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Deluxe Corp – ‘10-Q’ for 10/30/95

As of: Tuesday, 11/14/95 · For: 10/30/95 · Accession #: 912057-95-9946 · File #: 1-07945

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

11/14/95  Deluxe Corp                       10-Q       10/30/95    3:20K                                    Merrill Corp/FA

Quarterly Report — Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                       9     40K 
 2: EX-12.1     Statement re: Computation of Ratios                    1      6K 
 3: EX-27       Financial Data Schedule (Pre-XBRL)                     2      5K

10-Q — Quarterly Report
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Exhibits and Reports on Form 8-K Management's Discussion and Analysis of Financial Condition and Results of Operations
1	1st Page - Filing Submission
6	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
8	Item 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              September 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 November 1, 1995 was 82,625,936.                            

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ITEM 1.  FINANCIAL STATEMENTS                     PART I.                                                 
                                           FINANCIAL INFORMATION                                          
                                   DELUXE CORPORATION AND SUBSIDIARIES                                    
                                        CONSOLIDATED BALANCE SHEET                                        
                                           (Dollars in Thousands)                                         

                                                                        September 30, 1995   December 31, 
                                                                           (Unaudited)           1994     
                                                                        ------------------   ------------ 
                                                                                                          
CURRENT ASSETS                                                                                            
     Cash and cash equivalents                                                  $   21,611     $   29,139 
     Marketable securities                                                          30,308         49,109 
     Trade accounts receivable                                                     161,841        142,087 
     Inventories:                                                                                         
          Raw material                                                              24,003         25,198 
          Semi-finished goods                                                       27,859         26,046 
          Finished goods                                                            49,345         36,976 
     Deferred advertising                                                           31,327         27,770 
     Deferred income taxes                                                          24,946         25,647 
     Prepaid expenses and other current assets                                      59,001         58,894 
                                                                                ----------     ---------- 
          Total current assets                                                     430,241        420,866 
                                                                                ----------     ---------- 
LONG-TERM INVESTMENTS                                                               46,265         45,091 
PROPERTY, PLANT AND EQUIPMENT                                                                             
      Land                                                                          42,803         38,286 
      Buildings and improvements                                                   292,402        284,131 
      Machinery and equipment                                                      581,918        544,092 
      Construction in progress                                                      15,987          3,225 
                                                                                ----------     ---------- 
           Total                                                                   933,110        869,734 
      Less accumulated depreciation                                                436,032        407,916 
                                                                                ----------     ---------- 
           Property, plant, and equipment - net                                    497,078        461,818 
INTANGIBLES                                                                                               

      Cost in excess of net assets acquired - net                                  308,906        284,420 
      Other intangible assets - net                                                 61,900         44,077 
                                                                                ----------     ---------- 
           Total intangibles                                                       370,806        328,497 
                                                                                ----------     ---------- 
                 TOTAL ASSETS                                                   $1,344,390     $1,256,272 
                                                                                ----------     ---------- 
                                                                                ----------     ---------- 
 LIABILITIES AND SHAREHOLDERS' EQUITY                                                                     
 CURRENT LIABILITIES                                                                                      
      Accounts payable                                                          $   66,371      $  65,033 
      Accrued liabilities:                                                                                

           Wages, including vacation pay                                            58,750         50,366 
           Employee profit sharing and pension                                      42,823         57,915 
           Accrued rebates                                                          31,580         28,741 
           Income taxes                                                              7,181          5,394 
           Other                                                                    72,107         67,313 
      Short-term debt                                                               86,754         11,219 
      Long-term debt due within one year                                             4,916          4,479 
                                                                                ----------     ---------- 
           Total current liabilities                                               370,482        290,460 
                                                                                ----------     ---------- 
LONG-TERM DEBT                                                                     114,438        110,867 
                                                                                ----------     ---------- 
DEFERRED INCOME TAXES                                                               37,908         40,552 
SHAREHOLDERS' EQUITY                                                                                      
      Common shares - $1 par value (authorized 500,000,000                          82,512         82,375 
        shares; issued:  82,511,562)                                                                      
      Additional paid-in capital                                                     5,891          1,694 
      Retained earnings                                                            733,449        732,158 
      Cumulative translation adjustment                                              1,243            369 
      Unearned compensation                                                           (765)          (149)
      Net unrealized change - marketable securities                                   (768)        (2,054)
                                                                                ----------     ---------- 
           Total shareholders' equity                                              821,562        814,393 
                                                                                ----------     ---------- 
                 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                     $1,344,390     $1,256,272 
                                                                                ----------     ---------- 
                                                                                ----------     ---------- 


See Notes to Consolidated Financial Statements                                  

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                                   DELUXE  CORPORATION AND SUBSIDIARIES                                             
                                     CONSOLIDATED STATEMENTS OF INCOME                                              
                            (Dollars in Thousands Except per Share Amounts)                                         
                                               (Unaudited)                                                          

                                                        QUARTER ENDED SEPTEMBER 30,  NINE MONTHS ENDED SEPTEMBER 30,
                                                        ---------------------------  -------------------------------
                                                             1995          1994             1995        1994        
                                                             ----          ----             ----        ----        
                                                                                                                    
NET SALES                                                  $449,526      $426,654          $1,357,633    $1,268,986 
OPERATING EXPENSES                                                                                                  
    Cost of sales                                           203,322       195,914             616,079       581,813 
    Selling, general, and administrative                    171,463       160,601             515,511       457,935 
    Employee profit sharing and pension                      14,972        15,383              44,934        45,826 
    Employee bonus and stock purchase discount                5,240         4,946              17,936        17,615 
    Restructuring credit                                                  (10,000)                          (10,000)
                                                         ----------    ----------         -----------    ---------- 
         Total                                              394,997       366,844           1,194,460     1,093,189 
                                                         ----------    ----------         -----------    ---------- 
INCOME FROM OPERATIONS                                       54,529        59,810             163,173       175,797 

OTHER INCOME (EXPENSE)                                                                                              

    Investment and other income                               1,369         1,535              9,359          7,065 
    Interest expense                                         (3,589)       (2,534)           (10,042)        (8,695)
                                                         ----------    ----------         ----------     ---------- 
INCOME BEFORE INCOME TAXES                                   52,309        58,811            162,490        174,167 

PROVISION FOR INCOME TAXES                                   22,933        25,536             69,542         73,294 
                                                         ----------    ----------         ----------     ---------- 

NET INCOME                                               $   29,376    $   33,275         $   92,948     $  100,873 
                                                         ----------    ----------         ----------     ---------- 
                                                         ----------    ----------         ----------     ---------- 

AVERAGE COMMON SHARES OUTSTANDING                        82,486,220    82,332,373         82,435,645      82,396,913
NET INCOME PER COMMON SHARE                                   $0.36         $0.40              $1.13           $1.22
CASH DIVIDENDS PER COMMON SHARE                               $0.37         $0.37              $1.11           $1.09


See Notes to Consolidated Financial Statements                                  

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                                  DELUXE CORPORATION AND SUBSIDIARIES                        
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS                       
                         For the Nine Months Ended September 30, 1995 and 1994               
                                         (Dollars in Thousands)                              
                                              (Unaudited)                                    

                                                                           1995       1994   
                                                                           ----       ----   
                                                                                             
CASH FLOWS FROM OPERATING ACTIVITIES                                                         
    Net income                                                         $  92,948    $100,873 
    Adjustments to reconcile net income to net cash provided by                              
      operating activities:                                                                  
    Depreciation                                                          50,027      43,717 
    Amortization of intangibles                                           25,252      19,551 
    Stock purchase discount                                                6,134       6,274 
    Deferred income taxes                                                   (754)     (1,036)
    Changes in assets and liabilities, net of effects from                                   
      acquisitions:                                                                          
        Trade accounts receivable                                        (16,403)    (10,337)
        Inventories                                                      (12,445)    (21,139)
        Accounts payable                                                  (2,757)      8,531 
        Other assets and liabilities                                     (11,185)    (33,552)
                                                                        ---------  --------- 
            Net cash provided by operating activities                    130,817     112,882 

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                                               20,317      43,500 
    Net change in marketable securities with maturities of                                   
      3 months or less                                                                20,000 
    Purchases of property, plant, and equipment                          (91,904)    (74,203)
    Payments for acquisitions, net of cash acquired                      (37,313)    (52,196)
    Other                                                                 (2,190)    (21,816)
                                                                        --------   --------- 
          Net cash used in investing activities                         (111,090)    (97,830)

CASH FLOWS FROM FINANCING ACTIVITIES                                                         
    Payments on long-term debt                                            (7,094)     (2,632)
    Payments to retire common stock                                      (21,979)    (33,135)
    Proceeds from issuing stock under employee plans                      18,917      18,900 
    Proceeds from short-term debt                                         74,558      18,000 
    Cash dividends paid to shareholders                                  (91,657)    (89,951)
                                                                        --------   --------- 
          Net cash used in financing activities                          (27,255)    (88,818)
                                                                        --------   --------- 
NET DECREASE IN CASH AND CASH EQUIVALENTS                                 (7,528)    (73,766)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                          29,139     114,103 
                                                                        --------   --------- 
CASH AND CASH EQUIVALENTS AT END OF PERIOD                               $21,611     $40,337 
                                                                        --------   --------- 
                                                                        --------   --------- 


See Notes to Consolidated Financial Statements                                  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

1.  The consolidated balance sheet as of  September 30, 1995, the related       
consolidated statements of income for the three-month and nine-month    
 periods ended September 30, 1995 and 1994 and the consolidated statements
of cash flows for the nine-month periods ended September 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 $189.5 million          
available at variable interest rates.  As of  September 30, 1995,   $7.5
million was drawn on those lines at a weighted average interest rate of 
6.8%.  Also, the company has in place a $150 million committed line of  
credit as support for commercial paper.  As of September 30, 1995, $79.3
million of commercial paper was issued and outstanding at a weighted    
average interest rate of 5.9%.  During the third quarter of 1995, the   
Company filed a shelf registration for a $300 million medium term note  
program.  As of September 30, 1995, no such notes were issued or        
outstanding.                                                            

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.   

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ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND        
RESULTS OF OPERATIONS                                         

RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO NINE   
MONTHS ENDED SEPTEMBER 30, 1994                                                 

Net sales were $1,357.6 million for the first nine months of 1995, up 7.0%      
(2.9% excluding the impact of the acquisitions of NRC Holding 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 nine months of    
1994, when sales were $1,269.0 million.                                         

The Payment Systems segment revenue for the first nine months of 1995           
increased 7.1% from the first nine 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 46.3%           
increase in revenue from the Company's Electronic Payment Systems division,     
which was due in part to the acquisitions of NRC Holding Corporation, The       
Software Partnership Ltd., and Financial Alliance Processing Services, Inc.     
The Business Systems segment posted a 12.8% increase in revenue for the first   
nine months of 1995 over the first nine months of 1994, due to the growth in    
domestic and international business forms units and the acquisition of          
T/Maker Company.  Revenue for the Consumer Specialty Products segment           
decreased 1.3% due to decreased advertising and  lower product demand.          

Selling, general, and administrative expenses increased $57.6 million or        
12.6% for the first nine months of 1995 over the first nine months of 1994.     
The Business Systems segment's expenses increased approximately $23.0           
million, due to the acquisition of T/Maker Company, increased selling           
expenses in the international operations, and product development costs.  The   
Electronic Payments Systems division's expenses increased approximately $28.1   
million, due primarily to the acquisitions of NRC Holding Corporation,          
Financial Alliance Processing Services, Inc., and The Software Partnership      
Ltd. and increased product development costs.  Net income was $92.9 million     
for the first nine months of 1995, or 6.8% of sales, compared to $100.9         
million for the first nine 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.  1994 net income included a $10 million pretax credit to reduce     
the Company's 1993 restructuring charge.                                        

RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE 
MONTHS ENDED SEPTEMBER 30, 1994                                                 

Net  sales were $449.5 million for the third quarter of 1995, up 5.4% (3.5%     
excluding the acquisition Financial Alliance Processing Services Inc.) over     
the third quarter of 1994, when sales were $426.7 million.  The Payment         
Systems segment's revenue increased 6.0% over the third quarter of 1994.        
This included a 33.5% increase in revenue from the Company's Electronic         
Payment Systems division.  A significant portion of the Electronic Payment      
Systems division increase was due to the acquisition of Financial Alliance      
Processing Services, Inc.  The Company's Business Systems segment posted an     
11.0% increase in revenue, primarily due to increased revenue in domestic and   
United Kingdom business forms units.  Revenue for the Consumer Specialty        
Products segment decreased 5.5% due to decreased advertising and lower          
product demand.                                                                 

Selling, general and administrative expenses increased $10.9 million or 6.8%    
in second quarter 1995 over second quarter 1994.  The Electronic Payments       
Systems division expenses increased approximately $9.2 million, primarily due   
to the acquisition of  Financial Alliance Processing Services, Inc. and         
increased product development costs.  The Business Systems segment's expenses   
increased approximately $6.4 million, primarily due to product development      
and process  improvement costs.   Net income was  $29.4 million in the third    
quarter of 1995, or 6.5% of sales, compared to $33.3 million in 1994 or 7.8%    
of sales.  1994 net income included a $10 million pretax credit to reduce the   
Company's 1993 restructuring charge.                                            

FINANCIAL CONDITION - LIQUIDITY                                                 

Cash provided by operations was $130.8 million for the first nine months of     
1995, compared with $112.9 million for the first nine 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 September 30, 1995 was $59.8 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 September 30, 1995 and 1.4 to 1 on December 31, 1994.     

FINANCIAL CONDITION - CAPITAL RESOURCES                                         

Purchases of property, plant, and equipment totaled  $91.9 million for the      
first nine months of 1995, compared to $74.2 million for the comparable prior   
year period.                                                                    

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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 $189.5 million.  As of September 30, 1995,  
$7.5 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 September 30, 1995, $79.3 million of commercial paper was issued and         
outstanding.  During the third quarter of 1995 the company filed a shelf        
registration for a $300 million medium term note program 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.  As of September 30, 1995 no    
such notes were issued or outstanding.  Cash dividends totaled $91.7 million    
for the first nine months of 1995 compared to $90.0 million for the first       
nine months of 1994.                                                            

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PART II.  OTHER INFORMATION 

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                       

(a)  The following exhibits are filed as part of this report:                   

(12) Computation of Ratios                                            
(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.                    

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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      November 14, 1995              /s/  J.A. Blanchard III                
    ------------------------------      --------------------------------------
                               J.A. Blanchard III, President
                             and Chief Executive Officer
                               (Principal Executive Officer)

Date      November 14, 1995              /s/  C.M. Osborne                      
    ------------------------------      --------------------------------------
                                      C. M. Osborne, Senior Vice President
                             and Chief Financial Officer
                               (Principal Financial Officer)

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘10-Q’ Filing	Date	First	Last	Other Filings

Filed on:	11/14/95	9
	11/1/95	1
For Period End:	10/30/95
	9/30/95	1	7
	12/31/94	6		10-K405
	9/30/94	4	6	10-Q
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Deluxe Corp – ‘10-Q’ for 10/30/95

As of: Tuesday, 11/14/95 · For: 10/30/95 · Accession #: 912057-95-9946 · File #: 1-07945

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