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Deluxe Corp – ‘10-Q’ for 6/30/95

As of:  Monday, 8/14/95   ·   For:  6/30/95   ·   Accession #:  912057-95-6508   ·   File #:  1-07945

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/14/95  Deluxe Corp                       10-Q        6/30/95    2:20K                                    Merrill Corp/FA

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      10     42K 
 2: EX-27       Financial Data Schedule (Pre-XBRL)                     2      5K 


10-Q   —   Quarterly Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item I. Financial Statements
6Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
8Item 4. Submission of Matters to A Vote of Security Holders
9Item 6. Exhibits and Reports on Form 8-K
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended June 30, 1995 ----------------------------------------------------- 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", Shoreview, 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 the registrant's common stock, par value $1.00 per share, at August 1, 1995 was 82,647,806. 1
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ITEM I. FINANCIAL STATEMENTS PART I. FINANCIAL INFORMATION DELUXE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollars in Thousands) [Download Table] June 30, 1995 December 31, (Unaudited) 1994 ------------- ------------ CURRENT ASSETS Cash and cash equivalents $22,421 $29,139 Marketable securities 37,129 49,109 Trade accounts receivable 150,928 142,087 Inventories: Raw material 27,922 25,198 Semi-finished goods 25,301 26,046 Finished goods 43,707 36,976 Deferred advertising 22,355 27,770 Deferred income taxes 25,023 25,647 Prepaid expenses and other current assets 63,972 58,894 ------------- ------------ Total current assets 418,758 420,866 ------------- ------------ LONG-TERM INVESTMENTS 47,538 45,091 PROPERTY, PLANT AND EQUIPMENT Land 37,594 38,286 Buildings and improvements 286,694 284,131 Machinery and equipment 570,810 544,092 Construction in progress 11,579 3,225 ------------- ------------ Total 906,677 869,734 Less accumulated depreciation 423,352 407,916 ------------- ------------ Property, plant, and equipment - net 483,325 461,818 INTANGIBLES Cost in excess of net assets acquired - net 314,394 284,420 Other intangible assets - net 53,934 44,077 ------------- ------------ Total intangibles 368,328 328,497 ------------- ------------ TOTAL ASSETS $1,317,949 $1,256,272 ------------- ------------ ------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $59,317 $65,033 Accrued liabilities: Wages, including vacation pay 60,373 50,366 Employee profit sharing and pension 31,560 57,915 Accrued rebates 33,137 28,741 Income taxes 2,051 5,394 Other 68,288 67,313 Short-term debt 84,833 11,219 Long-term debt due within one year 4,546 4,479 ------------- ------------ Total current liabilities 344,105 290,460 ------------- ------------ LONG-TERM DEBT 113,897 110,867 ------------- ------------ DEFERRED INCOME TAXES 39,646 40,552 SHAREHOLDERS' EQUITY Common shares - $1 par value (authorized 500,000,000 shares; issued: 82,431,556) 82,432 82,375 Additional paid-in capital 3,457 1,694 Retained earnings 734,637 732,158 Cumulative translation adjustment 1,502 369 Unearned compensation (814) (149) Net unrealized change - marketable securities (913) (2,054) ------------- ------------ Total shareholders' equity 820,301 814,393 ------------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,317,949 $1,256,272 ------------- ------------ ------------- ------------ See Notes to Consolidated Financial Statements 2
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DELUXE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME --------------------------------- (Dollars in Thousands Except per Share Amounts) (Unaudited) [Enlarge/Download Table] QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, --------------------- ------------------------- 1995 1994 1995 1994 -------- -------- -------- -------- NET SALES $442,479 $412,344 $908,107 $842,332 OPERATING EXPENSES Cost of sales 202,087 189,225 412,757 385,899 Selling, general, and administrative 164,237 148,867 344,048 297,333 Employee profit sharing and pension 15,244 15,597 29,962 30,443 Employee bonus and stock purchase discount 7,181 6,506 12,696 12,670 -------- -------- -------- -------- Total 388,749 360,195 799,463 726,345 -------- -------- -------- -------- INCOME FROM OPERATIONS 53,730 52,149 108,644 115,987 OTHER INCOME (EXPENSE) Investment and other income 1,483 879 7,990 5,530 Interest expense (3,375) (2,458) (6,453) (6,161) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 51,838 50,570 110,181 115,356 PROVISION FOR INCOME TAXES 22,106 21,014 46,610 47,759 -------- -------- -------- -------- NET INCOME $29,732 $29,556 $63,571 $67,597 -------- -------- -------- -------- -------- -------- -------- -------- AVERAGE COMMON SHARES OUTSTANDING 82,370,935 82,324,840 82,406,161 82,428,636 NET INCOME PER COMMON SHARE $0.36 $0.36 $0.77 $0.82 CASH DIVIDENDS PER COMMON SHARE $0.37 $0.36 $0.74 $0.72 See Notes to Consolidated Financial Statements 3
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DELUXE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS -------------------------------------- For the Six Months Ended June 30, 1995 and 1994 (Dollars in Thousands) (Unaudited) [Enlarge/Download Table] 1995 1994 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income $63,571 $67,597 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 32,692 28,603 Amortization of intangibles 16,668 12,350 Stock purchase discount 4,095 4,175 Deferred income taxes (725) (167) Changes in assets and liabilities, net of effects from acquisitions: Trade accounts receivable (5,490) (6,155) Inventories (8,167) (12,336) Accounts payable (9,811) 1,578 Other assets and liabilities (17,029) (34,762) ------- ------- Net cash provided by operating activities 75,804 60,883 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of marketable securities with maturities of more than 3 months (13,115) Proceeds from sales of marketable securities with maturities of more than 3 months 13,409 32,501 Net change in marketable securities with maturities of 3 months or less 20,000 Purchases of property, plant, and equipment (62,495) (47,646) Payments for acquisitions, net of cash acquired (37,282) (36,993) Other 364 (18,411) ------- ------- Net cash used in investing activities (86,004) (63,664) CASH FLOWS FROM FINANCING ACTIVITIES Payments on long-term debt (5,591) (1,691) Payments to retire common stock (15,768) (23,047) Proceeds from issuing stock under employee plans 12,320 12,646 Proceeds from short-term debt 73,614 Cash dividends paid to shareholders (61,093) (59,451) ------- ------- Net cash provided by (used in) financing activities 3,482 (71,543) ------- ------- NET DECREASE IN CASH AND CASH EQUIVALENTS (6,718) (74,324) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 29,139 114,103 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $22,421 $39,779 ------- ------- ------- ------- See Notes to Consolidated Financial Statements 4
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of June 30, 1995, the related consolidated statements of income for the three-month and six-month periods ended June 30, 1995 and 1994 and the consolidated statements of cash flows for the six-month periods ended June 30, 1995 and 1994 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. The Company has uncommitted bank lines of credit of $180 million available at variable interest rates. As of June 30, 1995, $6.0 million was drawn on those lines at a weighted average interest rate of 6.4%. Also, the company has in place a $150 million committed line of credit as support for commercial paper. As of June 30, 1995, $78.8 million of commercial paper was issued and outstanding at a weighted average interest rate of 6.1%. 3. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The Company believes that this statement, when adopted in 1996, will not have a material effect on its financial position or results of operations. 5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS ENDED JUNE 30, 1994 Net sales were $908.1 million for the first six months of 1995, up 7.8% (3.5% excluding the impact of the acquisitions of National Revenue Corporation, which the Company acquired in the second quarter of 1994, The Software Partnership Ltd. and T/Maker Company, which were acquired in the third quarter of 1994, and Financial Alliance Processing Services, Inc., which the Company acquired in the first quarter of 1995) over the first six months of 1994, when sales were $842.3. The Payment Systems segment revenue for the first six months of 1995 increased 7.6% from the first six months of 1994. Flat sales in the Check Printing Division due to slow growth in unit sales and continued price competition in the financial institution market was offset by a 54.3% increase in revenue from the Company's Electronic Payment Systems division, which was due in part to the acquisitions of National Revenue Corporation, The Software Partnership Ltd., and Financial Alliance Processing Services, Inc. Deluxe's Business Systems segment posted a 13.6% increase in revenue for the first six months of 1995 over the first six months of 1994, due to the growth in domestic and international units and the acquisition of T/Maker Company. Revenue for the Consumer Specialty Products segment increased 0.8%. Selling, general, and administrative expenses increased $46.7 million or 15.7% for the first six months of 1995 over the first six months of 1994. The Business Systems segment's expenses increased approximately $16.6 million, due primarily to the acquisition of T/Maker Company, as well as increased selling expenses in the international operations. The Electronic Payments Systems division's expenses increased approximately $19.0 million, due primarily to the acquisitions of National Revenue Corporation, Financial Alliance Processing Services, Inc., and The Software Partnership Ltd. and product development costs. Net income was $63.6 million for the first six months of 1995, or 7.0% of sales, compared to $67.6 million for the first six months of 1994, or 8.0% of sales. Included in the 1995 net income is approximately $5 million of pretax gain resulting from insurance payments for the 1994 earthquake damage to the Company's facilities. RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1995 COMPARED TO THREE MONTHS ENDED JUNE 30, 1994 Net sales were $442.5 million for the second quarter of 1995, up 7.3% (3.9% excluding the acquisitions of National Revenue Corporation, The Software Partnership Ltd., T/Maker Company, and Financial Alliance Processing Services Inc.) over the second quarter of 1994, when sales were $412.3 million. The Payment Systems segment's revenue increased 6.9% over the second quarter of 1994. This included a 47.0% increase in revenue from the Company's Electronic Payment Systems division, where all business units reported double digit growth. A significant portion of the Electronic Payment Systems division increase was due to the acquisitions of The Software Partnership Ltd., and Financial Alliance Processing Services, Inc. The Company's Business Systems segment posted an 11.0% increase in revenue in the second quarter of 1995 over second quarter 1994 primarily due to increased revenue in domestic and United Kingdom business forms units, and the acquisition of T/Maker Company. Selling, general and administrative expenses increased $15.4 million or 10.3% in second quarter 1995 over second quarter 1994. The Electronic Payments Systems division expenses increased approximately $8.7 million, primarily due to the acquisitions noted above (except National Revenue Corporation, which was acquired on April 15, 1994). The Business Systems segment's expenses increased approximately $4.5 million, primarily due to the acquisition of T/Maker Company, as well as increased selling expenses in the international operations. Net income was $29.7 million in the second quarter of 1995, or 6.7% of sales, compared to $29.6 million in 1994 or 7.2% of sales. FINANCIAL CONDITION - LIQUIDITY Cash provided by operations was $75.8 million for the first six months of 1995, compared with $60.9 million for the first six months of 1994. This represents the Company's primary source of working capital for financing capital expenditures and paying cash dividends. The Company's working capital on June 30, 1995 was $74.6 million, compared to $130.4 million on December 31, 1994. The decrease in 1995 is primarily the result of the acquisition of Financial Alliance Processing Services, Inc. The current ratio was 1.2 to 1 on June 30, 1995 and 1.4 to 1 on December 31, 1994. FINANCIAL CONDITION - CAPITAL RESOURCES Purchases of property, plant, and equipment totaled $62.5 million for the six months of 1995, compared to $47.6 million for the comparable prior year period. In February 1991, the Company issued $100 million of notes, payable in 2001 under its 1989 shelf registration of debt securities. The Company has uncommitted bank lines of credit of $180 million. As of June 30, 1995, $6.0 million was drawn on those lines. In addition, the Company has in place a $150 million committed line of credit as support for commercial paper. As of June 30, 1995, $78.8 million of commercial paper was issued and outstanding. The company intends to pursue additional 6
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medium or long-term debt financing to be used for general corporate purposes, including working capital, repayment or repurchase of outstanding indebtedness and other securities of the Company, capital expenditures and possible acquisitions. Cash dividends totaled $61.1 million for the first six months of 1995 compared to $59.5 million for the first six months of 1994. OUTLOOK On May 1, 1995, J.A. (Gus) Blanchard III succeeded Harold V. Haverty as President and Chief Executive Officer of the Company. In addition, Mr. Blanchard was elected to the Company's Board of Directors following its annual meeting held on May 8, 1995. In connection with the recent management change, the Company is undertaking a comprehensive evaluation of its businesses and strategy and may, in the future, determine to adjust its business strategy and to pursue acquisitions of complimentary businesses or products or dispositions of certain businesses or products of the Company and its subsidiaries. The Company currently has no commitments to make any such acquisitions or dispositions. 7
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PART II. OTHER INFORMATION ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its annual shareholders' meeting on May 8, 1995: 70,991,076 shares were represented (85.98% of the 82,568,415 shares outstanding). 1. Election of Directors: The nominees listed in the proxy statement were: Haverty, Olson, Twogood, MacMillan, Renier, Grogan and Jacobson. The results were as follows: for all nominees: 70,061,959 Withheld as to all nominees: 675,954 Withheld as to fewer than all nominees: 253,163 Broker Non-Vote: 0 2. Ratification of appointment of Deloitte & Touche LLP as independent auditors: For: 70,530,670 Against: 154,626 Abstain: 305,780 Broker Non-Vote: 0 8
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PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibit is filed as part of this report: (27) Financial Data Schedule (b) The Company did not, and was not required to file any reports on Form 8-K during the quarter for which this report is filed. 9
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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DELUXE CORPORATION (Registrant) Date August 14, 1995 /s/ J.A. Blanchard III ---------------------------- ----------------------------------- J.A. Blanchard III, President and Chief Executive Officer (Principal Executive Officer) Date August 14, 1995 /s/ C.M. Osborne ---------------------------- ----------------------------------- C.M. Osborne, Senior Vice President and Chief Financial Officer (Principal Financial Officer) 10

Dates Referenced Herein   and   Documents Incorporated by Reference

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Filed on:8/14/9510
8/1/951
For Period End:6/30/9516
5/8/95788-K,  DEF 14A
5/1/957
12/31/94610-K405
6/30/944610-Q
4/15/946
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