UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ x ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the fiscal year ended December 31, 1994.
Commission file number 1-7945.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1080 West County Road F, Saint Paul, Minnesota55126-8201
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number: (612) 483-7111.
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $1.00 per share New York Stock Exchange
(Title of Class) (Name of each exchange
on which registered)
Securities registered pursuant to Section 12(g) of the act: None.
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. x Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ x ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is $2,255,102,157 based on the average bid and asked prices of the
stock on the New York Stock Exchange on March 13, 1995. The number of
outstanding shares of the registrant's common stock as of March 13, 1995, is
Documents Incorporated by Reference:
1. Portions of the registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1994 (Annual Report) are incorporated by reference
in Parts I, II and IV.
2. Portions of the registrant's proxy statement dated March 27, 1995 (Proxy
Statement) are incorporated by reference in Part III.
DELUXE CORPORATIONPART IItem 1. Description of Business
Deluxe Corporation was incorporated under the laws of the State of
Minnesota in 1920 as the successor to a business founded in 1915. Unless the
context otherwise requires, the term "Company," as used herein, refers to Deluxe
Corporation or one or more of its wholly owned subsidiaries.
The Company has four business divisions, which are composed of the
following corporate entities:
(1) Payment Systems, which consists of Deluxe Corporation's check and
financial form printing and plastic transaction card production units; Deluxe
Data Systems, Inc., (including Deluxe Data International Limited), a supplier of
software and processing services for automated teller machines, point-of-sale
systems, automated clearing houses and government benefit transfers; Chex
Systems, Inc., a checking account verification business providing services to
financial institutions; Electronic Transaction Corporation, a database
management business providing check authorization information to retailers;
National Revenue Corporation, a provider of collection and other accounts
receivable services to retail, financial and medical credit grantors; and
Financial Alliance Processing Services, Inc., a processor of electronic credit
and debit transactions;
(2) Business Systems, which consists of Deluxe Corporation's general
business and health care forms printing unit; Deluxe UK Limited and Deluxe
Canada, Inc.; PaperDirect, Inc., a direct mail marketer of specialty and
decorated papers for use by desktop publishers; Nelco, Inc., a supplier of tax
forms, tax forms software, and electronic tax filing services; and T/Maker
Company, a publisher of image content software, including clip art;
(3) Consumer Specialty Products, which consists of Current, Inc., a direct
mail marketer of greeting cards, stationery, bank checks and related specialty
products for consumer and household use; and
(4) Ink, which consists of Deluxe Corporation's ink division, which is
engaged in the manufacture and sale of water-washable lithographic ink and
solvent free press wash.
Except for a small but growing volume of business form and decorated paper
sales in the United Kingdom and Canada and licenses of electronic funds transfer
software in selected countries in Europe and Asia, most of the Company's
products and services are sold in the United States.
Reference is made to the information contained in Note 11, Business Segment
Information, in the Notes to Consolidated Financial Statements on page 38 in the
Company's Annual Report.
The material aspects of the operations of each of the Company's business
divisions are described below:
The Company's largest division, Payment Systems is composed of the paper-
based payments unit and the electronic payments unit. The paper-based payments
unit prints and sells to financial institutions and depositors a variety of
checks and related banking forms. It directs its efforts to the production and
marketing of checks and deposit tickets for personal and business accounts.
Several check styles are offered; some are designed for desk or office use and
others are designed to be carried in a pocket or purse.
Substantially all of the Company's checks and related banking forms are
imprinted with magnetic ink to conform with the specifications of the magnetic
ink character recognition (MICR) program currently utilized by the U.S. banking
For several years the banking industry and others have been seeking ways to
improve the payment system, and a variety of alternatives to the bank check have
been introduced, including charge cards, credit cards, debit cards, telephone
bill payment, etc., and in addition, a number of printers have begun to market
checks through channels other than financial institutions. Although such
alternative means of settling financial transactions and alternative marketing
channels may reduce the demand for checks and checks obtained through financial
institutions, the Company is unable to predict the effect of these alternative
means of payment and channels of distribution on its future operations.
Depositors commonly submit initial check orders and reorders to their
financial institutions which forward them to one of the Company's printing
plants. Printed checks are sent directly by the Company to the depositors,
typically on the business day after receipt of the order. The Company's charges
are paid by the financial institutions, which in turn usually deduct the charges
from the depositors' accounts.
Skeleton check forms are lithographed in three of the Company's regional
warehouse and distribution centers, principally on high-speed roll-fed presses.
From these centers, the forms are distributed to the Company's 46 check
production plants, where names, addresses, financial institution name and other
information are printed on the documents. The Company's facilities are located
in major metropolitan areas throughout the United States.
The Company has no material backlog of orders. Approximately 96 percent of
all financial institution check orders received by the Company in 1994 were
completed and shipped no later than the first working day after receipt of the
order. The approximate number of financial institutions (not including branches
as separate entities) to which the Company made gross sales of checks and
related banking forms in excess of $100,000 during the year was 1,925.
The Company's principal raw materials are safety paper and special MICR
bond papers. The Company purchases substantially all of its safety paper from
Simpson Paper Company, which finishes and warehouses the paper in its plants in
Warwick, New York, and Burlington, Iowa. Most of the Company's special MICR bond
papers are obtained from Georgia Pacific Corporation, primarily from its
facility in Port Edwards, Wisconsin. The Company has no long-term contract with
any of its suppliers and has never experienced a shortage of either safety paper
or MICR bond papers. In order to assure adequate sources of supply, the Company
is continually experimenting with the use of special MICR bond papers from other
suppliers. Other raw materials used by the Company are of standard composition
and are purchased from a number of sources at competitive prices.
The Company's primary competitors in the sale of bank checks and related
banking forms to financial institutions are two other large national printers
who specialize in check printing. However, any printer which complies with the
American Bankers Association's specifications for MICR printing is a potential
competitor. The Company is the largest firm engaged in check printing.
The electronic payments unit is a major supplier of electronic funds
transfer software and processing services, particularly software and services
for automated teller machines, processing of ATM interchange transactions within
and between regional shared networks, and electronic benefit transactions. The
Company provides ATM transaction processing technology and services to six of
the 10 largest ATM networks in the United States. The Company provides
electronic benefit transaction services for the automated payment of aid to
dependent children and food stamp benefits in Maryland and New Jersey.
Competition for the Company's electronic funds transfer software and
processing services comes from several large financial institutions and
Division Acquisitions in 1994
The Company expanded the business of the electronic payments unit in 1994
with the following acquisitions:
On April 15, 1994, the Company acquired N.R.C. Holding Corporation and its
principal subsidiary, National Revenue Corporation (NRC), a collection services
company headquartered in Columbus, Ohio. Founded in 1973, NRC provides accounts
receivable management and collection services for approximately 25,000 retail,
commercial, medical, and financial credit grantors located throughout the United
States. NRC has sales offices in 30 major metropolitan areas, a national
operations center in Columbus, and regional operations centers in Atlanta,
Philadelphia, and Anaheim, California. NRC's revenues were approximately $28
million in 1994. With its proprietary technology, the Company believes
NRC is well positioned to take advantage of future consolidation in the accounts
receivable management and collections markets.
On July 14, 1994, the Company acquired The Software Partnership Limited of
Runcorn, England. The Software Partnership Limited is a major provider of open
systems software architecture for large financial institutions. The Software
Partnership's sp/ARCHITECT is an electronic delivery framework which assists
third-party software developers and in-house data processing departments with
applications development. sp/ARCHITECT accommodates a wide variety of access
devices, including smart phones, smart cards, PCs, and UNIX workstations. The
Software Partnership had revenues of L6 million in 1994. Combined with certain
Deluxe Data Systems, Inc., units, The Software Partnership has been renamed
Deluxe Data International Limited. sp/ARCHITECT is well designed to serve large
financial institutions, and the addition of open systems architecture to its
software products enhances the Company's position in electronic banking.
In accordance with a purchase agreement entered into before year end, on
January 10, 1995, the Company acquired Financial Alliance Processing Services,
Inc., of Louisville, Kentucky. Financial Alliance provides a variety of credit
and debit processing services to 150 financial institutions, 40,000 retailers,
and more than 30 independent sales organizations. Founded in 1991, Financial
Alliance is one of the fastest-growing merchant credit card processors in the
United States and had net revenues of approximately $21 million in 1994.
Financial Alliance's services are marketed through financial institutions,
independent sales organizations, and its own representatives, offering fully
integrated card payment processing services that enable retailers to accept all
nationally recognized credit cards.
The second largest of the Company's divisions, Business Systems directs its
efforts to the production and marketing of short-run computer and business forms
and record-keeping systems for small businesses and professional practices. In
addition, it is a direct mail marketer of decorated and other specialty papers
to users of laser printers and office copiers. Other products and services
marketed by the division include tax forms, tax forms software, one-write
accounting systems, and electronic tax filing services.
The division has no material backlog of orders and does not carry
significant inventory. Approximately 94 percent of all personalized standard
forms orders were completed and shipped no later than the third working day
after receipt, and all custom forms were completed and shipped no later than the
fifth day after receipt. Orders for specialty papers were typically filled no
later than the first day after receipt.
Business Systems' products are sold primarily through direct mail and check
package advertisements. Business Systems' computer and business forms are
produced or inventoried in nine of the Company's plants, and its specialty
papers are inventoried and shipped from a PaperDirect facility in Secaucus, New
Jersey. Business Systems' principal competition consists of a large number of
national and local business forms and office products suppliers.
Division Acquisitions in 1994
On June 28, 1994, the Company acquired T/Maker Company of Mountain View,
California. T/Maker Company produces image content and multimedia software for
consumer and business markets. According to software industry analysts,
T/Maker's ClickArt [REGISTERED TRADEMARK] image content software is the nation's
leading supplier of electronic clip art. Image content is one of the fastest-
growing categories of computer software, due to the growing popularity of
graphical computer systems. T/Maker is also the producer of the VroomBooks-TM-
series of children's multimedia software. T/Maker's revenues were approximately
$12 million in 1994.
In July 1994, through PaperDirect, the Company entered into a joint venture
to market decorated and other specialty papers in Australia and New Zealand.
Based in Sydney, Australia, the joint venture operates under the name
On August 15, 1994, the Company acquired Pacific Medsoft, a small software
development company located in Tahoe City, California, providing software to
medical professionals. Pacific Medsoft's Physician Office Management
Information System is designed for sole and small group physician practices.
Consumer Specialty Products
This division produces and markets greeting cards, gift wrap, bank checks,
and miscellaneous stationery products. In addition, it markets a variety of
novelty items for household use, many of which have been created by the division
and are sold under its proprietary trademarks. All such products are sold to
consumers by means of catalogs and other direct mail advertisements. Many of the
division's promotions are based on holidays, and due to the significance of the
year-end holiday season, approximately 35 percent of the division's sales occur
in the fourth quarter.
Consumer Specialty Products are produced in two of the Company's plants.
The division's competitors are primarily the national greeting card and
stationery printers that market their products through owned and franchised card
and gift shops, and the printers that solicit orders for bank checks by direct
In June 1994, the Company formed the Ink Division to produce and market its
water-washable lithographic ink and solvent-free press wash system. The
Company's innovative ink meets or exceeds the performance standards of
conventional lithographic inks, requires no press modifications and is based
entirely on renewable vegetable oils. The ink system eliminates the need for
organic- or petroleum-based cleaning solvents which are a major source of
pollution. On November 21, 1994, the Company entered into an agreement with
Coates Lorilleux S.A. under which it licensed Coates to manufacture and
distribute the ink and solvent-free press wash system in Europe and in certain
Including its subsidiaries, the Company has approximately 18,000 full- and
part-time employees. It has a number of employee benefit plans, including
retirement, medical and hospitalization plans. The Company has never experienced
a work stoppage or strike and considers its employee relations to be good.
Executive Officers of the Company
The executive officers of the Company are elected by the board of directors
each year. The term of office of each executive officer will expire at the
annual meeting of the board after the annual shareholders' meeting on May 8,1995. The principal occupation of each of the executive officers listed below is
with the Company.
Name Position Age Since
---- -------- --- ---------
Harold V. Haverty Chairman, President and Chief 64 1969
Jerry K. Twogood Executive Vice President 54 1974
Charles M. Osborne Senior Vice President and
Chief Financial Officer 41 1981
Arnold A. Angeloni Senior Vice President 52 1985
Kenneth J. Chupita Senior Vice President 53 1981
Mark T. Gritton Senior Vice President 46
Jay B. Skutt Senior Vice President 51
Vernon W. Yates Senior Vice President 59 1993
John H. LeFevre Senior Vice President, Secretary and 51 1994
Michael R. Schwab Senior Vice President and 49 1994
Chief Information Officer
Mr. Haverty has been employed by the Company since 1954 and has served as
Chief Executive Officer since 1986.
Mr. Twogood has been employed by the Company since 1959 and has served as
Executive Vice President since 1987 and Chief Operating Officer since 1991.
Mr. Osborne has been employed by the Company since 1981 and has served as
Chief Financial Officer since 1984 and Senior Vice President since 1989.
Mr. Angeloni has been employed by the Company since 1961 and has served as
principal executive officer of the Business Systems Division since 1984 and as
Senior Vice President since 1989.
Mr. Chupita has been employed by the Company with principal responsibility
for corporate development since 1979 and has served as Senior Vice President
Mr. Gritton has been employed by the Company since 1972. From 1990 to
1993, Mr. Gritton was Vice President with principal responsibility for regional
operations of the Payment Systems Division and since 1993 he has been president
of the paper payment unit of the Payment Systems Division; he has served as a
Senior Vice President of the Company since 1993.
Mr. Skutt has been employed by the Company since 1965. Since 1988, Mr.
Skutt has been a Vice President with prinicipal responsibility for manufacturing
and national production operations and he has served as Senior Vice President
Mr. Yates was employed by Primary Access Corporation from 1989 until
November 1992 in the position of Chairman, President and Chief Executive
Officer. Primary Access Corporation, which is headquartered in San Diego,
California, is a manufacturer of telecommunications access systems. Since March
1993 he has served as president of the Company's electronic payments unit in the
Payment Systems Division and as a Senior Vice President.
Mr. LeFevre was employed by Wang Laboratories, Inc., from 1978 until
February 1994. During the period from 1988 until February 1994, he held a
variety of positions in its legal department including, at various times,
Corporate Counsel, Vice President, General Counsel and Secretary. Wang
Laboratories, Inc., which is headquartered in Lowell, Massachusetts, is engaged
in the manufacture and sale of computer hardware and software and related
services. Since February 1994, Mr. LeFevre has been responsible for the legal
department of the Company and has served as Senior Vice President, General
Counsel and Secretary.
Mr. Schwab was employed by USAir from 1986 until April 1994. From 1989 to
1991, he served as Senior Vice President, Information Systems, and Chief
Information Officer, and from 1991 to April 1994, he served as Executive Vice
President of Operations. USAir, which is headquartered in Arlington, Virginia,
is engaged in commercial air transportation. Since November 1994, Mr. Schwab
has had responsibility for the information systems of the Company and has served
as Senior Vice President and Chief Information Officer.
Item 2. PropertiesThe Company conducts production operations in 74 facilities located in 30
states, Puerto Rico, Canada and the United Kingdom aggregating approximately
4,813,000 square feet; in addition, the Payment Systems Division occupies three
facilities in Shoreview, Minnesota, aggregating approximately 433,000 square
feet, which are devoted to administration, information systems, research and
development; the Business Systems Division occupies a 156,000 square foot
administration building in Shoreview, Minnesota, and the Consumer Specialty
Products Division occupies a 148,000 square foot administration and product
design building in Colorado Springs, Colorado. All but four of the production
facilities are of one story construction and most were constructed and equipped
in accordance with the Company's plans and specifications.
Over one-half of the Company's total production area has been constructed
during the past 20 years. The Company owns 59 of its facilities and leases the
remainder for terms expiring from 1995 to 2001. Depending upon the
circumstances, when a lease expires, the
Company either renews the lease or constructs a new facility to replace the
leased facility. All facilities are adequately equipped for the Company's
Item 3. Legal Proceedings
Other than ordinary routine litigation incidental to the business, there
are no material pending legal proceedings to which the Company or any of its
subsidiaries is a party or to which any of the Company's property is subject.
Item 4. Submission of Matters to a Vote of Security Holders
PART IIItem 5. Market for Registrant's Common Equity and Related Stockholder Matters
Reference is made to the information contained under the caption "Financial
Highlights" on page 1, and "Shareholder Information" on page 41 of the Company's
Item 6. Selected Financial Data
Reference is made to the information contained under the caption "Eleven-
Year Summary" on pages 22 and 23 in the Company's Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Reference is made to the information contained under the caption
"Management's Discussion and Analysis" on pages 24 through 26 in the Company's
Item 8. Financial Statements and Supplementary Data
Reference is made to the financial statements, notes and independent
auditors' report on pages 21 through 39 of the Company's Annual Report and the
information contained under the caption "Summarized Quarterly Financial Data" on
page 39 in the Company's Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Items 10, 11, 12 and 13.
Directors and Executive Officers of the Registrant, Executive Compensation,
Security Ownership of Certain Beneficial Owners and Management, and Certain
Relationships and Related Transactions.
Reference is made to the Company's Proxy Statement.
PART IVItem 14. Exhibits and Reports on Form 8-K
(a) The following financial statements and independent auditors' consent
are filed as part of this report:
(1) Financial Statements:
Consolidated Balance Sheets at December 31, 1994 and 1993....... 28 - 29
Consolidated Statements of Income for the three years in the
period ended December 31, 1994............................. 30
Consolidated Statements of Cash Flows for the three years in
the period ended December 31, 1994......................... 31
Notes to Consolidated Financial Statements...................... 32 - 38
Independent Auditors' Report.................................... 39
(2) Supplemental Financial Information (Unaudited):
Summarized Quarterly Financial Data............................. 39
Page in this
(3) Independent Auditors' Consent to the incorporation by reference
of its reports in the Company's registration statements 33-53585,
33-57261, 33-32279 and 33-58510................................. F-1
Schedules other than those listed above are not required or are not
applicable, or the required information is shown in the financial statements or
(b) The Company did not file a report on Form 8-K during the fourth
quarter of 1994.
(c) The following exhibits are filed as part of or are incorporated in
this report by reference:
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities indicated on
March 27, 1995.
By /s/ Harold V. HavertyHarold V. Haverty for Himself and
Harold V. Haverty, Director and as Attorney-In-Fact*
Principal Executive Officer
Jerry K. Twogood, Director
Eugene R. Olson, Director
Edward W. Asplin, Director
John Schreiner, Director
Whitney MacMillan, Director
James J. Renier, Director
Barbara B. Grogan, Director
Allen F. Jacobson, Director
Charles M. Osborne, Principal
Financial Officer and
Principal Accounting Officer
*By Power of Attorney set forth in Exhibit 24 to this report.