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<PAGE>
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 March 31, 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", St. Paul, Minnesota 55126-8201
- -------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(612) 483-7111
- -------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares outstanding of registrant's common stock, par value
$1.00 per share, at May 1, 1995 was 82,504,839.
1
<PAGE>
ITEM I. FINANCIAL STATEMENTS
PART I. FINANCIAL INFORMATION
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
<TABLE>
<CAPTION>
May 31, 1995 December 31,
(Unaudited) 1994
----------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $27,279 $29,139
Marketable securities 46,775 49,109
Trade accounts receivable 151,315 142,087
Inventories:
Raw material 27,968 25,198
Semi-finished goods 26,432 26,046
Finished goods 35,641 36,976
Deferred advertising 18,920 27,770
Deferred income taxes 25,352 25,647
Prepaid expenses and other current assets 66,945 58,894
------ ------
Total current assets 426,627 420,866
------- -------
LONG-TERM INVESTMENTS 45,372 45,091
PROPERTY, PLANT AND EQUIPMENT
Land 37,677 38,286
Buildings and improvements 280,838 284,131
Machinery and equipment 570,287 544,092
Construction in progress 6,361 3,225
----- -----
Total 895,163 869,734
Less accumulated depreciation 419,010 407,916
------- -------
Property, plant, and equipment - net 476,153 461,818
INTANGIBLES
Cost in excess of net assets acquired - net 315,982 284,420
Other intangible assets - net 53,375 44,077
------ ------
Total intangibles 369,357 328,497
------- -------
TOTAL ASSETS $1,317,509 $1,256,272
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 64,000 $ 65,033
Accrued liabilities:
Wages, including vacation pay 54,941 50,366
Employee profit sharing and pension 16,511 57,915
Accrued rebates 34,029 28,741
Income taxes 23,896 5,394
Other 73,199 67,313
Short-term debt 73,000 11,219
Long-term debt due within one year 4,606 4,479
------- -------
Total current liabilities 344,182 290,460
------- -------
LONG-TERM DEBT 114,857 110,867
------- -------
DEFERRED INCOME TAXES 40,599 40,552
SHAREHOLDERS' EQUITY
Common shares - $1 par value (authorized 500,000,000 shares; issued: 82,316,759) 82,317 82,375
Additional paid-in capital 42 1,694
Retained earnings 735,420 732,158
Cumulative translation adjustment 1,744 369
Unearned compensation (134) (149)
Net unrealized change - marketable securities (1,518) (2,054)
------- -------
Total shareholders' equity 817,871 814,393
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,317,509 $ 1.256,272
----------- -----------
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Dollars in Thousands Except per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
----------------------
1995 1994
------ ----
<S> <C> <C>
NET SALES $465,628 $429,988
OPERATING EXPENSES
Cost of sales 210,670 196,674
Selling, general, and administrative 179,811 148,466
Employee profit sharing and pension 14,718 14,846
Employee bonus and stock purchase discount 5,515 6,164
----- -----
Total 410,714 366,150
------- -------
INCOME FROM OPERATIONS 54,914 63,838
OTHER INCOME (EXPENSE)
Investment and other income 6,540 4,726
Interest expense (3,111) (3,778)
------- -------
INCOME BEFORE INCOME TAXES 58,343 64,786
PROVISION FOR INCOME TAXES 24,504 26,745
------ ------
NET INCOME $33,839 $38,041
------- -------
------- -------
AVERAGE COMMON SHARES OUTSTANDING 82,419,035 82,541,814
NET INCOME PER COMMON SHARE $0.41 $0.46
CASH DIVIDENDS PER COMMON SHARE $0.37 $0.36
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
DELUXE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1995 and 1994
(in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $33,839 $38,041
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 16,129 14,133
Amortization of intangibles 8,173 5,778
Stock purchase discount 2,067 2,084
Deferred income taxes (35) (74)
Changes in assets and liabilities, net of effects from acquisitions:
Trade accounts receivable (4,529) 4,883
Inventories (1,248) (3,986)
Accounts payable (4,996) 710
Other assets and liabilities (9,646) (22,597)
------- --------
Net cash provided by operating activities 39,754 38,972
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities with maturities of more than 3 months (9,867)
Proceeds from sales of marketable securities with maturities of more than 3 months 3,010 23,501
Net change in marketable securities with maturities of 3 months or less 20,000
Purchases of property, plant, and equipment (30,818) (20,104)
Payments for acquisitions, net of cash acquired (37,290)
Other 243 (17,102)
--- --------
Net cash used in investing activities (64,855) (3,572)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (3.799) (756)
Payments to retire common stock (10,352) (11,017)
Proceeds from issuing stock under employee plans 6,188 6,358
Proceeds from short-term debt 61,781
Cash dividends paid to shareholders (30,577) (29,790)
-------- --------
Net cash provided by (used in) financing activities 23,241 (35,205)
------ --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,860) 195
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 29,139 114,103
------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $27,279 $114,298
------- --------
------- --------
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of March 31, 1995, and the related
consolidated statements of income and consolidated statements of cash flows
for the three-month periods ended March 31, 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. During the first quarter of 1995, the Company acquired all of the
outstanding stock of Financial Alliance Processing Services, Inc. The
Company recorded the acquisition under the purchase method of accounting.
The acquisition did not have a material proforma impact on operations.
3. The Company has uncommitted bank lines of credit of $130 million available
at variable interest rates. As of March 31, 1995, $73 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. The Company made its first issuance of commercial paper
during the second quarter of 1995.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1994
Net sales were $465.6 million for the first quarter of 1995, up 8.3% over the
first quarter of 1994, when sales were $430.0 million. Payment Systems
segment's revenue increased 8.5% over the first quarter of 1994. This included
a 63.0% increase in revenue from the Company's Electronic Payment Systems
division and a 0.2% increase in the Paper Payment division. A portion of the
Electronic Payment division increase was due to the acquisitions of National
Revenue Corporation, The Software Partnership Ltd., and Financial Alliance
Processing Services, Inc. The Company's Business Systems segment posted a
16.1% increase in revenue in the first quarter of 1995 over first quarter 1994
primarily due to increased revenue in the Business Forms unit, as well as the
contribution of T/Maker Company, which was acquired in the second quarter of
1994, and sales increases by the Company's Canadian and United Kingdom
operations.
Selling, general and administrative expenses increased $31.3 million or 21.1%
in first quarter 1995 over first quarter 1994. The Electronic Payments Systems
division expenses increased approximately $10.3 million, primarily due to the
acquisitions noted above. The Business Systems segment's expenses increased
approximately $9.3 million, primarily due to the acquisition of T/Maker
Company, as well as increased selling expenses in the international
operations. Net income was $33.8 million in the first quarter of 1995,
or 7.3% of sales, compared to $38.0 million in 1994 or 8.8% of sales. Included
in first quarter 1995 net income is approximately $5 million of pretax gain
resulting from insurance payments for the 1994 earthquake damage to the
Company's facilities.
FINANCIAL CONDITION - LIQUIDITY
Cash provided by operations was $39.8 million for the first three months of
1995, compared with $39.0 million for the first three 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 March 31, 1995 was $82.4 million, compared to $130.4 million on
December 31, 1994. The decrease in 1995 is primarily the result of the
acquisition of Financial Alliance. The current ratio was 1.2 to 1 on
March 31, 1995 and 1.4 to 1 on December 31, 1994.
FINANCIAL CONDITION - CAPITAL RESOURCES
Purchases of property, plant, and equipment totaled $30.8 million for the
first three months of 1995, compared to $20.1 million one year ago.
In February, 1991, the Company issued $100 million of notes, payable in 2001
under its 1989 shelf registration of debt securities. Additional long-term
borrowings could be secured in the event the Company makes a significant
acquisition. Such borrowings could include medium or long-term notes.
The Company has uncommitted bank lines of credit of $130 million. As of
March 31, 1995, $73 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.
Cash dividends totaled $30.6 million for the first three months of 1995 compared
to $29.8 million for the first three months of 1994.
6
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) The Company did not, and was not required to, file
any reports on Form 8-K during the quarter for
which this report is filed.
7
<PAGE>
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 May 15, 1995 /s/ J. A. Blanchard III
------------------------------ ----------------------------------
J.A. Blanchard III, President
and Chief Executive Officer
(Principal Executive Officer)
Date May 15, 1995 /s/ C. M. Osborne
------------------------------ ----------------------------------
C. M. Osborne, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 27,279
<SECURITIES> 46,775
<RECEIVABLES> 151,315
<ALLOWANCES> 0
<INVENTORY> 90,041
<CURRENT-ASSETS> 426,627
<PP&E> 895,163
<DEPRECIATION> 419,010
<TOTAL-ASSETS> 1,317,509
<CURRENT-LIABILITIES> 344,182
<BONDS> 114,857
<COMMON> 82,317
0
0
<OTHER-SE> 735,554
<TOTAL-LIABILITY-AND-EQUITY> 1,317,509
<SALES> 465,628
<TOTAL-REVENUES> 465,628
<CGS> 210,670
<TOTAL-COSTS> 410,714
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,111
<INCOME-PRETAX> 58,343
<INCOME-TAX> 24,504
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,839
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
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