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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Deluxe Corp | NYSE:DLX | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 21.52 | 0 | 12:00:12 |
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
MN
|
41-0216800
|
||
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
||
3680 Victoria St. N.
|
Shoreview
|
MN
|
55126-2966
|
(Address of principal executive offices)
|
(Zip Code)
|
Title of each class
|
Trading symbol(s)
|
Name of each exchange on which registered
|
Common Stock, par value $1.00 per share
|
DLX
|
NYSE
|
Large Accelerated Filer
|
☒
|
Accelerated Filer
|
☐
|
Non-accelerated Filer
|
☐
|
Smaller Reporting Company
|
☐
|
|
|
Emerging Growth Company
|
☐
|
PART I – FINANCIAL INFORMATION
|
Item 1. FINANCIAL STATEMENTS
|
DELUXE CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
|
(in thousands, except share par value)
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
ASSETS
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
310,146
|
|
|
$
|
73,620
|
|
Trade accounts receivable, net of allowance for uncollectible accounts of $3,946 and $4,985, respectively
|
|
158,681
|
|
|
163,421
|
|
||
Inventories and supplies
|
|
42,681
|
|
|
39,921
|
|
||
Funds held for customers, including assets carried at fair value of $26,282 and $34,450, respectively
|
|
90,938
|
|
|
117,641
|
|
||
Revenue in excess of billings, net of allowance for uncollectible accounts of $830 as of March 31, 2020
|
|
33,696
|
|
|
32,790
|
|
||
Other current assets
|
|
50,062
|
|
|
44,818
|
|
||
Total current assets
|
|
686,204
|
|
|
472,211
|
|
||
Deferred income taxes
|
|
5,817
|
|
|
3,907
|
|
||
Long-term investments
|
|
45,588
|
|
|
44,995
|
|
||
Property, plant and equipment, net of accumulated depreciation of $379,141 and $377,180, respectively
|
|
94,291
|
|
|
96,467
|
|
||
Operating lease assets
|
|
43,919
|
|
|
44,372
|
|
||
Intangibles, net of accumulated amortization of $555,739 and $557,023, respectively
|
|
240,014
|
|
|
276,122
|
|
||
Goodwill
|
|
736,688
|
|
|
804,487
|
|
||
Assets held for sale
|
|
2,762
|
|
|
2,880
|
|
||
Other non-current assets
|
|
189,253
|
|
|
197,870
|
|
||
Total assets
|
|
$
|
2,044,536
|
|
|
$
|
1,943,311
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
108,271
|
|
|
$
|
112,198
|
|
Funds held for customers
|
|
89,310
|
|
|
116,411
|
|
||
Accrued liabilities
|
|
161,120
|
|
|
179,338
|
|
||
Total current liabilities
|
|
358,701
|
|
|
407,947
|
|
||
Long-term debt
|
|
1,140,000
|
|
|
883,500
|
|
||
Operating lease liabilities
|
|
32,686
|
|
|
33,585
|
|
||
Deferred income taxes
|
|
4,960
|
|
|
14,898
|
|
||
Other non-current liabilities
|
|
34,222
|
|
|
32,520
|
|
||
Commitments and contingencies (Notes 12 and 15)
|
|
|
|
|
|
|
||
Shareholders' equity:
|
|
|
|
|
|
|
||
Common shares $1 par value (authorized: 500,000 shares; outstanding: March 31, 2020 – 41,691; December 31, 2019 – 42,126)
|
|
41,691
|
|
|
42,126
|
|
||
Additional paid-in capital
|
|
—
|
|
|
4,086
|
|
||
Retained earnings
|
|
492,230
|
|
|
572,596
|
|
||
Accumulated other comprehensive loss
|
|
(59,954
|
)
|
|
(47,947
|
)
|
||
Total shareholders’ equity
|
|
473,967
|
|
|
570,861
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
2,044,536
|
|
|
$
|
1,943,311
|
|
DELUXE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(unaudited)
|
|
|
Quarter Ended March 31,
|
||||||
(in thousands, except per share amounts)
|
|
2020
|
|
2019
|
||||
Product revenue
|
|
$
|
330,687
|
|
|
$
|
350,519
|
|
Service revenue
|
|
155,736
|
|
|
148,546
|
|
||
Total revenue
|
|
486,423
|
|
|
499,065
|
|
||
Cost of products
|
|
(121,587
|
)
|
|
(131,263
|
)
|
||
Cost of services
|
|
(80,462
|
)
|
|
(68,360
|
)
|
||
Total cost of revenue
|
|
(202,049
|
)
|
|
(199,623
|
)
|
||
Gross profit
|
|
284,374
|
|
|
299,442
|
|
||
Selling, general and administrative expense
|
|
(237,204
|
)
|
|
(230,177
|
)
|
||
Restructuring and integration expense
|
|
(17,654
|
)
|
|
(5,492
|
)
|
||
Asset impairment charges
|
|
(90,330
|
)
|
|
—
|
|
||
Operating (loss) income
|
|
(60,814
|
)
|
|
63,773
|
|
||
Interest expense
|
|
(6,999
|
)
|
|
(9,301
|
)
|
||
Other income
|
|
4,472
|
|
|
1,766
|
|
||
(Loss) income before income taxes
|
|
(63,341
|
)
|
|
56,238
|
|
||
Income tax benefit (provision)
|
|
3,210
|
|
|
(15,048
|
)
|
||
Net (loss) income
|
|
$
|
(60,131
|
)
|
|
$
|
41,190
|
|
Comprehensive (loss) income
|
|
$
|
(72,138
|
)
|
|
$
|
43,080
|
|
Basic (loss) earnings per share
|
|
(1.43
|
)
|
|
0.93
|
|
||
Diluted (loss) earnings per share
|
|
(1.45
|
)
|
|
0.93
|
|
DELUXE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
|
(in thousands)
|
|
Common shares
|
|
Common shares
par value
|
|
Additional paid-in capital
|
|
Retained earnings
|
|
Accumulated other comprehensive loss
|
|
Total
|
|||||||||||
Balance, December 31, 2019
|
|
42,126
|
|
|
$
|
42,126
|
|
|
$
|
4,086
|
|
|
$
|
572,596
|
|
|
$
|
(47,947
|
)
|
|
$
|
570,861
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(60,131
|
)
|
|
—
|
|
|
(60,131
|
)
|
|||||
Cash dividends ($0.30 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,861
|
)
|
|
—
|
|
|
(12,861
|
)
|
|||||
Common shares issued
|
|
81
|
|
|
81
|
|
|
1,801
|
|
|
—
|
|
|
—
|
|
|
1,882
|
|
|||||
Common shares repurchased
|
|
(499
|
)
|
|
(499
|
)
|
|
(9,767
|
)
|
|
(3,734
|
)
|
|
—
|
|
|
(14,000
|
)
|
|||||
Other common shares retired
|
|
(17
|
)
|
|
(17
|
)
|
|
(779
|
)
|
|
—
|
|
|
—
|
|
|
(796
|
)
|
|||||
Employee share-based compensation
|
|
—
|
|
|
—
|
|
|
4,659
|
|
|
—
|
|
|
—
|
|
|
4,659
|
|
|||||
Adoption of Accounting Standards Update No. 2016-13 (Note 2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,640
|
)
|
|
—
|
|
|
(3,640
|
)
|
|||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,007
|
)
|
|
(12,007
|
)
|
|||||
Balance, March 31, 2020
|
|
41,691
|
|
|
$
|
41,691
|
|
|
$
|
—
|
|
|
$
|
492,230
|
|
|
$
|
(59,954
|
)
|
|
$
|
473,967
|
|
(in thousands)
|
|
Common shares
|
|
Common shares
par value
|
|
Additional paid-in capital
|
|
Retained earnings
|
|
Accumulated other comprehensive loss
|
|
Total
|
|||||||||||
Balance, December 31, 2018
|
|
44,647
|
|
|
$
|
44,647
|
|
|
$
|
—
|
|
|
$
|
927,345
|
|
|
$
|
(56,579
|
)
|
|
$
|
915,413
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41,190
|
|
|
—
|
|
|
41,190
|
|
|||||
Cash dividends ($0.30 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,170
|
)
|
|
—
|
|
|
(13,170
|
)
|
|||||
Common shares issued
|
|
86
|
|
|
86
|
|
|
1,862
|
|
|
—
|
|
|
—
|
|
|
1,948
|
|
|||||
Common shares repurchased
|
|
(1,038
|
)
|
|
(1,038
|
)
|
|
(2,478
|
)
|
|
(46,484
|
)
|
|
—
|
|
|
(50,000
|
)
|
|||||
Other common shares retired
|
|
(57
|
)
|
|
(57
|
)
|
|
(2,615
|
)
|
|
—
|
|
|
—
|
|
|
(2,672
|
)
|
|||||
Employee share-based compensation
|
|
—
|
|
|
—
|
|
|
3,231
|
|
|
—
|
|
|
—
|
|
|
3,231
|
|
|||||
Adoption of Accounting Standards Update No. 2016-02
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(267
|
)
|
|
—
|
|
|
(267
|
)
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,890
|
|
|
1,890
|
|
|||||
Balance, March 31, 2019
|
|
43,638
|
|
|
$
|
43,638
|
|
|
$
|
—
|
|
|
$
|
908,614
|
|
|
$
|
(54,689
|
)
|
|
$
|
897,563
|
|
DELUXE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
|
Quarter Ended March 31,
|
||||||||
(in thousands)
|
|
2020
|
|
2019
|
||||||
Cash flows from operating activities:
|
|
|
|
|
||||||
Net (loss) income
|
|
$
|
(60,131
|
)
|
|
$
|
41,190
|
|
||
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
|
|
|
||||
Depreciation
|
|
4,919
|
|
|
4,245
|
|
||||
Amortization of intangibles
|
|
23,511
|
|
|
28,174
|
|
||||
Operating lease expense
|
|
3,933
|
|
|
4,030
|
|
||||
Asset impairment charges
|
|
90,330
|
|
|
—
|
|
||||
Amortization of prepaid product discounts
|
|
7,077
|
|
|
5,757
|
|
||||
Deferred income taxes
|
|
(9,129
|
)
|
|
1,640
|
|
||||
Employee share-based compensation expense
|
|
3,618
|
|
|
3,760
|
|
||||
Other non-cash items, net
|
|
8,439
|
|
|
3,137
|
|
||||
Changes in assets and liabilities:
|
|
|
|
|
|
|
||||
Trade accounts receivable
|
|
3,575
|
|
|
15,927
|
|
||||
Inventories and supplies
|
|
(3,165
|
)
|
|
1,322
|
|
||||
Other current assets
|
|
(7,403
|
)
|
|
(6,231
|
)
|
||||
Non-current assets
|
|
(917
|
)
|
|
(1,557
|
)
|
||||
Accounts payable
|
|
(18,059
|
)
|
|
(15,069
|
)
|
||||
Prepaid product discount payments
|
|
(7,321
|
)
|
|
(9,189
|
)
|
||||
Other accrued and non-current liabilities
|
|
(20,723
|
)
|
|
(31,737
|
)
|
||||
Net cash provided by operating activities
|
|
18,554
|
|
|
45,399
|
|
||||
Cash flows from investing activities:
|
|
|
|
|
|
|
||||
Purchases of capital assets
|
|
(6,355
|
)
|
|
(14,619
|
)
|
||||
Purchases of customer funds marketable securities
|
|
(34
|
)
|
|
(42
|
)
|
||||
Proceeds from customer funds marketable securities
|
|
34
|
|
|
42
|
|
||||
Other
|
|
354
|
|
|
(208
|
)
|
||||
Net cash used by investing activities
|
|
(6,001
|
)
|
|
(14,827
|
)
|
||||
Cash flows from financing activities:
|
|
|
|
|
|
|
||||
Proceeds from issuing long-term debt
|
|
1,011,000
|
|
|
82,500
|
|
||||
Payments on long-term debt
|
|
(754,500
|
)
|
|
(46,500
|
)
|
||||
Net change in customer funds obligations
|
|
(19,407
|
)
|
|
(9,908
|
)
|
||||
Proceeds from issuing shares under employee plans
|
|
1,736
|
|
|
1,548
|
|
||||
Employee taxes paid for shares withheld
|
|
(757
|
)
|
|
(2,672
|
)
|
||||
Payments for common shares repurchased
|
|
(14,000
|
)
|
|
(50,000
|
)
|
||||
Cash dividends paid to shareholders
|
|
(12,714
|
)
|
|
(13,118
|
)
|
||||
Other
|
|
(202
|
)
|
|
(1,257
|
)
|
||||
Net cash provided (used) by financing activities
|
|
211,156
|
|
|
(39,407
|
)
|
||||
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
(12,717
|
)
|
|
2,076
|
|
||||
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
210,992
|
|
|
(6,759
|
)
|
||||
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of year
|
|
174,811
|
|
|
145,259
|
|
||||
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period (Note 3)
|
|
$
|
385,803
|
|
|
$
|
138,500
|
|
NOTE 1: CONSOLIDATED FINANCIAL STATEMENTS
|
NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
NOTE 3: SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION
|
|
|
Quarter Ended March 31,
|
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
Balance, beginning of year
|
|
$
|
4,985
|
|
|
$
|
3,639
|
|
Bad debt expense
|
|
1,059
|
|
|
1,248
|
|
||
Write-offs and other
|
|
(2,098
|
)
|
|
(423
|
)
|
||
Balance, end of period
|
|
$
|
3,946
|
|
|
$
|
4,464
|
|
(in thousands)
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Raw materials
|
|
$
|
7,355
|
|
|
$
|
6,977
|
|
Semi-finished goods
|
|
7,532
|
|
|
7,368
|
|
||
Finished goods
|
|
24,091
|
|
|
21,982
|
|
||
Supplies
|
|
3,703
|
|
|
3,594
|
|
||
Inventories and supplies
|
|
$
|
42,681
|
|
|
$
|
39,921
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
March 31, 2020
|
||||||||||||||
(in thousands)
|
|
Cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Fair value
|
||||||||
Funds held for customers:(1)
|
|
|
|
|
|
|
|
|
||||||||
Domestic money market fund
|
|
$
|
11,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,000
|
|
Canadian and provincial government securities
|
|
8,302
|
|
|
—
|
|
|
(38
|
)
|
|
8,264
|
|
||||
Canadian guaranteed investment certificates
|
|
7,017
|
|
|
—
|
|
|
—
|
|
|
7,017
|
|
||||
Available-for-sale debt securities
|
|
$
|
26,319
|
|
|
$
|
—
|
|
|
$
|
(38
|
)
|
|
$
|
26,281
|
|
|
|
December 31, 2019
|
||||||||||||||
(in thousands)
|
|
Cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Fair value
|
||||||||
Funds held for customers:(1)
|
|
|
|
|
|
|
|
|
||||||||
Domestic money market fund
|
|
$
|
18,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,000
|
|
Canadian and provincial government securities
|
|
9,056
|
|
|
—
|
|
|
(304
|
)
|
|
8,752
|
|
||||
Canadian guaranteed investment certificates
|
|
7,698
|
|
|
—
|
|
|
—
|
|
|
7,698
|
|
||||
Available-for-sale debt securities
|
|
$
|
34,754
|
|
|
$
|
—
|
|
|
$
|
(304
|
)
|
|
$
|
34,450
|
|
(in thousands)
|
|
Fair value
|
||
Due in one year or less
|
|
$
|
20,323
|
|
Due in two to five years
|
|
2,884
|
|
|
Due in six to ten years
|
|
3,075
|
|
|
Available-for-sale debt securities
|
|
$
|
26,282
|
|
(in thousands)
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Conditional right to receive consideration
|
|
$
|
26,971
|
|
|
$
|
24,499
|
|
Unconditional right to receive consideration
|
|
6,725
|
|
|
8,291
|
|
||
Revenue in excess of billings
|
|
$
|
33,696
|
|
|
$
|
32,790
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
(in thousands)
|
|
Quarter Ended
March 31, 2020
|
||
Balance, beginning of year
|
|
$
|
—
|
|
Adoption of ASU No. 2016-13 (Note 2)
|
|
808
|
|
|
Bad debt expense
|
|
22
|
|
|
Balance, end of period
|
|
$
|
830
|
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
(in thousands)
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
||||||||||||
Amortizable intangibles:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Internal-use software
|
|
$
|
387,356
|
|
|
$
|
(312,444
|
)
|
|
$
|
74,912
|
|
|
$
|
380,905
|
|
|
$
|
(299,698
|
)
|
|
$
|
81,207
|
|
Customer lists/relationships
|
|
307,372
|
|
|
(170,776
|
)
|
|
136,596
|
|
|
348,055
|
|
|
(187,462
|
)
|
|
160,593
|
|
||||||
Software to be sold
|
|
36,900
|
|
|
(20,714
|
)
|
|
16,186
|
|
|
36,900
|
|
|
(19,657
|
)
|
|
17,243
|
|
||||||
Technology-based intangibles
|
|
34,613
|
|
|
(23,763
|
)
|
|
10,850
|
|
|
34,780
|
|
|
(22,122
|
)
|
|
12,658
|
|
||||||
Trade names
|
|
29,512
|
|
|
(28,042
|
)
|
|
1,470
|
|
|
32,505
|
|
|
(28,084
|
)
|
|
4,421
|
|
||||||
Intangibles
|
|
$
|
795,753
|
|
|
$
|
(555,739
|
)
|
|
$
|
240,014
|
|
|
$
|
833,145
|
|
|
$
|
(557,023
|
)
|
|
$
|
276,122
|
|
(in thousands)
|
|
Estimated
amortization
expense
|
||
Remainder of 2020
|
|
$
|
65,994
|
|
2021
|
|
74,042
|
|
|
2022
|
|
50,325
|
|
|
2023
|
|
31,879
|
|
|
2024
|
|
15,013
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
(in thousands)
|
|
Payments
|
|
Cloud Solutions
|
|
Promotional Solutions
|
|
Checks
|
|
Total
|
||||||||||
Balance, December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Goodwill, gross
|
|
$
|
168,165
|
|
|
$
|
432,984
|
|
|
$
|
252,834
|
|
|
$
|
434,812
|
|
|
$
|
1,288,795
|
|
Accumulated impairment charges
|
|
—
|
|
|
(357,741
|
)
|
|
(126,567
|
)
|
|
—
|
|
|
(484,308
|
)
|
|||||
Goodwill, net of accumulated impairment charges
|
|
168,165
|
|
|
75,243
|
|
|
126,267
|
|
|
434,812
|
|
|
804,487
|
|
|||||
Impairment charges (Note 7)
|
|
—
|
|
|
(4,317
|
)
|
|
(63,356
|
)
|
|
—
|
|
|
(67,673
|
)
|
|||||
Currency translation adjustment
|
|
—
|
|
|
—
|
|
|
(126
|
)
|
|
—
|
|
|
(126
|
)
|
|||||
Balance, March 31, 2020
|
|
$
|
168,165
|
|
|
$
|
70,926
|
|
|
$
|
62,785
|
|
|
$
|
434,812
|
|
|
$
|
736,688
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance, March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Goodwill, gross
|
|
$
|
168,165
|
|
|
$
|
432,984
|
|
|
$
|
252,708
|
|
|
$
|
434,812
|
|
|
$
|
1,288,669
|
|
Accumulated impairment charges
|
|
—
|
|
|
(362,058
|
)
|
|
(189,923
|
)
|
|
—
|
|
|
(551,981
|
)
|
|||||
Goodwill, net of accumulated impairment charges
|
|
$
|
168,165
|
|
|
$
|
70,926
|
|
|
$
|
62,785
|
|
|
$
|
434,812
|
|
|
$
|
736,688
|
|
(in thousands)
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Postretirement benefit plan asset
|
|
$
|
58,130
|
|
|
$
|
56,743
|
|
Loans and notes receivable from Safeguard distributors, net of allowance for doubtful accounts(1)
|
|
55,861
|
|
|
66,872
|
|
||
Prepaid product discounts
|
|
45,994
|
|
|
51,145
|
|
||
Deferred sales commissions(2)
|
|
9,530
|
|
|
9,682
|
|
||
Other
|
|
19,738
|
|
|
13,428
|
|
||
Other non-current assets
|
|
$
|
189,253
|
|
|
$
|
197,870
|
|
|
|
Quarter Ended March 31,
|
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
Balance, beginning of year
|
|
$
|
284
|
|
|
$
|
284
|
|
Adoption of ASU No. 2016-13 (Note 2)
|
|
4,749
|
|
|
—
|
|
||
Bad debt expense
|
|
5,382
|
|
|
—
|
|
||
Balance, end of period
|
|
$
|
10,415
|
|
|
$
|
284
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
Quarter Ended March 31,
|
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
Balance, beginning of year
|
|
$
|
51,145
|
|
|
$
|
54,642
|
|
Additions(1)
|
|
2,470
|
|
|
9,553
|
|
||
Amortization
|
|
(7,077
|
)
|
|
(5,757
|
)
|
||
Other
|
|
(544
|
)
|
|
(201
|
)
|
||
Balance, end of period
|
|
$
|
45,994
|
|
|
$
|
58,237
|
|
(in thousands)
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Deferred revenue(1)
|
|
$
|
46,401
|
|
|
$
|
46,098
|
|
Employee cash bonuses
|
|
13,818
|
|
|
36,918
|
|
||
Operating lease liabilities
|
|
12,924
|
|
|
12,898
|
|
||
Prepaid product discounts due within one year
|
|
11,772
|
|
|
14,709
|
|
||
Customer rebates
|
|
7,857
|
|
|
8,944
|
|
||
Other
|
|
68,348
|
|
|
59,771
|
|
||
Accrued liabilities
|
|
$
|
161,120
|
|
|
$
|
179,338
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
(in thousands)
|
|
March 31,
2020 |
|
March 31,
2019 |
||||
Cash and cash equivalents
|
|
$
|
310,146
|
|
|
$
|
61,529
|
|
Restricted cash and restricted cash equivalents included in funds held for customers
|
|
75,657
|
|
|
76,971
|
|
||
Total cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
$
|
385,803
|
|
|
$
|
138,500
|
|
NOTE 4: (LOSS) EARNINGS PER SHARE
|
|
|
Quarter Ended March 31,
|
||||||
(in thousands, except per share amounts)
|
|
2020
|
|
2019
|
||||
(Loss) earnings per share – basic:
|
|
|
|
|
||||
Net (loss) income
|
|
$
|
(60,131
|
)
|
|
$
|
41,190
|
|
Income allocated to participating securities
|
|
(21
|
)
|
|
(110
|
)
|
||
(Loss) income available to common shareholders
|
|
$
|
(60,152
|
)
|
|
$
|
41,080
|
|
Weighted-average shares outstanding
|
|
42,028
|
|
|
43,965
|
|
||
(Loss) earnings per share – basic
|
|
$
|
(1.43
|
)
|
|
$
|
0.93
|
|
|
|
|
|
|
||||
(Loss) earnings per share – diluted:
|
|
|
|
|
|
|
||
Net (loss) income
|
|
$
|
(60,131
|
)
|
|
$
|
41,190
|
|
Income allocated to participating securities
|
|
(21
|
)
|
|
(65
|
)
|
||
Re-measurement of share-based awards classified as liabilities
|
|
(775
|
)
|
|
—
|
|
||
(Loss) income available to common shareholders
|
|
$
|
(60,927
|
)
|
|
$
|
41,125
|
|
Weighted-average shares outstanding
|
|
42,028
|
|
|
43,965
|
|
||
Dilutive impact of potential common shares
|
|
37
|
|
|
100
|
|
||
Weighted-average shares and potential common shares outstanding
|
|
42,065
|
|
|
44,065
|
|
||
(Loss) earnings per share – diluted
|
|
$
|
(1.45
|
)
|
|
$
|
0.93
|
|
Antidilutive options excluded from calculation
|
|
2,214
|
|
|
1,097
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
NOTE 5: OTHER COMPREHENSIVE (LOSS) INCOME
|
Accumulated other comprehensive loss components
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
Affected line item in consolidated statements of comprehensive (loss) income
|
||||||
|
|
Quarter Ended
March 31, |
|
|
||||||
(in thousands)
|
|
2020
|
|
2019
|
|
|
||||
Realized gain on interest rate swap
|
|
$
|
93
|
|
|
$
|
—
|
|
|
Interest expense
|
Tax expense
|
|
(24
|
)
|
|
—
|
|
|
Income tax benefit (provision)
|
||
Realized gain on interest rate swap, net of tax
|
|
69
|
|
|
—
|
|
|
Net income
|
||
Amortization of postretirement benefit plan items:
|
|
|
|
|
|
|
||||
Prior service credit
|
|
355
|
|
|
355
|
|
|
Other income
|
||
Net actuarial loss
|
|
(575
|
)
|
|
(806
|
)
|
|
Other income
|
||
Total amortization
|
|
(220
|
)
|
|
(451
|
)
|
|
Other income
|
||
Tax benefit
|
|
12
|
|
|
70
|
|
|
Income tax benefit (provision)
|
||
Amortization of postretirement benefit plan items, net of tax
|
|
(208
|
)
|
|
(381
|
)
|
|
Net income
|
||
Total reclassifications, net of tax
|
|
$
|
(139
|
)
|
|
$
|
(381
|
)
|
|
|
(in thousands)
|
|
Postretirement benefit plans
|
|
Net unrealized loss on available-for-sale debt securities(1)
|
|
Net unrealized loss on cash flow hedge(2)
|
|
Currency translation adjustment
|
|
Accumulated other comprehensive loss
|
||||||||||
Balance, December 31, 2019
|
|
$
|
(28,406
|
)
|
|
$
|
(275
|
)
|
|
$
|
(1,097
|
)
|
|
$
|
(18,169
|
)
|
|
$
|
(47,947
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
—
|
|
|
189
|
|
|
(4,980
|
)
|
|
(7,355
|
)
|
|
(12,146
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
|
208
|
|
|
—
|
|
|
(69
|
)
|
|
—
|
|
|
139
|
|
|||||
Net current-period other comprehensive income (loss)
|
|
208
|
|
|
189
|
|
|
(5,049
|
)
|
|
(7,355
|
)
|
|
(12,007
|
)
|
|||||
Balance, March 31, 2020
|
|
$
|
(28,198
|
)
|
|
$
|
(86
|
)
|
|
$
|
(6,146
|
)
|
|
$
|
(25,524
|
)
|
|
$
|
(59,954
|
)
|
NOTE 6: DERIVATIVE FINANCIAL INSTRUMENTS
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
NOTE 7: FAIR VALUE MEASUREMENTS
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
|
Fair value measurements using
|
|
|
||||||||||||||
|
|
Fair value as of measurement date
|
|
Quoted prices in active markets for identical assets
|
|
Significant other observable inputs
|
|
Significant unobservable inputs
|
|
Impairment charge
|
||||||||||
(in thousands)
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
||||||||||||
Customer lists
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,397
|
|
Internal-use software
|
|
2,172
|
|
|
—
|
|
|
—
|
|
|
2,172
|
|
|
6,932
|
|
|||||
Small business distributor
|
|
7,622
|
|
|
—
|
|
|
—
|
|
|
7,622
|
|
|
2,752
|
|
|||||
Assets held for sale
|
|
1,412
|
|
|
—
|
|
|
—
|
|
|
1,412
|
|
|
2,227
|
|
|||||
Trade names
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,182
|
|
|||||
Technology-based intangibles
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
167
|
|
|||||
Goodwill
|
|
|
|
|
|
|
|
|
|
67,673
|
|
|||||||||
Total
|
|
|
|
|
|
|
|
|
|
$
|
90,330
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
Fair value measurements using
|
||||||||||||||||
|
|
|
|
March 31, 2020
|
|
Quoted prices in active markets for identical assets
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
||||||||||||
(in thousands)
|
|
Balance sheet location
|
|
Carrying value
|
|
Fair value
|
|
|
|
|||||||||||||
Measured at fair value through comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash equivalents
|
|
Funds held for customers
|
|
$
|
11,000
|
|
|
$
|
11,000
|
|
|
$
|
11,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale debt securities
|
|
Funds held for customers
|
|
15,281
|
|
|
15,281
|
|
|
—
|
|
|
15,281
|
|
|
—
|
|
|||||
Derivative liability (Note 6)
|
|
Other non-current liabilities
|
|
(8,289
|
)
|
|
(8,289
|
)
|
|
—
|
|
|
(8,289
|
)
|
|
—
|
|
|||||
Amortized cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
|
|
Cash and cash equivalents
|
|
310,146
|
|
|
310,146
|
|
|
310,146
|
|
|
—
|
|
|
—
|
|
|||||
Cash
|
|
Funds held for customers
|
|
64,657
|
|
|
64,657
|
|
|
64,657
|
|
|
—
|
|
|
—
|
|
|||||
Loans and notes receivable from Safeguard distributors
|
|
Other current and non-current assets
|
|
59,227
|
|
|
60,572
|
|
|
—
|
|
|
—
|
|
|
60,572
|
|
|||||
Long-term debt
|
|
Long-term debt
|
|
1,140,000
|
|
|
1,140,000
|
|
|
—
|
|
|
1,140,000
|
|
|
—
|
|
|
|
|
|
|
|
Fair value measurements using
|
||||||||||||||||
|
|
|
|
December 31, 2019
|
|
Quoted prices in active markets for identical assets
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
||||||||||||
(in thousands)
|
|
Balance sheet location
|
|
Carrying value
|
|
Fair value
|
|
|
|
|||||||||||||
Measured at fair value through comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash equivalents
|
|
Funds held for customers
|
|
$
|
18,000
|
|
|
$
|
18,000
|
|
|
$
|
18,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale debt securities
|
|
Funds held for customers
|
|
16,450
|
|
|
16,450
|
|
|
—
|
|
|
16,450
|
|
|
—
|
|
|||||
Derivative liability (Note 6)
|
|
Other non-current liabilities
|
|
(1,480
|
)
|
|
(1,480
|
)
|
|
—
|
|
|
(1,480
|
)
|
|
—
|
|
|||||
Amortized cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
|
|
Cash and cash equivalents
|
|
73,620
|
|
|
73,620
|
|
|
73,620
|
|
|
—
|
|
|
—
|
|
|||||
Cash
|
|
Funds held for customers
|
|
83,191
|
|
|
83,191
|
|
|
83,191
|
|
|
—
|
|
|
—
|
|
|||||
Loans and notes receivable from Safeguard distributors
|
|
Other current and non-current assets
|
|
70,383
|
|
|
68,887
|
|
|
—
|
|
|
—
|
|
|
68,887
|
|
|||||
Long-term debt
|
|
Long-term debt
|
|
883,500
|
|
|
883,500
|
|
|
—
|
|
|
883,500
|
|
|
—
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
NOTE 8: RESTRUCTURING AND INTEGRATION EXPENSE
|
|
|
Quarter Ended
March 31, |
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
Total cost of revenue
|
|
$
|
829
|
|
|
$
|
791
|
|
Operating expenses
|
|
17,654
|
|
|
5,492
|
|
||
Restructuring and integration expense
|
|
$
|
18,483
|
|
|
$
|
6,283
|
|
|
|
Quarter Ended
March 31, |
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
External consulting fees
|
|
$
|
10,901
|
|
|
$
|
2,146
|
|
Employee severance benefits
|
|
5,083
|
|
|
2,064
|
|
||
Internal labor
|
|
1,853
|
|
|
2,061
|
|
||
Other
|
|
646
|
|
|
12
|
|
||
Restructuring and integration expense
|
|
$
|
18,483
|
|
|
$
|
6,283
|
|
(in thousands)
|
|
Employee severance benefits
|
||
Balance, December 31, 2019
|
|
$
|
3,459
|
|
Charges
|
|
5,318
|
|
|
Reversals
|
|
(235
|
)
|
|
Payments
|
|
(2,703
|
)
|
|
Balance, March 31, 2020
|
|
$
|
5,839
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
NOTE 9: INCOME TAX PROVISION
|
|
|
Quarter Ended March 31, 2020
|
|
Year Ended December 31, 2019
|
||
Income tax at federal statutory rate
|
|
21.0
|
%
|
|
21.0
|
%
|
Goodwill impairment charges
|
|
(18.8
|
%)
|
|
(29.3
|
%)
|
Change in valuation allowances
|
|
—
|
|
|
(4.5
|
%)
|
Net tax impact of share-based compensation
|
|
(0.9
|
%)
|
|
(1.1
|
%)
|
Foreign tax rate differences
|
|
3.9
|
%
|
|
1.3
|
%
|
State income tax expense, net of federal income tax benefit
|
|
2.2
|
%
|
|
4.9
|
%
|
Other
|
|
(2.3
|
%)
|
|
—
|
|
Effective tax rate
|
|
5.1
|
%
|
|
(7.7
|
%)
|
NOTE 10: POSTRETIREMENT BENEFITS
|
|
|
Quarter Ended
March 31, |
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
Interest cost
|
|
$
|
478
|
|
|
$
|
682
|
|
Expected return on plan assets
|
|
(1,905
|
)
|
|
(1,740
|
)
|
||
Amortization of prior service credit
|
|
(355
|
)
|
|
(355
|
)
|
||
Amortization of net actuarial losses
|
|
575
|
|
|
806
|
|
||
Net periodic benefit income
|
|
$
|
(1,207
|
)
|
|
$
|
(607
|
)
|
NOTE 11: DEBT
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
(in thousands)
|
|
Quarter Ended March 31, 2020
|
|
Year Ended
December 31, 2019
|
||||
Daily average amount outstanding
|
|
$
|
923,423
|
|
|
$
|
925,715
|
|
Weighted-average interest rate
|
|
2.83
|
%
|
|
3.54
|
%
|
(in thousands)
|
|
Total
available
|
||
Revolving credit facility commitment
|
|
$
|
1,150,000
|
|
Amount drawn on revolving credit facility
|
|
(1,140,000
|
)
|
|
Outstanding letters of credit(1)
|
|
(5,428
|
)
|
|
Net available for borrowing as of March 31, 2020
|
|
$
|
4,572
|
|
NOTE 12: OTHER COMMITMENTS AND CONTINGENCIES
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
Note 13: SHAREHOLDERS' EQUITY
|
NOTE 14: BUSINESS SEGMENT INFORMATION
|
•
|
Payments – This segment includes our treasury management solutions, including remittance and lockbox processing, remote deposit capture, receivables management, payment processing and paperless treasury management, in addition to payroll and disbursement services, including Deluxe Payment Exchange and fraud and security services.
|
•
|
Cloud Solutions – This segment includes web hosting and design services, data-driven marketing solutions and hosted solutions, including digital engagement, logo design, financial institution profitability reporting, account switching tools and business incorporation services.
|
•
|
Promotional Solutions – This segment includes business forms, accessories, advertising specialties, promotional apparel, retail packaging and strategic sourcing services.
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
Quarter Ended March 31,
|
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
Payments:
|
|
|
|
|
||||
Revenue
|
|
$
|
77,040
|
|
|
$
|
65,150
|
|
Adjusted EBITDA
|
|
18,023
|
|
|
16,867
|
|
||
Cloud Solutions:
|
|
|
|
|
||||
Revenue
|
|
75,945
|
|
|
78,288
|
|
||
Adjusted EBITDA
|
|
14,920
|
|
|
17,060
|
|
||
Promotional Solutions:
|
|
|
|
|
||||
Revenue
|
|
142,794
|
|
|
155,829
|
|
||
Adjusted EBITDA
|
|
11,197
|
|
|
23,590
|
|
||
Checks:
|
|
|
|
|
||||
Revenue
|
|
190,644
|
|
|
199,798
|
|
||
Adjusted EBITDA
|
|
90,712
|
|
|
102,234
|
|
||
Total segment:
|
|
|
|
|
||||
Revenue
|
|
$
|
486,423
|
|
|
$
|
499,065
|
|
Adjusted EBITDA
|
|
134,852
|
|
|
159,751
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
Quarter Ended March 31,
|
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
Total segment adjusted EBITDA
|
|
$
|
134,852
|
|
|
$
|
159,751
|
|
Corporate operations
|
|
(51,518
|
)
|
|
(46,043
|
)
|
||
Depreciation and amortization
|
|
(28,430
|
)
|
|
(32,419
|
)
|
||
Interest expense
|
|
(6,999
|
)
|
|
(9,301
|
)
|
||
Asset impairment charges
|
|
(90,330
|
)
|
|
—
|
|
||
Restructuring, integration and other costs
|
|
(19,633
|
)
|
|
(6,283
|
)
|
||
CEO transition costs
|
|
180
|
|
|
(5,488
|
)
|
||
Share-based compensation expense
|
|
(3,618
|
)
|
|
(3,291
|
)
|
||
Acquisition transaction costs
|
|
(9
|
)
|
|
(177
|
)
|
||
Certain legal-related expenses
|
|
2,164
|
|
|
(412
|
)
|
||
Loss on sales of businesses and customer lists
|
|
—
|
|
|
(99
|
)
|
||
(Loss) income before income taxes
|
|
$
|
(63,341
|
)
|
|
$
|
56,238
|
|
|
|
Quarter Ended March 31, 2020
|
||||||||||||||||||
(in thousands)
|
|
Payments
|
|
Cloud Solutions
|
|
Promotional Solutions
|
|
Checks
|
|
Consolidated
|
||||||||||
Checks
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
190,644
|
|
|
$
|
190,644
|
|
Forms and other products
|
|
—
|
|
|
—
|
|
|
81,813
|
|
|
—
|
|
|
81,813
|
|
|||||
Marketing and promotional solutions
|
|
—
|
|
|
—
|
|
|
60,981
|
|
|
—
|
|
|
60,981
|
|
|||||
Treasury management solutions
|
|
56,867
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56,867
|
|
|||||
Data-driven marketing solutions
|
|
—
|
|
|
38,997
|
|
|
—
|
|
|
—
|
|
|
38,997
|
|
|||||
Web and hosted solutions
|
|
—
|
|
|
36,948
|
|
|
—
|
|
|
—
|
|
|
36,948
|
|
|||||
Other payments solutions
|
|
20,173
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,173
|
|
|||||
Total revenue
|
|
$
|
77,040
|
|
|
$
|
75,945
|
|
|
$
|
142,794
|
|
|
$
|
190,644
|
|
|
$
|
486,423
|
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
Quarter Ended March 31, 2019
|
||||||||||||||||||
(in thousands)
|
|
Payments
|
|
Cloud Solutions
|
|
Promotional Solutions
|
|
Checks
|
|
Consolidated
|
||||||||||
Checks
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
199,798
|
|
|
$
|
199,798
|
|
Forms and other products
|
|
—
|
|
|
—
|
|
|
86,706
|
|
|
—
|
|
|
86,706
|
|
|||||
Marketing and promotional solutions
|
|
—
|
|
|
—
|
|
|
69,123
|
|
|
—
|
|
|
69,123
|
|
|||||
Treasury management solutions
|
|
45,471
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45,471
|
|
|||||
Data-driven marketing solutions
|
|
—
|
|
|
36,784
|
|
|
—
|
|
|
—
|
|
|
36,784
|
|
|||||
Web and hosted solutions
|
|
—
|
|
|
41,504
|
|
|
—
|
|
|
—
|
|
|
41,504
|
|
|||||
Other payments solutions
|
|
19,679
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19,679
|
|
|||||
Total revenue
|
|
$
|
65,150
|
|
|
$
|
78,288
|
|
|
$
|
155,829
|
|
|
$
|
199,798
|
|
|
$
|
499,065
|
|
|
|
Quarter Ended March 31, 2020
|
||||||||||||||||||
(in thousands)
|
|
Payments
|
|
Cloud Solutions
|
|
Promotional Solutions
|
|
Checks
|
|
Consolidated
|
||||||||||
United States
|
|
$
|
68,358
|
|
|
$
|
68,070
|
|
|
$
|
136,814
|
|
|
$
|
184,294
|
|
|
$
|
457,536
|
|
Foreign, primarily Canada and Australia
|
|
8,682
|
|
|
7,875
|
|
|
5,980
|
|
|
6,350
|
|
|
28,887
|
|
|||||
Total revenue
|
|
$
|
77,040
|
|
|
$
|
75,945
|
|
|
$
|
142,794
|
|
|
$
|
190,644
|
|
|
$
|
486,423
|
|
|
|
Quarter Ended March 31, 2019
|
||||||||||||||||||
(in thousands)
|
|
Payments
|
|
Cloud Solutions
|
|
Promotional Solutions
|
|
Checks
|
|
Consolidated
|
||||||||||
United States
|
|
$
|
56,944
|
|
|
$
|
69,451
|
|
|
$
|
149,423
|
|
|
$
|
194,087
|
|
|
$
|
469,905
|
|
Foreign, primarily Canada and Australia
|
|
8,206
|
|
|
8,837
|
|
|
6,406
|
|
|
5,711
|
|
|
29,160
|
|
|||||
Total revenue
|
|
$
|
65,150
|
|
|
$
|
78,288
|
|
|
$
|
155,829
|
|
|
$
|
199,798
|
|
|
$
|
499,065
|
|
NOTE 15: RISKS AND UNCERTAINTIES
|
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
Executive Overview that discusses what we do, our operating results at a high level and our financial outlook for the upcoming year;
|
•
|
Consolidated Results of Operations; Restructuring, Integration and Other Costs; and Segment Results that includes a more detailed discussion of our revenue and expenses;
|
•
|
Cash Flows and Liquidity, Capital Resources and Other Financial Position Information that discusses key aspects of our cash flows, capital structure and financial position;
|
•
|
Off-Balance Sheet Arrangements, Guarantees and Contractual Obligations that discusses our financial commitments; and
|
•
|
Critical Accounting Policies that discusses the policies we believe are most important to understanding the assumptions and judgments underlying our financial statements.
|
EXECUTIVE OVERVIEW
|
CONSOLIDATED RESULTS OF OPERATIONS
|
|
|
Quarter Ended March 31,
|
|||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
|||||
Total revenue
|
|
$
|
486,423
|
|
|
$
|
499,065
|
|
|
(2.5
|
%)
|
|
|
Quarter Ended
March 31, |
||||
|
|
2020
|
|
2019
|
||
Payments
|
|
15.8
|
%
|
|
13.1
|
%
|
Cloud Solutions
|
|
15.6
|
%
|
|
15.7
|
%
|
Promotional Solutions
|
|
29.4
|
%
|
|
31.2
|
%
|
Checks
|
|
39.2
|
%
|
|
40.0
|
%
|
Total revenue
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
Quarter Ended March 31,
|
|||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
|||||
Total cost of revenue
|
|
$
|
202,049
|
|
|
$
|
199,623
|
|
|
1.2
|
%
|
Total cost of revenue as a percentage of total revenue
|
|
41.5
|
%
|
|
40.0
|
%
|
|
1.5
|
pts.
|
|
|
Quarter Ended March 31,
|
|||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
|||||
SG&A expense
|
|
$
|
237,204
|
|
|
$
|
230,177
|
|
|
3.1
|
%
|
SG&A expense as a percentage of total revenue
|
|
48.8
|
%
|
|
46.1
|
%
|
|
2.7
|
pts.
|
|
|
Quarter Ended March 31,
|
||||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||||
Restructuring and integration expense
|
|
$
|
17,654
|
|
|
$
|
5,492
|
|
|
$
|
12,162
|
|
|
|
Quarter Ended March 31,
|
||||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||||
Asset impairment charges
|
|
$
|
90,330
|
|
|
$
|
—
|
|
|
$
|
90,330
|
|
|
|
Quarter Ended March 31,
|
||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||
Interest expense
|
|
$
|
6,999
|
|
|
$
|
9,301
|
|
|
(24.8%)
|
Weighted-average debt outstanding
|
|
923,423
|
|
|
936,583
|
|
|
(1.4%)
|
||
Weighted-average interest rate
|
|
2.8
|
%
|
|
3.8
|
%
|
|
(1.0) pts.
|
|
|
Quarter Ended March 31,
|
||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||
Income tax (benefit) provision
|
|
$
|
(3,210
|
)
|
|
$
|
15,048
|
|
|
(121.3%)
|
Effective income tax rate
|
|
5.1
|
%
|
|
26.8
|
%
|
|
(21.7) pts.
|
|
|
Quarter Ended March 31,
|
||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||
Adjusted EBITDA(1)
|
|
$
|
83,334
|
|
|
$
|
113,708
|
|
|
(26.7%)
|
Adjusted EBITDA margin
|
|
17.1
|
%
|
|
22.8
|
%
|
|
(5.7) pts.
|
|
|
Quarter Ended March 31,
|
|||||||||
|
|
2020
|
|
2019
|
|
Change
|
|||||
Diluted (loss) earnings per share
|
|
$
|
(1.45
|
)
|
|
$
|
0.93
|
|
|
(255.9
|
%)
|
Adjusted diluted EPS(1)
|
|
1.08
|
|
|
1.54
|
|
|
(29.9
|
%)
|
|
|
Quarter Ended March 31,
|
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
Net (loss) income
|
|
$
|
(60,131
|
)
|
|
$
|
41,190
|
|
Asset impairment charges
|
|
90,330
|
|
|
—
|
|
||
Acquisition amortization
|
|
14,724
|
|
|
19,005
|
|
||
Restructuring, integration and other costs
|
|
19,633
|
|
|
6,283
|
|
||
CEO transition costs(1)
|
|
(180
|
)
|
|
5,488
|
|
||
Share-based compensation
|
|
3,618
|
|
|
3,291
|
|
||
Acquisition transaction costs
|
|
9
|
|
|
177
|
|
||
Certain legal-related expense
|
|
(2,164
|
)
|
|
412
|
|
||
Loss on sales of businesses and customer lists
|
|
—
|
|
|
99
|
|
||
Adjustments, pre-tax
|
|
125,970
|
|
|
34,755
|
|
||
Income tax provision impact of pre-tax adjustments(2)
|
|
(19,175
|
)
|
|
(7,885
|
)
|
||
Adjustments, net of tax
|
|
106,795
|
|
|
26,870
|
|
||
Adjusted net income
|
|
46,664
|
|
|
68,060
|
|
||
Income allocated to participating securities
|
|
(77
|
)
|
|
(108
|
)
|
||
Re-measurement of share-based awards classified as liabilities
|
|
(788
|
)
|
|
—
|
|
||
Adjusted income available to common shareholders
|
|
$
|
45,799
|
|
|
$
|
67,952
|
|
|
|
|
|
|
||||
GAAP diluted (loss) earnings per share
|
|
$
|
(1.45
|
)
|
|
$
|
0.93
|
|
Adjustments, net of tax
|
|
2.53
|
|
|
0.61
|
|
||
Adjusted diluted EPS(3)
|
|
$
|
1.08
|
|
|
$
|
1.54
|
|
|
|
Quarter Ended March 31,
|
||||||
(in thousands)
|
|
2020
|
|
2019
|
||||
Net (loss) income
|
|
$
|
(60,131
|
)
|
|
$
|
41,190
|
|
Depreciation and amortization expense
|
|
28,430
|
|
|
32,419
|
|
||
Interest expense
|
|
6,999
|
|
|
9,301
|
|
||
Income tax provision
|
|
(3,210
|
)
|
|
15,048
|
|
||
Asset impairment charges
|
|
90,330
|
|
|
—
|
|
||
Restructuring, integration and other costs
|
|
19,633
|
|
|
6,283
|
|
||
CEO transition costs(1)
|
|
(180
|
)
|
|
5,488
|
|
||
Share-based compensation expense
|
|
3,618
|
|
|
3,291
|
|
||
Acquisition transaction costs
|
|
9
|
|
|
177
|
|
||
Certain legal-related expense
|
|
(2,164
|
)
|
|
412
|
|
||
Loss on sales of businesses and customer lists
|
|
—
|
|
|
99
|
|
||
Adjusted EBITDA
|
|
$
|
83,334
|
|
|
$
|
113,708
|
|
RESTRUCTURING, INTEGRATION AND OTHER COSTS
|
SEGMENT RESULTS
|
|
|
Quarter Ended March 31,
|
||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||
Total revenue
|
|
$
|
77,040
|
|
|
$
|
65,150
|
|
|
18.3%
|
Adjusted EBITDA
|
|
18,023
|
|
|
16,867
|
|
|
6.9%
|
||
Adjusted EBITDA margin
|
|
23.4
|
%
|
|
25.9
|
%
|
|
(2.5) pts.
|
|
|
Quarter Ended March 31,
|
||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||
Total revenue
|
|
$
|
75,945
|
|
|
$
|
78,288
|
|
|
(3.0%)
|
Adjusted EBITDA
|
|
14,920
|
|
|
17,060
|
|
|
(12.5%)
|
||
Adjusted EBITDA margin
|
|
19.6
|
%
|
|
21.8
|
%
|
|
(2.2) pts.
|
|
|
Quarter Ended March 31,
|
||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||
Total revenue
|
|
$
|
142,794
|
|
|
$
|
155,829
|
|
|
(8.4%)
|
Adjusted EBITDA
|
|
11,197
|
|
|
23,590
|
|
|
(52.5%)
|
||
Adjusted EBITDA margin
|
|
7.8
|
%
|
|
15.1
|
%
|
|
(7.3) pts.
|
|
|
Quarter Ended March 31,
|
||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||
Total revenue
|
|
$
|
190,644
|
|
|
$
|
199,798
|
|
|
(4.6%)
|
Adjusted EBITDA
|
|
90,712
|
|
|
102,234
|
|
|
(11.3%)
|
||
Adjusted EBITDA margin
|
|
47.6
|
%
|
|
51.2
|
%
|
|
(3.6) pts.
|
CASH FLOWS AND LIQUIDITY
|
|
|
Quarter Ended March 31,
|
||||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||||
Net cash provided by operating activities
|
|
$
|
18,554
|
|
|
$
|
45,399
|
|
|
$
|
(26,845
|
)
|
Net cash used by investing activities
|
|
(6,001
|
)
|
|
(14,827
|
)
|
|
8,826
|
|
|||
Net cash provided (used) by financing activities
|
|
211,156
|
|
|
(39,407
|
)
|
|
250,563
|
|
|||
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
(12,717
|
)
|
|
2,076
|
|
|
(14,793
|
)
|
|||
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
$
|
210,992
|
|
|
$
|
(6,759
|
)
|
|
$
|
217,751
|
|
|
|
Quarter Ended March 31,
|
||||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||||
Performance-based compensation payments(1)
|
|
$
|
20,777
|
|
|
$
|
23,308
|
|
|
$
|
(2,531
|
)
|
Prepaid product discount payments
|
|
7,321
|
|
|
9,189
|
|
|
(1,868
|
)
|
|||
Interest payments
|
|
6,705
|
|
|
8,979
|
|
|
(2,274
|
)
|
|||
Income tax payments
|
|
4,332
|
|
|
11,168
|
|
|
(6,836
|
)
|
|
|
Quarter Ended March 31,
|
||||||||||
(in thousands)
|
|
2020
|
|
2019
|
|
Change
|
||||||
Net change in debt
|
|
$
|
256,500
|
|
|
$
|
36,000
|
|
|
$
|
220,500
|
|
Net change in customer funds obligations
|
|
(19,407
|
)
|
|
(9,908
|
)
|
|
(9,499
|
)
|
|||
Payments for common shares repurchased
|
|
(14,000
|
)
|
|
(50,000
|
)
|
|
36,000
|
|
|||
Cash dividends paid to shareholders
|
|
(12,714
|
)
|
|
(13,118
|
)
|
|
404
|
|
|||
Purchases of capital assets
|
|
(6,355
|
)
|
|
(14,619
|
)
|
|
8,264
|
|
CAPITAL RESOURCES
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
|
||||||||||||
(in thousands)
|
|
Amount
|
|
Weighted-
average interest rate
|
|
Amount
|
|
Weighted-
average interest rate
|
|
Change
|
||||||||
Fixed interest rate(1)
|
|
$
|
200,000
|
|
|
3.2
|
%
|
|
$
|
200,000
|
|
|
3.2
|
%
|
|
$
|
—
|
|
Floating interest rate
|
|
940,000
|
|
|
3.0
|
%
|
|
683,500
|
|
|
3.0
|
%
|
|
256,500
|
|
|||
Total debt
|
|
1,140,000
|
|
|
3.0
|
%
|
|
883,500
|
|
|
3.0
|
%
|
|
256,500
|
|
|||
Shareholders’ equity
|
|
473,967
|
|
|
|
|
|
570,861
|
|
|
|
|
|
(96,894
|
)
|
|||
Total capital
|
|
$
|
1,613,967
|
|
|
|
|
|
$
|
1,454,361
|
|
|
|
|
|
$
|
159,606
|
|
(in thousands)
|
Total
available
|
||
Revolving credit facility commitment
|
$
|
1,150,000
|
|
Amount drawn on revolving credit facility
|
(1,140,000
|
)
|
|
Outstanding letters of credit(1)
|
(5,428
|
)
|
|
Net available for borrowing as of March 31, 2020
|
$
|
4,572
|
|
OTHER FINANCIAL POSITION INFORMATION
|
OFF-BALANCE SHEET ARRANGEMENTS, GUARANTEES AND CONTRACTUAL OBLIGATIONS
|
CRITICAL ACCOUNTING POLICIES
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4. CONTROLS AND PROCEDURES
|
ITEM 1. LEGAL PROCEEDINGS
|
ITEM 1A. RISK FACTORS
|
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Period
|
|
Total number of shares purchased
|
|
Average price paid per share
|
|
Total number of shares purchased as part of publicly announced plans or programs
|
|
Maximum approximate dollar value of shares that may yet be purchased under the plans or programs
|
||||||
January 1, 2020 –
January 31, 2020
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
301,452,391
|
|
February 1, 2020 –
February 29, 2020
|
|
—
|
|
|
—
|
|
|
—
|
|
|
301,452,391
|
|
||
March 1, 2020 –
March 31, 2020
|
|
499,202
|
|
|
28.04
|
|
|
499,202
|
|
|
287,452,394
|
|
||
Total
|
|
499,202
|
|
|
28.04
|
|
|
499,202
|
|
|
287,452,394
|
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
|
ITEM 4. MINE SAFETY DISCLOSURES
|
ITEM 5. OTHER INFORMATION
|
ITEM 6. EXHIBITS
|
Exhibit Number
|
|
Description
|
10.1
|
|
|
10.2
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
101.INS
|
|
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
104
|
|
Cover page interactive data file (formatted as Inline XBRL and contained in Exhibit 101)
|
SIGNATURES
|
|
DELUXE CORPORATION
(Registrant)
|
|
|
Date: May 8, 2020
|
/s/ Barry C. McCarthy
|
|
Barry C. McCarthy
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
Date: May 8, 2020
|
/s/ Keith A. Bush
|
|
Keith A. Bush
Senior Vice President, Chief Financial Officer
(Principal Financial Officer)
|
|
|
Date: May 8, 2020
|
/s/ Ronald Van Houwelingen
|
|
Ronald Van Houwelingen
Vice President, Corporate Controller
(Principal Accounting Officer)
|
1 Year Deluxe Chart |
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