Filed by: Deluxe Corporation
Pursuant to Rule 425 under the
Securities Act of 1933
Commission File No. 0-30791
Subject Company: eFunds Corporation
[LOGO] DELUXE CORPORATION DELUXE CORPORATION
P.O. Box 64235
St. Paul, MN 55164-0235
(651) 483-7111
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N E W S R E L E A S E
July 21, 2000
FOR ADDITIONAL INFORMATION:
STUART ALEXANDER
Vice President
Investor Relations
(651) 483-7358
LOIS M. MARTIN
Senior Vice President
Chief Financial Officer
(651) 481-4222
WE URGE INVESTORS AND SECURITY HOLDERS TO READ EFUNDS CORPORATION'S REGISTRATION
STATEMENT ON FORM S-4, INCLUDING THE PROSPECTUS RELATING TO THE EXCHANGE OFFER
DESCRIBED HEREIN, WHEN IT BECOMES AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. WHEN THESE AND OTHER DOCUMENTS RELATING TO THE TRANSACTION ARE
FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION, THEY MAY BE OBTAINED
FREE AT THE SEC'S WEB SITE AT www.sec.gov. HOLDERS OF DELUXE COMMON STOCK MAY
ALSO OBTAIN EACH OF THESE DOCUMENTS (WHEN THEY BECOME AVAILABLE) FOR FREE BY
DIRECTING YOUR REQUEST TO DELUXE CORPORATION, C/O SHAREOWNER SERVICES, P.O. BOX
64873, SAINT PAUL, MINNESOTA 55164-0873. THIS COMMUNICATION SHALL NOT CONSTITUTE
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY
SALE OF SECURITIES IN ANY STATE IN WHICH THE OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE. NO OFFERING OF SECURITIES SHALL BE MADE EXCEPT BY MEANS OF A
PROSPECTUS MEETING THE REQUIREMENTS OF SECTION 10 OF THE SECURITIES ACT OF 1933,
AS AMENDED.
DELUXE REPORTS RECORD SECOND QUARTER RESULTS COMPANY
REMAINS ON TRACK TO DELIVER ITS 2000 OPERATING EARNINGS TARGET
o EPS OF $1.13 FOR THE QUARTER
o EBITDA OF $112.5 MILLION
o $30.8 MILLION OF VALUE (DVA) CREATED
o PLANS PROCEEDING FOR SPLIT-OFF OF EFUNDS VIA EXCHANGE OFFER
St. Paul, Minn.--Deluxe Corporation (NYSE: DLX) reported record second quarter
and first six month earnings per share today. Second quarter earnings were $1.13
per diluted share and six-month results were $1.74 per diluted share. Second
quarter 2000 earnings include a gain of $30.1 million from the company's initial
public offering (IPO) of eFunds stock and pretax charges of $18.4 million for an
additional net adjustment for Government Services loss contracts, and expenses
under executive change of control and severance agreements. Excluding the gain
and charges, along with the resulting income tax effect, diluted EPS was $.64 in
second quarter 2000 compared to $.61 in 1999.
SECOND QUARTER PERFORMANCE
Deluxe's second quarter 2000 net earnings were $81.7 million, or $1.13 diluted
and basic per share, on revenues of $406.8 million, compared with net earnings
of $47.8 million, or $.61 diluted and basic per share, on revenues of $407.8
million in the second quarter of 1999. Second quarter 1999 results included
revenues of $32.2 million from a business that Deluxe divested at year-end.
Adjusted for divestitures, Deluxe's consolidated revenues increased 8.3 percent.
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Paper Payment Systems had second quarter revenues of $320.6 million, up 5.5
percent from $303.8 million a year ago. Designer Checks, which was acquired
earlier this year, contributed $15.6 million. Revenues for eFunds Corporation
(formerly Electronic Payment Systems, iDLX Technology Partners and Government
Services) increased to $101.0 million, up 39.1 percent from $72.6 million a year
ago. Deluxe's consolidated revenues reflect $14.8 million of eliminations from
intercompany sales in second quarter 2000 and just under $1 million of
eliminations for the year earlier period.
Gross margin improved to 55.7 percent of sales from 54.8 percent for the same
period last year, even though the quarter's cost of sales included an additional
net adjustment for Government Services loss contracts of $9.7 million. A charge
of $12.2 million for the final contract that was signed during the quarter was
partially offset by a reversal of prior charges resulting from productivity
improvements and infrastructure cost savings of $2.5 million. With these charges
excluded, gross margin was 58.1 percent of sales in second quarter 2000.
Selling, general and administration (SG&A) expense was up from 36.0 percent of
sales to 40.8 percent of sales reflecting expenses under executive change of
control and severance agreements, the acquisition of Designer Checks, and
investments in Paper Payment Systems' e-commerce capabilities and the eFunds
business. eFunds had higher promotional and organizational costs and had the
addition of a full quarter of Professional Services results in 2000. Excluding
the expenses for executive change of control and severance agreements, SG&A was
38.6 percent of sales in second quarter 2000.
Operating income was $60.6 million in the second quarter, compared to $76.9
million in the second quarter of 1999. Deluxe's operating income margin declined
to 14.9 percent of sales in the second quarter, down from 18.9 percent in the
second quarter of 1999 due to the additional loss contract provision, payments
for executive change of control and severance agreements and investments in
e-commerce capabilities and the eFunds business. With the loss contract charge
and the executive change of control and severance charges excluded, operating
margin was 19.4 percent in second quarter 2000, which was up from the prior
period even with investments in new e-commerce capabilities.
Non-operating income was up significantly, reflecting a gain of $30.1 million on
the eFunds IPO. This was partially offset by increased interest expense on
borrowings and decreased investment income.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) were up
13.9 percent to $112.5 million from $98.8 million in 1999, and $30.8 million of
Deluxe Value Added (DVA) was created in the second quarter compared to $29.8
million in 1999. DVA represents Deluxe's calculation of the return on capital
invested in the business that exceeds the cost of capital.
SIX-MONTH PERFORMANCE
Through six months, Deluxe's net earnings were $126.0 million, or $1.74 per
diluted share, compared to earnings of $95.8 million or $1.21 per diluted share
in 1999. Revenues were $811.2 million, compared to $821.9 million a year ago.
Six month 2000 earnings include a
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gain of $30.1 million from the company's IPO of eFunds stock and pretax charges
of $18.4 million for an additional net adjustment for Government Services loss
contracts, and expenses under executive change of control and severance
agreements. Six month 1999 results included revenues of $66.7 million from a
business that was divested at year-end. Adjusted for divestitures, six-month
revenues were up 7.4 percent year over year.
Paper Payment Systems' revenues were up 4.0 percent to $640.4 million, compared
to $615.6 million during the first half of 1999. Designer Checks contributed
$26.8 million of revenue. Revenues for eFunds were $201.2 million, up 43.3
percent in the first six months of 2000, compared to $140.4 million a year ago.
Deluxe's consolidated revenues reflect $30.4 million of eliminations from
intercompany sales during the first half of 2000 and just under $1 million
during the first half of 1999.
Deluxe's operating income margin declined to 16.4 percent of sales through six
months, down from 18.9 percent in 1999 due to the additional loss contract
provision, expenses for executive change of control and severance agreements and
investments in e-commerce capabilities and the eFunds business. Excluding the
loss contract provisions and expenses made under executive change of control
agreements and severance, operating margin was 18.7 percent of sales for the
six-month period. EBITDA was up 5.6 percent to $206.7 million from $195.8
million in 1999, and $58.5 million of DVA was created during the first half of
the year compared to $60.9 million in 1999.
The company's effective tax rate through six months was 19.6 percent versus 38.5
percent in 1999. Excluding non-taxable gains from the IPO and exchange offer,
the tax rate was 37.5 percent for the first six months of 2000.
2000 OPERATING PLAN ON TRACK
"Deluxe is on track to meet its 2000 operating targets," said J. A. Blanchard,
chairman and CEO. "Deluxe and eFunds both had strong performance in the recent
quarter and Deluxe is on track to deliver its 2000 earnings from operations
target."
"We completed the IPO of eFunds, which is step one of our plan to separate and
split-off eFunds from Deluxe," Blanchard said. "We expect the second and final
step to be an exchange offer that will be made to Deluxe's shareholders later
this year."
THE EXCHANGE OFFER
Deluxe has stated its intent to pursue a distribution of the balance of its
interest in eFunds, representing about 88 percent of eFunds shares, to the
shareholders of Deluxe via an exchange offer. The distribution is dependent on
receiving a ruling from the Internal Revenue Service that the distribution would
be tax-free to Deluxe and its shareholders.
The exchange offer will permit current Deluxe shareholders the opportunity to
elect to retain their shares in Deluxe or to offer some or all of their shares
in exchange for shares of eFunds common stock. Assuming the offer is successful,
the exchange offer would have the effect of reducing Deluxe's shares outstanding
and increasing Deluxe's earnings per share, as shareholders tender some or all
of their Deluxe shares for shares in eFunds.
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Detailed information about the exchange offer process will be sent to
shareholders at the time of the offer.
Deluxe will hold a one-hour teleconference call today at 10:00 a.m. central
daylight time.
Deluxe has also scheduled an investor conference at the World Trade Center in
St. Paul, Minnesota on Wednesday, August 2, 2000. At that time, Deluxe will
introduce a new e-commerce growth strategy as well as present a review of its
core businesses.
FINANCIAL HIGHLIGHTS
QUARTERS ENDED JUNE 30
$ IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
UNAUDITED
2000 1999
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Sales 406.8 407.8
Operating income 60.6 76.9
Net income 81.7 47.8
Basic EPS 1.13 .61
Diluted EPS 1.13 .61
Average shares outstanding 72,274,557 77,776,350
Dividends declared per share .37 .37
SELECTED DATA
Capital expenditures 21.9 26.0
Depreciation/amortization 23.1 20.1
EBITDA 112.5 98.8
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SIX MONTHS ENDED JUNE 30
$ IN MILLIONS (EXCEPT PER SHARE AMOUNTS)
UNAUDITED
2000 1999
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Sales 811.2 821.9
Operating income 133.4 155.2
Net income 126.0 95.8
Basic EPS 1.74 1.22
Diluted EPS 1.74 1.21
Average shares outstanding 72,202,965 78,790,422
Dividends declared per share .74 .74
SELECTED DATA
Capital expenditures 42.8 51.6
Depreciation/amortization 45.1 40.7
EBITDA 206.7 195.8
# # #
STATEMENTS MADE IN THIS RELEASE CONCERNING THE COMPANY'S OR MANAGEMENT'S
INTENTIONS, EXPECTATIONS, OR PREDICTIONS ABOUT FUTURE RESULTS OR EVENTS ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE NECESSARILY SUBJECT TO RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO VARY FROM STATED
EXPECTATIONS, AND SUCH VARIATIONS COULD BE MATERIAL AND ADVERSE. FACTORS THAT
COULD RESULT IN SUCH A VARIATION INCLUDE, BUT ARE NOT LIMITED TO, THE INHERENT
UNRELIABILITY OF EARNINGS AND REVENUE GROWTH PREDICTIONS DUE TO NUMEROUS
FACTORS, INCLUDING MANY BEYOND THE COMPANY'S CONTROL, POTENTIAL DIFFICULTIES,
DELAYS AND UNANTICIPATED EXPENSES INHERENT IN THE DEVELOPMENT AND MARKETING OF
NEW PRODUCTS AND SERVICES, COMPETITIVE FACTORS, AND THE NUMEROUS RISKS AND
POTENTIAL ADDITIONAL COSTS, DISRUPTIONS AND DELAYS ASSOCIATED WITH THE
REORGANIZATION AND SEPARATION OF OUR BUSINESS UNITS, AND THE ESTABLISHMENT OF
NEW BUSINESS VENTURES AND E-COMMERCE BUSINESS INITIATIVES. OUR INTENTIONS WITH
RESPECT TO EFUNDS CORPORATION ARE SUBJECT TO FURTHER RISKS AND UNCERTAINTIES,
INCLUDING THE ABILITY OF EFUNDS TO SUCCESSFULLY MANAGE AND COMPLETE THE
INTEGRATION OF THREE BUSINESS SEGMENTS INTO EFUNDS; THE POTENTIAL THAT THE
SEPARATION OF THE TWO COMPANIES MAY DISRUPT ONE OR MORE OF DELUXE'S BUSINESSES
AND CUSTOMER RELATIONSHIPS; AND THE UNCERTAINTY OF OBTAINING A FAVORABLE RULING
FROM THE INTERNAL REVENUE SERVICE, WHICH IS A NECESSARY CONDITION OF THE
EXCHANGE OFFER. ADDITIONAL INFORMATION CONCERNING THESE AND OTHER FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S CURRENT
EXPECTATIONS IS CONTAINED IN THE COMPANY'S FORM 10-Q FOR THE QUARTER ENDED MARCH
31, 2000.
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DELUXE CORPORATION
CONDENSED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
(UNAUDITED)
DEC 31, 1999 JUNE 30, 2000 VARIANCE
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<S> <C> <C> <C>
ASSETS
Cash/Marketable Securities $166.2 $109.3 ($56.9)
Other Current Assets 252.6 234.4 (18.2)
Long term Restricted Cash 28.9 28.7 (0.2)
Long term Investments 40.8 65.3 24.5
Property, Plant & Equipment NET 294.8 272.4 (22.4)
Intangibles NET 209.3 320.7 111.4
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TOTAL ASSETS $992.6 $1,030.8 $38.2
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LIABILITIES & EQUITY
Current Liabilities $404.7 $333.2 ($71.5)
Long Term Debt 115.5 113.5 (2.0)
Deferred Income Taxes 46.3 46.6 0.3
Other Long Term Liabilities 8.8 8.1 (0.7)
Minority Interest in Net Assets of Subsidiary 31.9 31.9
Shareholders' Equity 417.3 497.5 80.2
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TOTAL LIABILITIES & EQUITY $992.6 $1,030.8 $38.2
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SHARES OUTSTANDING 72,019,898 72,331,225
AVERAGE SHARES OUTSTANDING
Full Year, 1999/YTD, 2000 76,710,308 72,202,965
</TABLE>
