial 800-322-8359 to receive the latest financial
results, dividend news, and other information about Deluxe. The 24-hour service
replaces Deluxe's traditional quarterly reports with a more efficient, cost-
effective, and timely system. All shareholders can now have access to Company
news the same day it becomes public.
Planned release date: Quarterly results: Monday, April 24, July 24, October 23
Dividends: The Deluxe Board of Directors usually meets during the second week in
February, May, August, and November.
13-26
Dates Referenced Herein and Documents Incorporated by Reference
↑Top
Filing Submission 0000912057-95-001739 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Wed., Apr. 24, 6:55:19.1am ET 
