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 the quarterly period ended March 31, 2000
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 1-6352
JOHN H. HARLAND COMPANY
(Exact name of registrant as specified in its charter)
GEORGIA 58-0278260
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2939 Miller Rd.
Decatur, Georgia 30035
(Address of principal executive offices) (Zip code)
(770) 981-9460
(Registrant's telephone number, including area code)
(Not Applicable)
(Former name, former address and former fiscal year, if changed since
last report.)
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 of the Registrant's Common Stock outstanding on
April 28, 2000 was 28,358,342.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
(In thousands, except share and March 31, December 31,
per share amounts) 2000 1999
----------------------------------------------------------------------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 52,681 $ 49,823
Accounts receivable, net 56,948 60,901
Inventories 20,989 23,411
Deferred income taxes 11,350 12,664
Other 5,243 6,249
---------- ----------
Total current assets 147,211 153,048
---------- ----------
INVESTMENTS AND OTHER ASSETS:
Investments 23,526 23,167
Goodwill and other intangibles - net 60,915 61,213
Deferred income taxes 9,748 9,911
Other 32,513 32,070
---------- ----------
Total investments and other assets 126,702 126,361
---------- ----------
PROPERTY, PLANT AND EQUIPMENT 280,103 272,555
Less accumulated depreciation
and amortization 166,742 160,559
---------- ----------
Property, plant and equipment - net 113,361 111,996
---------- ----------
Total $ 387,274 $ 391,405
========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
(In thousands, except share and March 31, December 31,
per share amounts) 2000 1999
----------------------------------------------------------------------
(Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable - trade $ 21,966 $ 29,587
Deferred revenues 20,059 22,471
Accrued liabilities:
Salaries, wages and employee benefits 22,718 25,793
Taxes 9,381 6,284
Other 16,787 14,598
---------- ----------
Total current liabilities 90,911 98,733
---------- ----------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 106,439 106,446
Other 17,448 17,200
---------- ----------
Total long-term liabilities 123,887 123,646
---------- ----------
Total liabilities 214,798 222,379
---------- ----------
SHAREHOLDERS' EQUITY:
Series preferred stock, authorized 500,000
shares of $1.00 par value, none issued
Common stock, authorized 144,000,000
shares of $1.00 par value,
37,907,497 shares issued 37,907 37,907
Retained earnings 334,506 326,049
Accumulated other comprehensive
income 19,479 19,091
Unamortized restricted stock award (1,664) (415)
---------- ----------
Total shareholders' equity 390,228 382,632
Less 9,550,074 and 9,263,895 shares
of treasury stock - at cost,
respectively 217,752 213,606
---------- ----------
Shareholders' equity - net 172,476 169,026
---------- ----------
Total $ 387,274 $ 391,405
========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2000
AND APRIL 2, 1999
(Unaudited)
(In thousands, except
per share amounts) 2000 1999
--------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 176,702 $ 178,744
---------- ----------
COST AND EXPENSES:
Cost of sales 108,995 111,925
Selling, general and
administrative expenses 46,420 46,575
Amortization of intangibles 1,499 1,508
---------- ----------
Total 156,914 160,008
---------- ----------
INCOME FROM OPERATIONS 19,788 18,736
---------- ----------
OTHER INCOME(EXPENSE):
Interest expense (1,708) (1,799)
Other _ net 808 41
---------- ----------
Total
(900) (1,758)
---------- ----------
INCOME BEFORE INCOME TAXES 18,888 16,978
INCOME TAXES 7,366 6,961
---------- ----------
NET INCOME 11,522 10,017
RETAINED EARNINGS AT
BEGINNING OF PERIOD 326,049 293,425
---------- ----------
337,571 303,442
Cash dividends (2,120) (2,333)
Issuance of treasury and deferred shares
under stock plans (945) (701)
---------- ----------
RETAINED EARNINGS AT END
OF PERIOD $ 334,506 $ 300,408
========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 28,411 31,123
DILUTED 28,901 31,450
========== ==========
EARNINGS PER COMMON SHARE:
BASIC $ .41 $ .32
DILUTED $ .40 $ .32
========== ==========
CASH DIVIDENDS PER
COMMON SHARE $ .075 $ .075
========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND APRIL 2, 1999
(Unaudited)
(In thousands) 2000 1999
-----------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 11,522 $ 10,017
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 9,501 9,242
Other 583 353
Change in assets and liabilities:
Deferred income taxes 1,444 857
Accounts receivable 4,025 555
Inventories and other current assets 3,427 1,707
Accounts payable and accrued expenses (7,810) (7,271)
---------- --------
Net cash provided by operating activities 22,692 15,460
---------- --------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (8,277) (4,403)
Proceeds from sale of property, plant
and equipment 33 125
Long-term investments and other assets (3,015) (298)
---------- --------
Net cash used in investing activities (11,259) (4,576)
---------- --------
FINANCING ACTIVITIES:
Purchases of treasury stock (7,000) -
Issuance of treasury stock 498 618
Dividends paid (2,120) (2,333)
Long-term debt - net (9) (485)
Other - net 56 3
---------- ---------
Net cash used in financing activities (8,575) (2,197)
---------- ---------
Increase in cash and cash equivalents 2,858 8,687
Cash and cash equivalents at beginning of period 49,823 42,541
---------- ----------
Cash and cash equivalents at end of period $ 52,681 $ 51,228
========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
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<PAGE>
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements contained in this
report are unaudited but reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the
results of operations, financial position and cash flows of the John
H. Harland Company and subsidiaries ("the Company") for the interim
periods reflected. Certain information and note disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant
to applicable rules and regulations of the Securities and Exchange
Commission. The results of operations for the interim period reported
herein are not necessarily indicative of results to be expected for
the full year.
2. Accounting Policies
The condensed consolidated financial statements included herein
should be read in conjunction with the consolidated financial
statements and notes thereto, and the Independent Auditors' Report
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999 ("1999 Form 10-K").
Reference is made to the accounting policies of the Company described
in the notes to consolidated financial statements included in the
1999 Form 10-K. The Company has consistently followed those policies
in preparing this report.
3. Income Taxes
The provisions for income taxes for the three months ended March 31,
2000 and April 2, 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999
------------------------------------------------------------------------
<S> <C> <C>
Current provision $ 5,922 $ 6,104
Deferred provision 1,444 857
--------- ---------
Total $ 7,366 $ 6,961
========= =========
</TABLE>
4. Inventories
As of March 31, 2000 and December 31, 1999, inventories consisted of
the following (in thousands):
<TABLE>
<CAPTION>
2000 1999
------------------------------------------------------------------------
<S> <C> <C>
Raw materials and semi-finished goods $ 20,489 $ 22,628
Finished goods 195 592
Hardware component parts 305 191
--------- ---------
Total $ 20,989 $ 23,411
========= =========
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<PAGE>
5. Comprehensive Income
Other comprehensive income for the Company includes foreign currency
translation adjustments and unrealized gains on investments. Total
comprehensive income for the three month periods ended March 31, 2000
and April 2, 1999 was as follows (in thousands):
</TABLE>
<TABLE>
<CAPTION>
2000 1999
------------------------------------------------------------------------
<S> <C> <C>
Net income: $ 11,522 $ 10,017
Other comprehensive
income, net of tax:
Foreign exchange
translation adjustments 56 2
Unrealized gains on
investments 332 20,945
--------- ---------
Comprehensive income $ 11,910 $ 30,964
========= =========
</TABLE>
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<PAGE>
6. Earnings per Common Share
The computation of basic and diluted earnings per share for the three
month periods ended March 31, 2000 and April 2, 1999 is as follows
(in thousands except per share amounts):
<TABLE>
<CAPTION>
March 31, April 2,
2000 1999
-----------------------------------------------------------------------
Computation of basic earnings per common share:
<S> <C> <C>
Numerator
Net Income $ 11,522 $ 10,017
--------- ---------
Denominator
Average weighted shares
outstanding 28,373 31,104
Average weighted deferred
shares outstanding under
non-employee directors
compensation plan 38 19
--------- ---------
Shares outstanding for
basic earnings per share
calculation 28,411 31,123
--------- ---------
Basic earnings per share $ 0.41 $ 0.32
========= =========
Computation of diluted earnings per common share:
Numerator
Net Income $ 11,522 $ 10,017
Reduced interest expense
on assumed conversions of
convertible subordinated
debentures 68 79
--------- ---------
Net income for diluted
earnings per share
calculation 11,590 10,096
--------- ---------
Denominator
Basic weighted average
shares outstanding 28,411 31,123
Dilutive effect of stock
options 229 39
Assumed conversions
of convertible subordinated
debentures 261 288
--------- ---------
Shares outstanding for
diluted earnings per share
calculation 28,901 31,450
--------- ---------
Diluted earnings per share $ 0.40 $ 0.32
========= =========
</TABLE>
-8-
<PAGE>
7. Business Segments
The Company operates its business in two segments. The Financial
Services segment ("FS") includes printed products (checks and bank forms)
and marketing services (database marketing software, direct marketing
services, and loan and deposit origination software sold primarily to
financial institutions).
The Scantron segment ("Scantron") represents products and services
sold by the Company's Scantron subsidiary including optical mark
reading ("OMR") equipment, scannable forms, survey solutions and
field maintenance. Scantron sells these products and services to the
commercial, financial and education markets.
The Company's operations are primarily in the United States and Puerto
Rico. There were no significant inter-segment sales and no material
amounts of the Company's sales are dependent upon a single customer.
Equity investments, as well as foreign assets, are not significant to
the consolidated results of the Company. The Company's accounting
policies for segments are the same as those referred to in Note 2.
Management evaluates segment performance based on segment income or
loss before income taxes. Segment income or loss includes restructuring
charges, software and other development and acquired in-process
research and development costs written off but excludes interest
income, interest expense and certain other non-operating gains and
losses that are considered corporate items. Total assets of each
business segment did not change materially from the amount disclosed in
the 1999 Form 10-K.
Selected summarized financial information for 2000 and 1999 periods
were as follows (in thousands):
<TABLE>
<CAPTION>
Business Segment
------------------------ Corporate Consol-
FS Scantron and Other idated
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Quarter ended March 31, 2000
Net Sales $ 154,209 $ 22,493 $ 176,702
Income (loss) 30,047 3,398
$ (14,557) 18,888
Quarter ended April 2, 1999
Net Sales $ 156,576 $ 22,168 $ 178,744
Income (loss) 29,248 2,882 $ (15,152) 16,978
</TABLE>
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company operates its business in two segments. The Financial
Services segment ("FS") includes printed products (checks and bank forms)
and marketing services (database marketing software, direct marketing
services, and loan and deposit origination software sold primarily to
financial institutions).
The Scantron segment ("Scantron") represents products and services
sold by the Company's Scantron subsidiary including optical mark
reading ("OMR") equipment, scannable forms, survey solutions and
field maintenance. Scantron sells these products and services to the
commercial, financial and education markets.
RESULTS OF OPERATIONS FIRST QUARTER 2000 VERSUS 1999
Consolidated net sales for the quarter ended March 31, 2000 were
$176.7 million compared to $178.7 million for the quarter ended
April 2, 1999. FS sales totaled $154.2 million and $156.6 million and
Scantron's sales totaled $22.5 million and $22.2 million for the
first quarters of 2000 and 1999, respectively. The decrease of $2.4
million in FS sales was incurred in printed products and also in the
software portion of marketing services (database marketing software
and loan and deposit origination software). Increased sales in direct
marketing services reduced the overall decrease. Volumes for checks
decreased in 2000 from 1999 primarily due to the intercompany
transfer of brokerage check production to Direct Marketing
operations, the decline in the orders received from a direct check
marketer, the favorable impact of a large conversion in 1999, and the
loss of major customers due to mergers and acquisitions. Scantron's
sales increased 1.5% to $22.5 million. This increase was essentially
a 7% increase when considering the impact from the sale of Scantron
Quality Computers which occurred in December 1999. The sales increase
came primarily from OMR equipment products and forms sales and as
well as from survey products and services.
Consolidated gross profit increased 1.3% in the first quarter of 2000
from the first quarter of 1999 and increased as a percentage of sales
from 37.4% in 1999 to 38.3% in 2000. An increase in FS margin, which
improved to 36.7% in 2000 from 35.9% in 1999, continued to drive the
overall improvement. The higher FS margins were due primarily to
plant consolidations during 1999 which lowered per unit costs of
manufacturing. Scantron's gross profit as a percentage of sales
improved to 49.2% in 2000 from 47.8% in 1999 primarily due to the
previously mentioned sale of one of its divisions which had low gross
margins.
Consolidated selling, general and administrative expenses decreased
by $0.2 million in the first quarter of 2000 from 1999. These
expenses as a percentage of sales did not change significantly at
26.3% in 2000 compared to 26.1% in 1999. Amortization of intangibles
decreased by 0.6% from the first quarter of 2000 compared to the
first quarter of 1999.
Consolidated income from operations increased $1.1 million from the
first quarter of 1999, primarily reflecting gross margin improvements
realized by the Company's businesses.
Other income (expense) was an expense of $0.9 million in the first
quarter of 2000, which was a decrease of $0.9 million from net
expense of $1.8 million in 1999.
Consolidated income before income taxes increased $1.9 million
compared to the first quarter of 1999.
The Company's consolidated effective income tax rate for the first
quarter of 2000 was 39% compared to 41% for the first quarter of
1999. The rate change reflected improved earnings which reduced the
impact of non-deductible goodwill.
The Company's net income for the first quarter of 2000 was $11.5
million compared to $10.0 million for 1999. Basic and diluted
earnings per share were $0.41 and $0.40, respectively for the first
quarter of 2000 compared to basic and diluted earnings per share of
$0.32 for the same period in 1999. Earnings per share in 2000 were
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<PAGE>
favorably impacted by the Company's repurchase of 3,040,000 shares
from April 1999 through March 2000. The reduction in shares
outstanding favorably impacted earnings per share on a net basis by
approximately $0.01.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
Cash flows provided by operating activities for the first three
months of 2000 were $22.7 million compared to $15.5 million for the
first three months of 1999. The primary uses of funds in the first
three months of 2000 were for capital expenditures, repurchases of
common stock and dividend payments.
In April 1999, the Company authorized the repurchase of up to 3.1
million shares or 10% of the Company's outstanding common stock.
Shares repurchased under the program can be held in treasury, used
for acquisitions, used to fund the Company's stock benefit and
compensation plans or for other corporate purposes. As of March 31,
2000, the Company had purchased 3,040,000 shares of common stock. The
total expended to date has been $56.5 million, representing an
average of $18.58 per share. The Company funded the purchases from
current cash flows. In March 2000, the Company approved the extension
of this program to include up to an additional 2.9 million shares of
common stock.
Purchases of property, plant and equipment totaled $8.3 million in
the first three months of 2000, compared to $4.4 million in 1999. The
increase in capital expenditures is primarily related to digital
printing equipment purchases. In January 2000, the Company entered
into a purchase agreement to purchase digital printing equipment with
an aggregate commitment of $21.3 million (2000 - $11.4 million, 2001
- $9.9 million).
As of March 31, 2000, the Company's asset balances include a net
unrealized gain of $19.3 million related to the Company's investment
in Bottomline Technologies, Inc. The unrealized gain is recorded as a
component of accumulated other comprehensive income in the
shareholders' equity section of the balance sheet.
The Company has unsecured lines of credit which provide for
borrowings up to $61.0 million. As of March 31, 2000, the Company had
no outstanding balances under these lines of credit.
On March 31, 2000, the Company had $52.7 million in cash and cash
equivalents. The Company believes that its current cash position,
funds from operations and the availability of funds under its lines
of credit will be sufficient to meet anticipated requirements for
working capital, dividends, capital expenditures and other corporate
needs. Management is not aware of any condition that would materially
alter this trend. The Company also believes that it possesses
sufficient unused debt capacity and access to equity capital markets
to pursue additional acquisition opportunities.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). This
Statement requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair value. Gains and
losses resulting from changes in the fair market values of those
derivative instruments would be accounted for depending on the use of
the instrument and whether it qualifies for hedge accounting. SFAS
133 will be effective for the Company beginning January 1, 2001.
Management is evaluating the impact, if any, that this statement may
have on the company's financial statements.
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<PAGE>
OUTLOOK
The Company's operating results were positively impacted by a number
of factors, including significant improvements in gross margins for
its checks business and growth in direct marketing revenues. The
Company will continue to consolidate printing facilities, install new
equipment and develop systems and processes in an effort to increase
profitability and improve service in its checks and other operations.
Two printing facilities remain to be closed as part of the previously
announced plant consolidation program. These plants will close during
2000 and early 2001.
The Company expects continued pricing pressure from renewals and
acquisitions of check printing contracts. In an effort to increase
volume and pricing, the Company has strengthened its marketing
efforts with regional and community accounts.
The Company introduced its Windows(R) version of Max$ell, its database
marketing software, in late 1999. The new release and ancillary
products in database marketing along with the introduction of other
software products in development should result in increased software
revenues in 2000.
The Company expects to incur immaterial charges during 2000 for
additional employee severance related to previously announced
restructurings and implementation of new printing technology.
YEAR 2000 COMPLIANCE
The Company's Year 2000 initiative defined and provided a continuing
process for assessment, remediation planning and plan implementation
to achieve a level of readiness that would meet the computer-related
challenges presented by the Year 2000 in a timely manner. Based on
these efforts, the Company considered its critical systems, critical
electronic assets, relationships with key business partners and
contingency plans ready as of December 31, 1999. The Company suffered
no material consequences in the first quarter of 2000 in these areas
due to the Year 2000 issues.
The Company believes that it will not incur significant expense
related to the Year 2000 initiatives in the year ending December 31,
2000.
RISK FACTORS AND CAUTIONARY STATEMENTS
When used in this report and in subsequent filings by the Company
with the Securities and Exchange Commission, in the Company's press
releases and in written or oral statements made by authorized
representatives of the Company, the words or phrases "should result",
"are expected to", "will continue", "is anticipated", "estimate",
"project" or similar expressions are intended to identify "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are necessarily
subject to certain risks and uncertainties, including, but not
limited to, those discussed below that could cause actual results to
differ materially from the Company's historical experience and its
present expectations or projections. Caution should be taken not to
place undue reliance on any such forward-looking statements, which
speak only as of the date such statements are made and which may or
may not be based on historical experiences and/or trends which may or
may not continue in the future. The Company does not undertake and
specifically declines any obligation to publicly release the result
of any revisions which may be made to any forward-looking statements
to reflect events or circumstances occurring after the date of such
statements or to reflect the occurrence of unanticipated events.
Various factors may affect the Company's financial performance,
including, but not limited to, those factors discussed below and
could cause the Company's actual results for future periods to differ
from any opinions, statements or projections expressed with respect
thereto. Such differences could be material and adverse.
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<PAGE>
Many variables will impact the ability to improve service quality,
production efficiencies and reduce expenses. These include, but are
not limited to, the development and implementation of new technology
and information systems used in the Company's manufacturing and call
center operations. Further, there can be no assurance that the
Company can reproduce or improve upon historic profit margin trends.
Many factors can affect the Company's ability to improve
profitability, including, among other factors, competitive pricing
trends, the ability to secure similar materials prices and labor
rates, and the ability to reduce the cost of manufacturing.
Competition among suppliers, restricted supply of materials, labor
and services, and other such factors outside of the Company's
control, may adversely affect prices and may materially impact the
Company's results.
Several factors outside the Company's control could negatively impact
check revenue. These include the continuing expansion of alternative
payment systems such as credit cards, debit cards and other forms of
electronic commerce or on-line payment systems. Check revenues could
also be adversely affected by continued consolidation of financial
institutions and competitive check pricing, among other factors.
There can be no assurances that the Company will not lose significant
customers or that any such loss could be offset by the addition of
new customers. Also, there can be no assurance that the Company will
experience similar or higher revenue compared to prior years, or that
any targets or projections made relating to check revenues will be
achieved.
While the Company believes substantial growth opportunities exist in
FS, specifically marketing services such as database marketing
software, direct marketing and loan and deposit origination software,
there can be no assurances that the Company will achieve its growth
targets. There are many variables relating to the development of new
software products, including the timing and costs of the development
effort, product performance, functionality, product acceptance and
competition. Also, no assurance can be made as to market acceptance
and to the potential impact of governmental regulations on the
Company's ability to expand its direct marketing business and meet
projected growth targets.
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<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
All financial instruments held by the Company are held for purposes other
than trading and are exposed to primarily two types of market risks:
interest rate and equity price.
Interest Rate Risk
The fair value of the Company's long-term debt is affected by changes in
interest rates. The following presents the sensitivity of the fair value
of the Company's long-term debt to a hypothetical 10% decrease in interest
rates as of March 31, 2000 (in thousands):
<TABLE>
<CAPTION>
Carrying Fair Hypothetical
Value Value(a) Fair Value(b)
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Long-term debt, including
current portion $106,446 $ 98,112 $101,872
========= ========= =========
</TABLE>
Equity Price Risk
The fair value of the Company's investments is primarily affected by
fluctuations in the market price for the common stock of Bottomline
Technologies, Inc. ("Bottomline"). The change in market value is accounted
for as a component of other comprehensive income. The following presents
the value at risk for the Company's investment in Bottomline reflecting
the high and low closing market prices for the three months ended March
31, 2000 (in thousands):
<TABLE>
<CAPTION>
Carrying
Value(c) High(a) Low(a)
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Investment in Bottomline $ 21,184 $ 29,360 $ 18,023
========= ========= =========
<FN>
(a) Based on quoted market prices for these or similar items.
(b) Calculated based on the change in discounted cash flow.
(c) Based on market value as of March 31, 2000.
</FN>
</TABLE>
As of April 28, 2000, the carrying value of the Bottomline investment was
$20.9 million.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Reference No. Description of Exhibit
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the quarterly period
ended March 31, 2000.
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<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.
JOHN H. HARLAND COMPANY
(Registrant)
05/15/2000 /s/ William M. Dollar
Date: _________________ By:_____________________________
William M. Dollar
Vice President,Corporate Controller
(Principal Accounting Officer)
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from the Company's financial statements for
the quarterly period ended March 31, 2000 and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 52,681
<SECURITIES> 0
<RECEIVABLES> 63,066
<ALLOWANCES> 6,118
<INVENTORY> 20,989
<CURRENT-ASSETS> 147,211
<PP&E> 280,103
<DEPRECIATION> 166,742
<TOTAL-ASSETS> 387,274
<CURRENT-LIABILITIES> 90,911
<BONDS> 106,439
<COMMON> 37,907
0
0
<OTHER-SE> 134,569
<TOTAL-LIABILITY-AND-EQUITY> 387,274
<SALES> 176,702
<TOTAL-REVENUES> 176,702
<CGS> 108,995
<TOTAL-COSTS> 108,995
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,708
<INCOME-PRETAX> 18,888
<INCOME-TAX> 7,366
<INCOME-CONTINUING> 11,522
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,522
<EPS-BASIC> 0.41
<EPS-DILUTED> 0.40
</TABLE>
