☒
|
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended
|
|
December 31, 2019
|
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
|
☐
|
Item
|
|
Page
|
||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
||||
|
ITEM 1. BUSINESS
|
COMPANY BACKGROUND
|
•
|
Small Business Services – This segment primarily serves small businesses and promotes and sells its products and services via internet advertising, direct response mail, partner referrals, networks of Safeguard® distributors and independent dealers, a direct sales force and an outbound telemarketing group.
|
•
|
Financial Services – This segment primarily serves financial institutions, including banks, credit unions and financial services companies, and promotes and sells its products and services primarily through a direct sales force.
|
•
|
Direct Checks – This segment is a leading direct-to-consumer check supplier, selling its products and services directly to consumers via direct marketing, utilizing search engine marketing and optimization strategies and print advertising.
|
PRODUCTS AND SERVICES
|
•
|
Small business marketing solutions – Our marketing products utilize digital printing and web-to-print solutions to provide printed marketing materials and promotional solutions, such as postcards, brochures, retail packaging supplies, apparel, greeting cards and business cards.
|
•
|
Treasury management solutions – These solutions include remittance and lockbox processing, remote deposit capture, receivables management, payment processing and paperless treasury management, as well as software, hardware and digital imaging solutions.
|
•
|
Web services – These service offerings include web hosting and domain name services, logo and web design, payroll services, email marketing, search engine marketing and optimization and business incorporation and organization services.
|
•
|
Data-driven marketing solutions – These offerings include outsourced marketing campaign targeting and execution and marketing analytics solutions that help our customers grow revenue through strategic targeting, lead optimization, retention and cross-selling services.
|
•
|
Fraud, security, risk management and operational services – These service offerings include fraud protection and security services, ePayments and digital engagement solutions, including loyalty and rewards programs and financial management tools.
|
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|||||
Marketing solutions and other services:
|
|
|
|
|
|
|
|
|
|
|
|||||
Small business marketing solutions
|
|
14.0
|
%
|
|
14.6
|
%
|
|
13.3
|
%
|
|
13.1
|
%
|
|
11.8
|
%
|
Treasury management solutions
|
|
9.6
|
%
|
|
7.4
|
%
|
|
5.5
|
%
|
|
5.0
|
%
|
|
4.2
|
%
|
Web services
|
|
8.3
|
%
|
|
8.1
|
%
|
|
6.7
|
%
|
|
6.3
|
%
|
|
6.3
|
%
|
Data-driven marketing solutions
|
|
7.9
|
%
|
|
7.4
|
%
|
|
7.7
|
%
|
|
2.7
|
%
|
|
1.2
|
%
|
Fraud, security, risk management and operational services
|
|
4.3
|
%
|
|
4.5
|
%
|
|
5.2
|
%
|
|
6.3
|
%
|
|
6.5
|
%
|
Total MOS
|
|
44.1
|
%
|
|
42.0
|
%
|
|
38.4
|
%
|
|
33.4
|
%
|
|
30.0
|
%
|
Checks
|
|
39.0
|
%
|
|
40.6
|
%
|
|
43.3
|
%
|
|
46.8
|
%
|
|
49.3
|
%
|
Forms, accessories and other products
|
|
16.9
|
%
|
|
17.4
|
%
|
|
18.3
|
%
|
|
19.8
|
%
|
|
20.7
|
%
|
Total revenue
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
"ONE DELUXE" STRATEGY
|
•
|
leverage our existing core competencies and assets, including our broad customer base, our highly respected and trusted brand, our efficient cost structure and our extensive catalog of products and services, to accelerate organic revenue growth;
|
•
|
fundamentally change how we go to market and operate, selling all of our products and services to any customer and unifying our existing brands;
|
•
|
compete in 4 primary areas: Payments, Cloud Solutions, Promotional Solutions and Checks; and
|
•
|
continue our commitment to the responsible management of shareholder assets, delivering ongoing efficiency savings and organic revenue growth while continuing to pay a dividend.
|
OUR CUSTOMERS
|
COMPETITION
|
MANUFACTURING AND DISTRIBUTION/SUSTAINABLE PRACTICES
|
CYBERSECURITY
|
MATERIALS, SUPPLIES AND SERVICE PROVIDERS
|
SEASONALITY
|
GOVERNMENT REGULATION
|
INTELLECTUAL PROPERTY
|
EMPLOYEES
|
AVAILABLE INFORMATION
|
CODE OF ETHICS AND CORPORATE GOVERNANCE GUIDELINES
|
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
|
Name
|
Age
|
Present Position
|
Executive Officer Since
|
Barry McCarthy
|
56
|
President and Chief Executive Officer
|
2018
|
Keith Bush
|
49
|
Senior Vice President, Chief Financial Officer
|
2017
|
Garry Capers, Jr.
|
43
|
Senior Vice President, General Manager, Cloud Solutions
|
2019
|
Jeffrey Cotter
|
52
|
Senior Vice President, Chief Administrative Officer and General Counsel
|
2018
|
Jane Elliott
|
53
|
Senior Vice President, Chief Human Resources Officer
|
2019
|
Tracey Engelhardt
|
55
|
Senior Vice President, General Manager, Checks
|
2012
|
Pete Godich
|
55
|
Senior Vice President, Chief of Operations
|
2008
|
Michael Mathews
|
47
|
Senior Vice President, Chief Information Officer
|
2013
|
Amanda Parrilli
|
41
|
Senior Vice President, New Business Development and Strategy
|
2019
|
Michael Reed
|
48
|
Senior Vice President, General Manager, Payments
|
2019
|
Thomas Riccio
|
46
|
Senior Vice President, General Manager, Promotional Solutions
|
2019
|
Christopher Thomas
|
51
|
Senior Vice President, Chief Revenue Officer
|
2019
|
ITEM 1A. RISK FACTORS
|
STRATEGIC RISKS
|
•
|
our failure to generate profitable revenue growth;
|
•
|
our failure to acquire new customers, retain our current customers and sell more products and services to current and new customers;
|
•
|
our failure to implement sales technology that enables a single view of our customers;
|
•
|
our inability to implement improvements to our technology infrastructure, our digital services offerings and other key assets to increase efficiency, enhance our competitive advantage and scale our operations;
|
•
|
our failure to effectively manage the growth, expanding complexity and pace of change of our business and operations;
|
•
|
our inability to effectively operate, integrate or leverage the businesses we acquire;
|
•
|
the failure of our digital services and products to achieve widespread customer acceptance;
|
•
|
our inability to promote, strengthen and protect our brand;
|
•
|
our failure to attract and retain skilled talent to execute our strategy and sustain our growth;
|
•
|
unanticipated changes in our business, markets, industry or the competitive landscape; and
|
•
|
general economic conditions.
|
•
|
difficulties and/or delays in assimilating operations, products and services, including effectively scaling revenue and ensuring a strong system of information security and controls is in place;
|
•
|
failure to realize expected synergies and savings or to achieve projected profitability levels on a sustained basis;
|
•
|
diversion of management's attention from other business concerns and risks of managing an increasingly diverse set of products and services across expanded and new industries;
|
•
|
unanticipated integration costs;
|
•
|
difficulty in maintaining controls, procedures and policies, especially when the acquired business was a non-public company and may not have employed the same rigor in these areas as required for a publicly traded company;
|
•
|
decisions by our customers or the customers of the acquired business to temporarily or permanently seek alternate suppliers;
|
•
|
difficulty in assimilating the acquired business into our corporate culture;
|
•
|
increased compliance and other complexity;
|
•
|
unidentified issues not discovered during our due diligence process, including product or service quality issues, intellectual property issues and tax or legal contingencies;
|
•
|
failure to address legacy distributor account protection rights; and
|
•
|
loss of key employees.
|
OPERATIONAL RISKS
|
LEGAL AND COMPLIANCE RISKS
|
FINANCIAL RISKS
|
•
|
changes in our business strategies, structure and/or the allocation of resources;
|
•
|
the failure of our acquisitions to achieve expected operating results;
|
•
|
changes in market conditions, including increased competition;
|
•
|
the loss of significant customers;
|
•
|
a decline in our stock price for a sustained period;
|
•
|
a downturn in economic conditions that negatively affects our actual and forecasted operating results; or
|
•
|
a material acceleration of order volume declines for checks and forms.
|
ITEM 1B. UNRESOLVED STAFF COMMENTS
|
ITEM 2. PROPERTIES
|
ITEM 3. LEGAL PROCEEDINGS
|
ITEM 4. MINE SAFETY DISCLOSURES
|
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
|
ASSUMES INITIAL INVESTMENT OF $100
|
DECEMBER 2019
|
ITEM 6. SELECTED FINANCIAL DATA
|
(dollars and orders in thousands, except per share and per order amounts)
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
Statement of (Loss) Income Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenue
|
|
$
|
2,008,715
|
|
|
$
|
1,998,025
|
|
|
$
|
1,965,556
|
|
|
$
|
1,849,062
|
|
|
$
|
1,772,817
|
|
As a percentage of total revenue:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross profit
|
|
59.5
|
%
|
|
60.4
|
%
|
|
62.2
|
%
|
|
63.9
|
%
|
|
63.9
|
%
|
|||||
Selling, general and administrative expense
|
|
44.4
|
%
|
|
42.7
|
%
|
|
42.2
|
%
|
|
43.7
|
%
|
|
43.8
|
%
|
|||||
Operating (loss) income
|
|
(7.9
|
%)
|
|
11.6
|
%
|
|
16.7
|
%
|
|
19.8
|
%
|
|
19.8
|
%
|
|||||
Operating (loss) income
|
|
$
|
(158,141
|
)
|
|
$
|
231,221
|
|
|
$
|
329,176
|
|
|
$
|
366,887
|
|
|
$
|
351,634
|
|
Net (loss) income:
|
|
(199,897
|
)
|
|
149,630
|
|
|
230,155
|
|
|
222,382
|
|
|
218,629
|
|
|||||
Per share - basic
|
|
(4.65
|
)
|
|
3.18
|
|
|
4.75
|
|
|
4.68
|
|
|
4.39
|
|
|||||
Per share - diluted
|
|
(4.65
|
)
|
|
3.16
|
|
|
4.72
|
|
|
4.65
|
|
|
4.36
|
|
|||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
73,620
|
|
|
$
|
59,740
|
|
|
$
|
59,240
|
|
|
$
|
76,574
|
|
|
$
|
62,427
|
|
Return on average assets(1)
|
|
(9.4
|
%)
|
|
6.6
|
%
|
|
10.5
|
%
|
|
11.4
|
%
|
|
12.4
|
%
|
|||||
Total assets
|
|
$
|
1,943,311
|
|
|
$
|
2,305,096
|
|
|
$
|
2,208,827
|
|
|
$
|
2,184,338
|
|
|
$
|
1,842,153
|
|
Long-term obligations(2)
|
|
931,319
|
|
|
911,864
|
|
|
709,300
|
|
|
758,648
|
|
|
629,018
|
|
|||||
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by operating activities
|
|
$
|
286,653
|
|
|
$
|
339,315
|
|
|
$
|
338,431
|
|
|
$
|
319,312
|
|
|
$
|
309,631
|
|
Net cash used by investing activities
|
|
(75,751
|
)
|
|
(275,414
|
)
|
|
(180,891
|
)
|
|
(279,511
|
)
|
|
(251,140
|
)
|
|||||
Net cash (used) provided by financing activities
|
|
(186,794
|
)
|
|
(39,825
|
)
|
|
(182,956
|
)
|
|
5,998
|
|
|
(30,237
|
)
|
|||||
Purchases of capital assets
|
|
(66,595
|
)
|
|
(62,238
|
)
|
|
(47,450
|
)
|
|
(46,614
|
)
|
|
(43,261
|
)
|
|||||
Payments for acquisitions, net of cash acquired
|
|
(11,605
|
)
|
|
(214,258
|
)
|
|
(139,223
|
)
|
|
(239,664
|
)
|
|
(212,990
|
)
|
|||||
Payments for common shares repurchased
|
|
(118,547
|
)
|
|
(200,000
|
)
|
|
(65,000
|
)
|
|
(55,224
|
)
|
|
(59,952
|
)
|
|||||
Other Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends per share
|
|
$
|
1.20
|
|
|
$
|
1.20
|
|
|
$
|
1.20
|
|
|
$
|
1.20
|
|
|
$
|
1.20
|
|
Orders(3)
|
|
47,815
|
|
|
47,534
|
|
|
49,981
|
|
|
52,176
|
|
|
53,138
|
|
|||||
Revenue per order(3)
|
|
$
|
42.01
|
|
|
$
|
42.03
|
|
|
$
|
39.33
|
|
|
$
|
35.44
|
|
|
$
|
33.36
|
|
Number of employees
|
|
6,352
|
|
|
6,701
|
|
|
5,886
|
|
|
6,026
|
|
|
5,874
|
|
|||||
Number of printing facilities(4)
|
|
11
|
|
|
11
|
|
|
11
|
|
|
12
|
|
|
11
|
|
|||||
Number of call center facilities(4)
|
|
25
|
|
|
27
|
|
|
26
|
|
|
26
|
|
|
14
|
|
ITEM 7. 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; CEO Transition 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
|
|
|
|
|
|
|
|
|
Change
|
||||||||
(in thousands, except per order amounts)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
Total revenue
|
|
$
|
2,008,715
|
|
|
$
|
1,998,025
|
|
|
$
|
1,965,556
|
|
|
0.5%
|
|
1.7%
|
Orders
|
|
47,815
|
|
|
47,534
|
|
|
49,981
|
|
|
0.6%
|
|
(4.9%)
|
|||
Revenue per order
|
|
$
|
42.01
|
|
|
$
|
42.03
|
|
|
$
|
39.33
|
|
|
—
|
|
6.9%
|
|
|
|
|
|
|
|
|
Change
|
|||||
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
|||
Marketing solutions and other services (MOS):
|
|
|
|
|
|
|
|
|
|
|
|||
Small business marketing solutions
|
|
14.0
|
%
|
|
14.6
|
%
|
|
13.3
|
%
|
|
(0.6) pt.
|
|
1.3 pt.
|
Treasury management solutions
|
|
9.6
|
%
|
|
7.4
|
%
|
|
5.5
|
%
|
|
2.2 pt.
|
|
1.9 pt.
|
Web services
|
|
8.3
|
%
|
|
8.1
|
%
|
|
6.7
|
%
|
|
0.2 pt.
|
|
1.4 pt.
|
Data-driven marketing solutions
|
|
7.9
|
%
|
|
7.4
|
%
|
|
7.7
|
%
|
|
0.5 pt.
|
|
(0.3) pt.
|
Fraud, security, risk management and operational services
|
|
4.3
|
%
|
|
4.5
|
%
|
|
5.2
|
%
|
|
(0.2) pt.
|
|
(0.7) pt.
|
Total MOS
|
|
44.1
|
%
|
|
42.0
|
%
|
|
38.4
|
%
|
|
2.1 pt.
|
|
3.6 pt.
|
Checks
|
|
39.0
|
%
|
|
40.6
|
%
|
|
43.3
|
%
|
|
(1.6) pt.
|
|
(2.7) pt.
|
Forms, accessories and other products
|
|
16.9
|
%
|
|
17.4
|
%
|
|
18.3
|
%
|
|
(0.5) pt.
|
|
(0.9) pt.
|
Total revenue
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
—
|
|
—
|
|
|
|
|
Change
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
Total cost of revenue
|
|
$
|
812,935
|
|
|
$
|
791,748
|
|
|
$
|
742,707
|
|
|
2.7%
|
|
6.6%
|
Total cost of revenue as a percentage of total revenue
|
|
40.5
|
%
|
|
39.6
|
%
|
|
37.8
|
%
|
|
0.9 pt.
|
|
1.8 pt.
|
|
|
|
|
Change
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
SG&A expense
|
|
$
|
891,693
|
|
|
$
|
854,000
|
|
|
$
|
830,231
|
|
|
4.4%
|
|
2.9%
|
SG&A expense as a percentage of total revenue
|
|
44.4
|
%
|
|
42.7
|
%
|
|
42.2
|
%
|
|
1.7 pt.
|
|
0.5 pt.
|
|
|
|
|
Change
|
||||||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||
Restructuring and integration expense
|
|
$
|
71,248
|
|
|
$
|
19,737
|
|
|
$
|
8,562
|
|
|
$
|
51,511
|
|
|
$
|
11,175
|
|
|
|
|
|
Change
|
||||||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||
Asset impairment charges
|
|
$
|
390,980
|
|
|
$
|
101,319
|
|
|
$
|
54,880
|
|
|
$
|
289,661
|
|
|
$
|
46,439
|
|
|
|
|
|
Change
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
Interest expense
|
|
$
|
34,682
|
|
|
$
|
27,112
|
|
|
$
|
21,359
|
|
|
27.9%
|
|
26.9%
|
Weighted-average debt outstanding
|
|
925,715
|
|
|
796,667
|
|
|
754,289
|
|
|
16.2%
|
|
5.6%
|
|||
Weighted-average interest rate
|
|
3.54
|
%
|
|
3.21
|
%
|
|
2.55
|
%
|
|
0.33 pt.
|
|
0.66 pt.
|
|
|
|
|
Change
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
Income tax provision
|
|
$
|
14,267
|
|
|
$
|
63,001
|
|
|
$
|
82,672
|
|
|
(77.4%)
|
|
(23.8%)
|
Effective tax rate
|
|
(7.7
|
%)
|
|
29.6
|
%
|
|
26.4
|
%
|
|
(37.3) pt.
|
|
3.2 pt.
|
|
|
|
|
Change
|
||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
Diluted (loss) earnings per share
|
|
$
|
(4.65
|
)
|
|
$
|
3.16
|
|
|
$
|
4.72
|
|
|
(247.2%)
|
|
(33.1%)
|
Adjusted diluted EPS(1)
|
|
6.82
|
|
|
6.88
|
|
|
6.18
|
|
|
(0.9%)
|
|
11.3%
|
|
|
Year Ended December 31,
|
||||||||||
(in thousands, except per share amounts)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Net (loss) income
|
|
$
|
(199,897
|
)
|
|
$
|
149,630
|
|
|
$
|
230,155
|
|
Asset impairment charges
|
|
390,980
|
|
|
101,319
|
|
|
54,880
|
|
|||
Acquisition amortization
|
|
70,720
|
|
|
78,577
|
|
|
74,944
|
|
|||
Restructuring, integration and other costs
|
|
79,511
|
|
|
21,203
|
|
|
9,130
|
|
|||
CEO transition costs(1)
|
|
9,390
|
|
|
7,210
|
|
|
—
|
|
|||
Share-based compensation expense
|
|
19,138
|
|
|
11,689
|
|
|
15,109
|
|
|||
Acquisition transaction costs
|
|
215
|
|
|
1,719
|
|
|
2,342
|
|
|||
Certain legal-related expense
|
|
6,420
|
|
|
10,502
|
|
|
—
|
|
|||
Loss (gain) on sales of businesses and customer lists
|
|
124
|
|
|
(15,641
|
)
|
|
(8,703
|
)
|
|||
Loss on debt retirement
|
|
—
|
|
|
453
|
|
|
—
|
|
|||
Adjustments, pre-tax
|
|
576,498
|
|
|
217,031
|
|
|
147,702
|
|
|||
Income tax provision impact of pre-tax adjustments(2)
|
|
(81,868
|
)
|
|
(39,715
|
)
|
|
(56,024
|
)
|
|||
Impact of federal tax reform
|
|
—
|
|
|
(1,700
|
)
|
|
(20,500
|
)
|
|||
Adjustments, net of tax
|
|
494,630
|
|
|
175,616
|
|
|
71,178
|
|
|||
Adjusted net income
|
|
$
|
294,733
|
|
|
$
|
325,246
|
|
|
$
|
301,333
|
|
|
|
|
|
|
|
|
||||||
GAAP Diluted EPS
|
|
$
|
(4.65
|
)
|
|
$
|
3.16
|
|
|
$
|
4.72
|
|
Adjustments, net of tax
|
|
11.47
|
|
|
3.72
|
|
|
1.46
|
|
|||
Adjusted Diluted EPS(3)
|
|
$
|
6.82
|
|
|
$
|
6.88
|
|
|
$
|
6.18
|
|
|
|
Year Ended December 31,
|
||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Net (loss) income
|
|
$
|
(199,897
|
)
|
|
$
|
149,630
|
|
|
$
|
230,155
|
|
Interest expense
|
|
34,682
|
|
|
27,112
|
|
|
21,359
|
|
|||
Income tax provision
|
|
14,267
|
|
|
63,001
|
|
|
82,672
|
|
|||
Depreciation and amortization expense
|
|
126,036
|
|
|
131,100
|
|
|
122,652
|
|
|||
Asset impairment charges
|
|
390,980
|
|
|
101,319
|
|
|
54,880
|
|
|||
Restructuring, integration and other costs
|
|
79,511
|
|
|
21,203
|
|
|
9,130
|
|
|||
CEO transition costs(1)
|
|
9,390
|
|
|
7,210
|
|
|
—
|
|
|||
Share-based compensation expense
|
|
19,138
|
|
|
11,689
|
|
|
15,109
|
|
|||
Acquisition transaction costs
|
|
215
|
|
|
1,719
|
|
|
2,342
|
|
|||
Certain legal-related expense
|
|
6,420
|
|
|
10,502
|
|
|
—
|
|
|||
Loss (gain) on sales of businesses and customer lists
|
|
124
|
|
|
(15,641
|
)
|
|
(8,703
|
)
|
|||
Loss on debt retirement
|
|
—
|
|
|
453
|
|
|
—
|
|
|||
Adjusted EBITDA
|
|
$
|
480,866
|
|
|
$
|
509,297
|
|
|
$
|
529,596
|
|
RESTRUCTURING, INTEGRATION AND OTHER COSTS
|
CEO TRANSITION COSTS
|
SEGMENT RESULTS
|
|
|
|
|
|
|
|
|
Change
|
||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
Total revenue
|
|
$
|
1,255,779
|
|
|
$
|
1,283,620
|
|
|
$
|
1,239,739
|
|
|
(2.2%)
|
|
3.5%
|
Operating (loss) income
|
|
(124,235
|
)
|
|
119,808
|
|
|
181,528
|
|
|
(203.7%)
|
|
(34.0%)
|
|||
Operating margin
|
|
(9.9
|
%)
|
|
9.3
|
%
|
|
14.6
|
%
|
|
(19.2) pt.
|
|
(5.3) pt.
|
|
|
|
|
|
|
|
|
Change
|
||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
Total revenue
|
|
$
|
633,498
|
|
|
$
|
586,967
|
|
|
$
|
585,275
|
|
|
7.9%
|
|
0.3%
|
Operating (loss) income
|
|
(67,524
|
)
|
|
69,939
|
|
|
101,047
|
|
|
(196.5%)
|
|
(30.8%)
|
|||
Operating margin
|
|
(10.7
|
%)
|
|
11.9
|
%
|
|
17.3
|
%
|
|
(22.6) pt.
|
|
(5.4) pt.
|
|
|
|
|
|
|
|
|
Change
|
||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||
Total revenue
|
|
$
|
119,438
|
|
|
$
|
127,438
|
|
|
$
|
140,542
|
|
|
(6.3%)
|
|
(9.3%)
|
Operating income
|
|
33,618
|
|
|
41,474
|
|
|
46,601
|
|
|
(18.9%)
|
|
(11.0%)
|
|||
Operating margin
|
|
28.1
|
%
|
|
32.5
|
%
|
|
33.2
|
%
|
|
(4.4) pt.
|
|
(0.7) pt.
|
CASH FLOWS AND LIQUIDITY
|
|
|
|
|
|
|
|
|
Change
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||
Net cash provided by operating activities
|
|
$
|
286,653
|
|
|
$
|
339,315
|
|
|
$
|
338,431
|
|
|
$
|
(52,662
|
)
|
|
$
|
884
|
|
Net cash used by investing activities
|
|
(75,751
|
)
|
|
(275,414
|
)
|
|
(180,891
|
)
|
|
199,663
|
|
|
(94,523
|
)
|
|||||
Net cash used by financing activities
|
|
(186,794
|
)
|
|
(39,825
|
)
|
|
(182,956
|
)
|
|
(146,969
|
)
|
|
143,131
|
|
|||||
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
5,444
|
|
|
(7,636
|
)
|
|
5,370
|
|
|
13,080
|
|
|
(13,006
|
)
|
|||||
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
$
|
29,552
|
|
|
$
|
16,440
|
|
|
$
|
(20,046
|
)
|
|
$
|
13,112
|
|
|
$
|
36,486
|
|
|
|
|
|
|
|
|
|
Change
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||
Income tax payments
|
|
$
|
60,764
|
|
|
$
|
88,253
|
|
|
$
|
124,878
|
|
|
$
|
(27,489
|
)
|
|
$
|
(36,625
|
)
|
Medical benefit payments
|
|
41,714
|
|
|
31,610
|
|
|
38,806
|
|
|
10,104
|
|
|
(7,196
|
)
|
|||||
Interest payments
|
|
33,227
|
|
|
25,910
|
|
|
19,465
|
|
|
7,317
|
|
|
6,445
|
|
|||||
Prepaid product discount payments
|
|
25,637
|
|
|
23,814
|
|
|
27,079
|
|
|
1,823
|
|
|
(3,265
|
)
|
|||||
Performance-based compensation payments(1)
|
|
23,583
|
|
|
21,780
|
|
|
21,174
|
|
|
1,803
|
|
|
606
|
|
|||||
Severance payments
|
|
10,585
|
|
|
6,971
|
|
|
6,981
|
|
|
3,614
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
Change
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
2019 vs. 2018
|
|
2018 vs. 2017
|
||||||||||
Payments for common shares repurchased
|
|
$
|
(118,547
|
)
|
|
$
|
(200,000
|
)
|
|
$
|
(65,000
|
)
|
|
$
|
81,453
|
|
|
$
|
(135,000
|
)
|
Purchases of capital assets
|
|
(66,595
|
)
|
|
(62,238
|
)
|
|
(47,450
|
)
|
|
(4,357
|
)
|
|
(14,788
|
)
|
|||||
Cash dividends paid to shareholders
|
|
(51,742
|
)
|
|
(56,669
|
)
|
|
(58,098
|
)
|
|
4,927
|
|
|
1,429
|
|
|||||
Net change in debt
|
|
(26,500
|
)
|
|
201,147
|
|
|
(51,165
|
)
|
|
(227,647
|
)
|
|
252,312
|
|
|||||
Payments for acquisitions, net of cash acquired
|
|
(11,605
|
)
|
|
(214,258
|
)
|
|
(139,223
|
)
|
|
202,653
|
|
|
(75,035
|
)
|
|||||
Employee taxes paid for shares withheld
|
|
(3,935
|
)
|
|
(7,977
|
)
|
|
(9,377
|
)
|
|
4,042
|
|
|
1,400
|
|
|||||
Net change in customer funds obligations
|
|
12,598
|
|
|
20,279
|
|
|
(6,007
|
)
|
|
(7,681
|
)
|
|
26,286
|
|
|||||
Proceeds from issuing shares under employee plans
|
|
3,198
|
|
|
7,523
|
|
|
9,033
|
|
|
(4,325
|
)
|
|
(1,510
|
)
|
CAPITAL RESOURCES
|
|
|
December 31, 2019
|
|
December 31, 2018
|
|
|
||||||||||||
(in thousands)
|
|
Amount
|
|
Period-end interest rate
|
|
Amount
|
|
Period-end interest rate
|
|
Change
|
||||||||
Fixed interest rate(1)
|
|
$
|
200,000
|
|
|
3.2
|
%
|
|
$
|
1,864
|
|
|
2.0
|
%
|
|
$
|
198,136
|
|
Floating interest rate
|
|
683,500
|
|
|
3.0
|
%
|
|
910,000
|
|
|
3.8
|
%
|
|
(226,500
|
)
|
|||
Total debt
|
|
883,500
|
|
|
3.0
|
%
|
|
911,864
|
|
|
3.8
|
%
|
|
(28,364
|
)
|
|||
Shareholders’ equity
|
|
570,861
|
|
|
|
|
|
915,413
|
|
|
|
|
|
(344,552
|
)
|
|||
Total capital
|
|
$
|
1,454,361
|
|
|
|
|
|
$
|
1,827,277
|
|
|
|
|
|
$
|
(372,916
|
)
|
(in thousands)
|
Total available
|
||
Revolving credit facility commitment
|
$
|
1,150,000
|
|
Amount drawn on revolving credit facility
|
(883,500
|
)
|
|
Outstanding letters of credit(1)
|
(5,408
|
)
|
|
Net available for borrowing as of December 31, 2019
|
$
|
261,092
|
|
OTHER FINANCIAL POSITION INFORMATION
|
OFF-BALANCE SHEET ARRANGEMENTS, GUARANTEES AND CONTRACTUAL OBLIGATIONS
|
(in thousands)
|
|
Total
|
|
2020
|
|
2021 and 2022
|
|
2023 and 2024
|
|
2025 and thereafter
|
||||||||||
Long-term debt
|
|
$
|
883,500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
883,500
|
|
|
$
|
—
|
|
Purchase obligations
|
|
144,219
|
|
|
74,913
|
|
|
45,272
|
|
|
17,237
|
|
|
6,797
|
|
|||||
Operating lease obligations
|
|
50,710
|
|
|
13,970
|
|
|
19,731
|
|
|
7,846
|
|
|
9,163
|
|
|||||
Other non-current liabilities
|
|
35,805
|
|
|
19,351
|
|
|
10,888
|
|
|
2,393
|
|
|
3,173
|
|
|||||
Total contractual obligations
|
|
$
|
1,114,234
|
|
|
$
|
108,234
|
|
|
$
|
75,891
|
|
|
$
|
910,976
|
|
|
$
|
19,133
|
|
•
|
Payments for uncertain tax positions – Due to the nature of the underlying liabilities and the extended time frame often needed to resolve income tax uncertainties, we cannot make reliable estimates of the amount or timing of cash payments that may be required to settle these liabilities. Our liability for uncertain tax positions, including accrued interest and penalties, was $5.1 million as of December 31, 2019, excluding tax benefits of deductible interest and the federal benefit of deductible state income tax.
|
•
|
A portion of the amount due under our deferred compensation plan – Under this plan, some employees may begin receiving payments upon the termination of employment or disability, and we cannot predict when these events will occur. As such, $3.0 million of our deferred compensation liability as of December 31, 2019 is excluded from the obligations shown in the table above.
|
•
|
Other non-current liabilities which are not settled in cash, such as incentive compensation that will be settled by issuing shares of our common stock and deferred revenue.
|
•
|
Benefit payments for our postretirement medical benefit plan – We have the option of paying benefits from the accumulated assets of the plan or from the general funds of the company. Additionally, we expect the plan assets to earn income over time. As such, we cannot predict when or if payments from our general funds will be required. We anticipate that we will utilize plan assets to pay a majority of our benefits during 2020. Our postretirement benefit plan was overfunded $56.7 million as of December 31, 2019.
|
•
|
Income tax payments, which are dependent upon our taxable income.
|
CRITICAL ACCOUNTING POLICIES
|
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
DELUXE CORPORATION
CONSOLIDATED BALANCE SHEETS
|
(in thousands, except share par value)
|
|
December 31,
2019 |
|
December 31,
2018 |
||||
ASSETS
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
73,620
|
|
|
$
|
59,740
|
|
Trade accounts receivable, net of allowances for uncollectible accounts
|
|
163,421
|
|
|
173,862
|
|
||
Inventories and supplies
|
|
39,921
|
|
|
46,441
|
|
||
Funds held for customers
|
|
117,641
|
|
|
100,982
|
|
||
Revenue in excess of billings
|
|
32,790
|
|
|
30,458
|
|
||
Other current assets
|
|
44,818
|
|
|
38,563
|
|
||
Total current assets
|
|
472,211
|
|
|
450,046
|
|
||
Deferred income taxes
|
|
3,907
|
|
|
2,886
|
|
||
Long-term investments
|
|
44,995
|
|
|
43,773
|
|
||
Property, plant and equipment, net of accumulated depreciation
|
|
96,467
|
|
|
90,342
|
|
||
Operating lease assets
|
|
44,372
|
|
|
—
|
|
||
Intangibles, net of accumulated amortization
|
|
276,122
|
|
|
359,965
|
|
||
Goodwill
|
|
804,487
|
|
|
1,160,626
|
|
||
Assets held for sale
|
|
2,880
|
|
|
1,350
|
|
||
Other non-current assets
|
|
197,870
|
|
|
196,108
|
|
||
Total assets
|
|
$
|
1,943,311
|
|
|
$
|
2,305,096
|
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
112,198
|
|
|
$
|
106,978
|
|
Funds held for customers
|
|
116,411
|
|
|
99,818
|
|
||
Accrued liabilities
|
|
179,338
|
|
|
184,463
|
|
||
Long-term debt due within one year
|
|
—
|
|
|
791
|
|
||
Total current liabilities
|
|
407,947
|
|
|
392,050
|
|
||
Long-term debt
|
|
883,500
|
|
|
911,073
|
|
||
Operating lease liabilities
|
|
33,585
|
|
|
—
|
|
||
Deferred income taxes
|
|
14,898
|
|
|
46,680
|
|
||
Other non-current liabilities
|
|
32,520
|
|
|
39,880
|
|
||
Commitments and contingencies (Notes 11, 16 and 17)
|
|
|
|
|
|
|
||
Shareholders’ equity:
|
|
|
|
|
|
|
||
Common shares $1 par value (authorized: 500,000 shares; outstanding: December 31, 2019 – 42,126; December 31, 2018 – 44,647)
|
|
42,126
|
|
|
44,647
|
|
||
Additional paid-in capital
|
|
4,086
|
|
|
—
|
|
||
Retained earnings
|
|
572,596
|
|
|
927,345
|
|
||
Accumulated other comprehensive loss
|
|
(47,947
|
)
|
|
(56,579
|
)
|
||
Total shareholders’ equity
|
|
570,861
|
|
|
915,413
|
|
||
Total liabilities and shareholders’ equity
|
|
$
|
1,943,311
|
|
|
$
|
2,305,096
|
|
DELUXE CORPORATION
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
|
|
|
Year Ended December 31,
|
||||||||||
(in thousands, except per share amounts)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Product revenue
|
|
$
|
1,409,155
|
|
|
$
|
1,451,833
|
|
|
$
|
1,469,854
|
|
Service revenue
|
|
599,560
|
|
|
546,192
|
|
|
495,702
|
|
|||
Total revenue
|
|
2,008,715
|
|
|
1,998,025
|
|
|
1,965,556
|
|
|||
Cost of products
|
|
(531,307
|
)
|
|
(547,640
|
)
|
|
(529,638
|
)
|
|||
Cost of services
|
|
(281,628
|
)
|
|
(244,108
|
)
|
|
(213,069
|
)
|
|||
Total cost of revenue
|
|
(812,935
|
)
|
|
(791,748
|
)
|
|
(742,707
|
)
|
|||
Gross profit
|
|
1,195,780
|
|
|
1,206,277
|
|
|
1,222,849
|
|
|||
Selling, general and administrative expense
|
|
(891,693
|
)
|
|
(854,000
|
)
|
|
(830,231
|
)
|
|||
Restructuring and integration expense
|
|
(71,248
|
)
|
|
(19,737
|
)
|
|
(8,562
|
)
|
|||
Asset impairment charges
|
|
(390,980
|
)
|
|
(101,319
|
)
|
|
(54,880
|
)
|
|||
Operating (loss) income
|
|
(158,141
|
)
|
|
231,221
|
|
|
329,176
|
|
|||
Interest expense
|
|
(34,682
|
)
|
|
(27,112
|
)
|
|
(21,359
|
)
|
|||
Other income
|
|
7,193
|
|
|
8,522
|
|
|
5,010
|
|
|||
(Loss) income before income taxes
|
|
(185,630
|
)
|
|
212,631
|
|
|
312,827
|
|
|||
Income tax provision
|
|
(14,267
|
)
|
|
(63,001
|
)
|
|
(82,672
|
)
|
|||
Net (loss) income
|
|
$
|
(199,897
|
)
|
|
$
|
149,630
|
|
|
$
|
230,155
|
|
Basic (loss) earnings per share
|
|
$
|
(4.65
|
)
|
|
$
|
3.18
|
|
|
$
|
4.75
|
|
Diluted (loss) earnings per share
|
|
(4.65
|
)
|
|
3.16
|
|
|
4.72
|
|
DELUXE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
|
|
|
Year Ended December 31,
|
||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Net (loss) income
|
|
$
|
(199,897
|
)
|
|
$
|
149,630
|
|
|
$
|
230,155
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
||||||
Postretirement benefit plans:
|
|
|
|
|
|
|
||||||
Net actuarial gain (loss) arising during the year
|
|
6,594
|
|
|
(3,805
|
)
|
|
7,011
|
|
|||
Less reclassification of amounts from other comprehensive income (loss) to net (loss) income:
|
|
|
|
|
|
|
||||||
Amortization of prior service credit
|
|
(1,054
|
)
|
|
(853
|
)
|
|
(1,049
|
)
|
|||
Amortization of net actuarial loss
|
|
2,583
|
|
|
1,825
|
|
|
2,893
|
|
|||
Postretirement benefit plans
|
|
8,123
|
|
|
(2,833
|
)
|
|
8,855
|
|
|||
Interest rate swap:
|
|
|
|
|
|
|
||||||
Unrealized loss arising during the year
|
|
(1,040
|
)
|
|
—
|
|
|
—
|
|
|||
Reclassification of realized gain on interest rate swap from other comprehensive income (loss) to net (loss) income
|
|
(57
|
)
|
|
—
|
|
|
—
|
|
|||
Interest rate swap
|
|
(1,097
|
)
|
|
—
|
|
|
—
|
|
|||
Unrealized holding gain (loss) on debt securities arising during the year
|
|
48
|
|
|
(1
|
)
|
|
(109
|
)
|
|||
Unrealized foreign currency translation adjustment
|
|
1,558
|
|
|
(9,281
|
)
|
|
4,028
|
|
|||
Other comprehensive income (loss)
|
|
8,632
|
|
|
(12,115
|
)
|
|
12,774
|
|
|||
Comprehensive (loss) income
|
|
$
|
(191,265
|
)
|
|
$
|
137,515
|
|
|
$
|
242,929
|
|
|
|
|
|
|
|
|
||||||
Income tax (expense) benefit of other comprehensive income (loss) included in above amounts:
|
|
|
|
|
|
|
||||||
Postretirement benefit plans:
|
|
|
|
|
|
|
||||||
Net actuarial gain (loss) arising during the year
|
|
$
|
(2,321
|
)
|
|
$
|
1,339
|
|
|
$
|
(2,465
|
)
|
Less reclassification of amounts from other comprehensive income (loss) to net (loss) income:
|
|
|
|
|
|
|
||||||
Amortization of prior service credit
|
|
367
|
|
|
568
|
|
|
372
|
|
|||
Amortization of net actuarial loss
|
|
(640
|
)
|
|
(1,059
|
)
|
|
(744
|
)
|
|||
Postretirement benefit plans
|
|
(2,594
|
)
|
|
848
|
|
|
(2,837
|
)
|
|||
Interest rate swap:
|
|
|
|
|
|
|
||||||
Unrealized loss arising during the year
|
|
364
|
|
|
—
|
|
|
—
|
|
|||
Reclassification of realized gain on interest rate swap from other comprehensive income (loss) to net (loss) income
|
|
20
|
|
|
—
|
|
|
—
|
|
|||
Interest rate swap
|
|
384
|
|
|
—
|
|
|
—
|
|
|||
Unrealized holding gain (loss) on debt securities arising during the year
|
|
(17
|
)
|
|
—
|
|
|
38
|
|
|||
Total net tax (expense) benefit included in other comprehensive income (loss)
|
|
$
|
(2,227
|
)
|
|
$
|
848
|
|
|
$
|
(2,799
|
)
|
DELUXE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLERS' EQUITY
|
(in thousands)
|
|
Common shares
|
|
Common shares par value
|
|
Additional paid-in capital
|
|
Retained earnings
|
|
Accumulated other comprehensive loss
|
|
Total
|
|||||||||||
Balance, December 31, 2016
|
|
48,546
|
|
|
$
|
48,546
|
|
|
$
|
—
|
|
|
$
|
882,795
|
|
|
$
|
(50,371
|
)
|
|
$
|
880,970
|
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
230,155
|
|
|
—
|
|
|
230,155
|
|
|||||
Cash dividends ($1.20 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(58,103
|
)
|
|
—
|
|
|
(58,103
|
)
|
|||||
Common shares issued
|
|
558
|
|
|
558
|
|
|
16,334
|
|
|
—
|
|
|
—
|
|
|
16,892
|
|
|||||
Common shares repurchased
|
|
(924
|
)
|
|
(924
|
)
|
|
(13,886
|
)
|
|
(50,190
|
)
|
|
—
|
|
|
(65,000
|
)
|
|||||
Other common shares retired
|
|
(227
|
)
|
|
(227
|
)
|
|
(16,369
|
)
|
|
—
|
|
|
—
|
|
|
(16,596
|
)
|
|||||
Employee share-based compensation
|
|
—
|
|
|
—
|
|
|
13,921
|
|
|
—
|
|
|
—
|
|
|
13,921
|
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,774
|
|
|
12,774
|
|
|||||
Balance, December 31, 2017
|
|
47,953
|
|
|
47,953
|
|
|
—
|
|
|
1,004,657
|
|
|
(37,597
|
)
|
|
1,015,013
|
|
|||||
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
149,630
|
|
|
—
|
|
|
149,630
|
|
|||||
Cash dividends ($1.20 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56,743
|
)
|
|
—
|
|
|
(56,743
|
)
|
|||||
Common shares issued
|
|
525
|
|
|
525
|
|
|
18,397
|
|
|
—
|
|
|
—
|
|
|
18,922
|
|
|||||
Common shares repurchased
|
|
(3,584
|
)
|
|
(3,584
|
)
|
|
(14,384
|
)
|
|
(182,032
|
)
|
|
—
|
|
|
(200,000
|
)
|
|||||
Other common shares retired
|
|
(247
|
)
|
|
(247
|
)
|
|
(17,609
|
)
|
|
—
|
|
|
—
|
|
|
(17,856
|
)
|
|||||
Employee share-based compensation
|
|
—
|
|
|
—
|
|
|
13,596
|
|
|
—
|
|
|
—
|
|
|
13,596
|
|
|||||
Adoption of Accounting Standards Update No. 2014-09
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,966
|
|
|
—
|
|
|
4,966
|
|
|||||
Adoption of Accounting Standards Update No. 2018-02
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,867
|
|
|
(6,867
|
)
|
|
—
|
|
|||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,115
|
)
|
|
(12,115
|
)
|
|||||
Balance, December 31, 2018
|
|
44,647
|
|
|
44,647
|
|
|
—
|
|
|
927,345
|
|
|
(56,579
|
)
|
|
915,413
|
|
|||||
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(199,897
|
)
|
|
—
|
|
|
(199,897
|
)
|
|||||
Cash dividends ($1.20 per share)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(52,285
|
)
|
|
—
|
|
|
(52,285
|
)
|
|||||
Common shares issued
|
|
194
|
|
|
194
|
|
|
3,645
|
|
|
—
|
|
|
—
|
|
|
3,839
|
|
|||||
Common shares repurchased
|
|
(2,632
|
)
|
|
(2,632
|
)
|
|
(13,615
|
)
|
|
(102,300
|
)
|
|
—
|
|
|
(118,547
|
)
|
|||||
Other common shares retired
|
|
(83
|
)
|
|
(83
|
)
|
|
(3,852
|
)
|
|
—
|
|
|
—
|
|
|
(3,935
|
)
|
|||||
Employee share-based compensation
|
|
—
|
|
|
—
|
|
|
17,908
|
|
|
—
|
|
|
—
|
|
|
17,908
|
|
|||||
Adoption of Accounting Standards Update No. 2016-02 (Note 2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(267
|
)
|
|
—
|
|
|
(267
|
)
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,632
|
|
|
8,632
|
|
|||||
Balance, December 31, 2019
|
|
42,126
|
|
|
$
|
42,126
|
|
|
$
|
4,086
|
|
|
$
|
572,596
|
|
|
$
|
(47,947
|
)
|
|
$
|
570,861
|
|
DELUXE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Year Ended December 31,
|
||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
|
||||||
Net (loss) income
|
|
$
|
(199,897
|
)
|
|
$
|
149,630
|
|
|
$
|
230,155
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
||||
Depreciation
|
|
16,502
|
|
|
16,572
|
|
|
15,868
|
|
|||
Amortization of intangibles
|
|
109,534
|
|
|
114,528
|
|
|
106,784
|
|
|||
Operating lease expense
|
|
19,113
|
|
|
—
|
|
|
—
|
|
|||
Asset impairment charges
|
|
390,980
|
|
|
101,319
|
|
|
54,880
|
|
|||
Amortization of prepaid product discounts
|
|
24,055
|
|
|
22,941
|
|
|
19,969
|
|
|||
Deferred income taxes
|
|
(34,950
|
)
|
|
(11,356
|
)
|
|
(39,177
|
)
|
|||
Employee share-based compensation expense
|
|
19,702
|
|
|
13,378
|
|
|
15,109
|
|
|||
Loss (gain) on sales of businesses and customer lists
|
|
124
|
|
|
(15,641
|
)
|
|
(8,703
|
)
|
|||
Other non-cash items, net
|
|
13,220
|
|
|
8,030
|
|
|
7,708
|
|
|||
Changes in assets and liabilities, net of effect of acquisitions:
|
|
|
|
|
|
|
|
|
||||
Trade accounts receivable
|
|
5,609
|
|
|
(16,795
|
)
|
|
5,279
|
|
|||
Inventories and supplies
|
|
4,843
|
|
|
(3,641
|
)
|
|
(644
|
)
|
|||
Other current assets
|
|
(10,568
|
)
|
|
(12,032
|
)
|
|
(7,976
|
)
|
|||
Non-current assets
|
|
(5,360
|
)
|
|
(6,913
|
)
|
|
(5,710
|
)
|
|||
Accounts payable
|
|
5,130
|
|
|
4,366
|
|
|
(7,796
|
)
|
|||
Prepaid product discount payments
|
|
(25,637
|
)
|
|
(23,814
|
)
|
|
(27,079
|
)
|
|||
Other accrued and non-current liabilities
|
|
(45,747
|
)
|
|
(1,257
|
)
|
|
(20,236
|
)
|
|||
Net cash provided by operating activities
|
|
286,653
|
|
|
339,315
|
|
|
338,431
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
||||
Purchases of capital assets
|
|
(66,595
|
)
|
|
(62,238
|
)
|
|
(47,450
|
)
|
|||
Payments for acquisitions, net of cash acquired
|
|
(11,605
|
)
|
|
(214,258
|
)
|
|
(139,223
|
)
|
|||
Purchases of customer funds marketable securities
|
|
(7,642
|
)
|
|
(7,807
|
)
|
|
(7,737
|
)
|
|||
Proceeds from customer funds and corporate marketable securities
|
|
7,642
|
|
|
7,807
|
|
|
11,237
|
|
|||
Other
|
|
2,449
|
|
|
1,082
|
|
|
2,282
|
|
|||
Net cash used by investing activities
|
|
(75,751
|
)
|
|
(275,414
|
)
|
|
(180,891
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
||||
Proceeds from issuing long-term debt
|
|
241,500
|
|
|
1,280,000
|
|
|
403,000
|
|
|||
Payments on long-term debt
|
|
(268,000
|
)
|
|
(1,078,853
|
)
|
|
(454,165
|
)
|
|||
Net change in customer funds obligations
|
|
12,598
|
|
|
20,279
|
|
|
(6,007
|
)
|
|||
Proceeds from issuing shares under employee plans
|
|
3,198
|
|
|
7,523
|
|
|
9,033
|
|
|||
Employee taxes paid for shares withheld
|
|
(3,935
|
)
|
|
(7,977
|
)
|
|
(9,377
|
)
|
|||
Payments for common shares repurchased
|
|
(118,547
|
)
|
|
(200,000
|
)
|
|
(65,000
|
)
|
|||
Cash dividends paid to shareholders
|
|
(51,742
|
)
|
|
(56,669
|
)
|
|
(58,098
|
)
|
|||
Other
|
|
(1,866
|
)
|
|
(4,128
|
)
|
|
(2,342
|
)
|
|||
Net cash used by financing activities
|
|
(186,794
|
)
|
|
(39,825
|
)
|
|
(182,956
|
)
|
|||
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
5,444
|
|
|
(7,636
|
)
|
|
5,370
|
|
|||
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
29,552
|
|
|
16,440
|
|
|
(20,046
|
)
|
|||
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of year
|
|
145,259
|
|
|
128,819
|
|
|
148,865
|
|
|||
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of year (Note 3)
|
|
$
|
174,811
|
|
|
$
|
145,259
|
|
|
$
|
128,819
|
|
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
•
|
The fair value of stock options is measured on the grant date using the Black-Scholes option pricing model. The related compensation expense is recognized on the straight-line basis, net of estimated forfeitures, over the options' vesting periods.
|
•
|
The fair value of restricted stock and a portion of our restricted stock unit awards is measured on the grant date based on the market value of our common stock. The related compensation expense, net of estimated forfeitures, is recognized over the applicable service period.
|
•
|
Certain of our restricted stock unit awards may be settled in cash if an employee voluntarily chooses to leave the company. These awards are included in accrued liabilities and other non-current liabilities on the consolidated balance sheets and are re-measured at fair value as of each balance sheet date.
|
•
|
Compensation expense resulting from the 15% discount provided under our employee stock purchase plan is recognized over the purchase period of 6 months.
|
•
|
The performance share awards specify certain performance and market-based conditions that must be achieved in order for the awards to vest. For the portion of the awards based on a performance condition, the performance target is not considered in determining the fair value of the awards and thus, fair value is measured on the grant date based on the market value of our common stock. The related compensation expense for this type of award is recognized, net of estimated forfeitures, over the related service period. The amount of compensation expense is dependent on our periodic assessment of the probability of the targets being achieved and our estimate, which may vary over time, of the number of shares that ultimately will be issued. For the portion of the awards based on a market condition, fair value is calculated on the grant date using the Monte Carlo simulation model. All compensation cost for these awards is recognized, net of estimated forfeitures, over the related service period, even if the market condition is never satisfied.
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
NOTE 2: NEW ACCOUNTING PRONOUNCEMENTS
|
•
|
we excluded leases with original terms of 12 months or less from lease assets and lease liabilities;
|
•
|
we separated nonlease components, such as common area maintenance charges and utilities, from the associated lease component for real estate leases, based on their estimated fair values; and
|
•
|
we used the accounting lease term when determining the incremental borrowing rate for leases with renewal options.
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
NOTE 3: SUPPLEMENTAL BALANCE SHEET AND CASH FLOW INFORMATION
|
(in thousands)
|
|
2019
|
|
2018
|
||||
Trade accounts receivable – gross
|
|
$
|
168,406
|
|
|
$
|
177,501
|
|
Allowances for uncollectible accounts
|
|
(4,985
|
)
|
|
(3,639
|
)
|
||
Trade accounts receivable – net
|
|
$
|
163,421
|
|
|
$
|
173,862
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Balance, beginning of year
|
|
$
|
3,639
|
|
|
$
|
2,884
|
|
|
$
|
2,828
|
|
Bad debt expense
|
|
5,213
|
|
|
3,622
|
|
|
3,208
|
|
|||
Write-offs, net of recoveries
|
|
(3,867
|
)
|
|
(2,867
|
)
|
|
(3,152
|
)
|
|||
Balance, end of year
|
|
$
|
4,985
|
|
|
$
|
3,639
|
|
|
$
|
2,884
|
|
(in thousands)
|
|
2019
|
|
2018
|
||||
Raw materials
|
|
$
|
6,977
|
|
|
$
|
7,543
|
|
Semi-finished goods
|
|
7,368
|
|
|
7,273
|
|
||
Finished goods
|
|
21,982
|
|
|
27,608
|
|
||
Supplies
|
|
3,594
|
|
|
4,017
|
|
||
Inventories and supplies
|
|
$
|
39,921
|
|
|
$
|
46,441
|
|
|
|
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
|
|
|
|
December 31, 2018
|
||||||||||||||
(in thousands)
|
|
Cost
|
|
Gross unrealized gains
|
|
Gross unrealized losses
|
|
Fair value
|
||||||||
Funds held for customers:(1)
|
|
|
|
|
|
|
|
|
||||||||
Domestic money market fund
|
|
$
|
16,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,000
|
|
Canadian and provincial government securities
|
|
8,485
|
|
|
—
|
|
|
(355
|
)
|
|
8,130
|
|
||||
Canadian guaranteed investment certificates
|
|
7,333
|
|
|
—
|
|
|
—
|
|
|
7,333
|
|
||||
Available-for-sale debt securities
|
|
$
|
31,818
|
|
|
$
|
—
|
|
|
$
|
(355
|
)
|
|
$
|
31,463
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
Fair value
|
||
Due in one year or less
|
|
$
|
28,700
|
|
Due in two to five years
|
|
3,282
|
|
|
Due in six to ten years
|
|
2,468
|
|
|
Available-for-sale debt securities
|
|
$
|
34,450
|
|
(in thousands)
|
|
2019
|
|
2018
|
||||
Conditional right to receive consideration
|
|
$
|
24,499
|
|
|
$
|
19,705
|
|
Unconditional right to receive consideration
|
|
8,291
|
|
|
10,753
|
|
||
Revenue in excess of billings
|
|
$
|
32,790
|
|
|
$
|
30,458
|
|
|
|
2019
|
|
2018
|
||||||||||||||||||||
(in thousands)
|
|
Gross carrying amount
|
|
Accumulated depreciation
|
|
Net carrying amount
|
|
Gross carrying amount
|
|
Accumulated depreciation
|
|
Net carrying amount
|
||||||||||||
Machinery and equipment
|
|
$
|
327,151
|
|
|
$
|
(282,741
|
)
|
|
$
|
44,410
|
|
|
$
|
313,000
|
|
|
$
|
(275,721
|
)
|
|
$
|
37,279
|
|
Buildings and improvements
|
|
118,284
|
|
|
(86,162
|
)
|
|
32,122
|
|
|
116,348
|
|
|
(83,317
|
)
|
|
33,031
|
|
||||||
Land and improvements
|
|
28,212
|
|
|
(8,277
|
)
|
|
19,935
|
|
|
28,199
|
|
|
(8,167
|
)
|
|
20,032
|
|
||||||
Property, plant and equipment
|
|
$
|
473,647
|
|
|
$
|
(377,180
|
)
|
|
$
|
96,467
|
|
|
$
|
457,547
|
|
|
$
|
(367,205
|
)
|
|
$
|
90,342
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
2019
|
|
2018
|
||||||||||||||||||||
(in thousands)
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
|
Gross carrying amount
|
|
Accumulated amortization
|
|
Net carrying amount
|
||||||||||||
Internal-use software
|
|
$
|
380,905
|
|
|
$
|
(299,698
|
)
|
|
$
|
81,207
|
|
|
$
|
388,477
|
|
|
$
|
(308,313
|
)
|
|
$
|
80,164
|
|
Customer lists/relationships
|
|
348,055
|
|
|
(187,462
|
)
|
|
160,593
|
|
|
379,570
|
|
|
(170,973
|
)
|
|
208,597
|
|
||||||
Software to be sold
|
|
36,900
|
|
|
(19,657
|
)
|
|
17,243
|
|
|
36,900
|
|
|
(15,430
|
)
|
|
21,470
|
|
||||||
Technology-based intangibles
|
|
34,780
|
|
|
(22,122
|
)
|
|
12,658
|
|
|
40,000
|
|
|
(14,707
|
)
|
|
25,293
|
|
||||||
Trade names
|
|
32,505
|
|
|
(28,084
|
)
|
|
4,421
|
|
|
50,645
|
|
|
(26,204
|
)
|
|
24,441
|
|
||||||
Intangibles
|
|
$
|
833,145
|
|
|
$
|
(557,023
|
)
|
|
$
|
276,122
|
|
|
$
|
895,592
|
|
|
$
|
(535,627
|
)
|
|
$
|
359,965
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Customer lists/relationships
|
|
$
|
51,243
|
|
|
$
|
57,243
|
|
|
$
|
54,450
|
|
Internal-use software
|
|
41,258
|
|
|
38,307
|
|
|
35,952
|
|
|||
Technology-based intangibles
|
|
7,415
|
|
|
7,607
|
|
|
6,400
|
|
|||
Trade names
|
|
5,391
|
|
|
6,362
|
|
|
5,789
|
|
|||
Software to be sold
|
|
4,227
|
|
|
5,009
|
|
|
4,193
|
|
|||
Amortization of intangibles
|
|
$
|
109,534
|
|
|
$
|
114,528
|
|
|
$
|
106,784
|
|
(in thousands)
|
|
Estimated
amortization
expense
|
||
2020
|
|
$
|
90,381
|
|
2021
|
|
69,249
|
|
|
2022
|
|
42,415
|
|
|
2023
|
|
28,133
|
|
|
2024
|
|
17,296
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||
(in thousands)
|
|
Amount
|
|
Weighted-average amortization period
(in years)
|
|
Amount
|
|
Weighted-average amortization period
(in years)
|
|
Amount
|
|
Weighted-average amortization period
(in years)
|
||||||
Internal-use software
|
|
$
|
43,991
|
|
|
3
|
|
$
|
42,744
|
|
|
3
|
|
$
|
38,422
|
|
|
3
|
Customer lists/relationships(1)
|
|
17,771
|
|
|
8
|
|
60,775
|
|
|
8
|
|
60,034
|
|
|
7
|
|||
Trade names
|
|
—
|
|
|
—
|
|
14,700
|
|
|
7
|
|
10,000
|
|
|
6
|
|||
Technology-based intangibles
|
|
—
|
|
|
—
|
|
7,500
|
|
|
5
|
|
800
|
|
|
3
|
|||
Software to be sold
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
2,200
|
|
|
5
|
|||
Acquired intangibles
|
|
$
|
61,762
|
|
|
5
|
|
$
|
125,719
|
|
|
6
|
|
$
|
111,456
|
|
|
6
|
(in thousands)
|
|
Small
Business
Services
|
|
Financial
Services
|
|
Direct
Checks
|
|
Total
|
||||||||
Balance, December 31, 2017:
|
|
|
|
|
|
|
|
|
||||||||
Goodwill, gross
|
|
$
|
706,568
|
|
|
$
|
324,239
|
|
|
$
|
148,506
|
|
|
$
|
1,179,313
|
|
Accumulated impairment charges
|
|
(48,379
|
)
|
|
—
|
|
|
—
|
|
|
(48,379
|
)
|
||||
Goodwill, net of accumulated impairment charges
|
|
658,189
|
|
|
324,239
|
|
|
148,506
|
|
|
1,130,934
|
|
||||
Impairment charge (Note 8)
|
|
(78,188
|
)
|
|
—
|
|
|
—
|
|
|
(78,188
|
)
|
||||
Goodwill resulting from acquisitions (Note 6)
|
|
59,488
|
|
|
46,419
|
|
|
—
|
|
|
105,907
|
|
||||
Measurement-period adjustments for prior year acquisitions (Note 6)
|
|
1,420
|
|
|
2,763
|
|
|
—
|
|
|
4,183
|
|
||||
Adjustment of assets held for sale
|
|
635
|
|
|
—
|
|
|
—
|
|
|
635
|
|
||||
Currency translation adjustment
|
|
(2,845
|
)
|
|
—
|
|
|
—
|
|
|
(2,845
|
)
|
||||
Balance, December 31, 2018
|
|
$
|
638,699
|
|
|
$
|
373,421
|
|
|
$
|
148,506
|
|
|
$
|
1,160,626
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Goodwill, gross
|
|
$
|
765,266
|
|
|
$
|
373,421
|
|
|
$
|
148,506
|
|
|
$
|
1,287,193
|
|
Accumulated impairment charges
|
|
(126,567
|
)
|
|
—
|
|
|
—
|
|
|
(126,567
|
)
|
||||
Goodwill, net of accumulated impairment charges
|
|
638,699
|
|
|
373,421
|
|
|
148,506
|
|
|
1,160,626
|
|
||||
Impairment charges (Note 8)
|
|
(242,267
|
)
|
|
(115,474
|
)
|
|
—
|
|
|
(357,741
|
)
|
||||
Goodwill resulting from acquisitions (Note 6)
|
|
—
|
|
|
4,174
|
|
|
—
|
|
|
4,174
|
|
||||
Measurement-period adjustments for prior year acquisitions (Note 6)
|
|
(340
|
)
|
|
(1,426
|
)
|
|
—
|
|
|
(1,766
|
)
|
||||
Currency translation adjustment
|
|
(806
|
)
|
|
—
|
|
|
—
|
|
|
(806
|
)
|
||||
Balance, December 31, 2019
|
|
$
|
395,286
|
|
|
$
|
260,695
|
|
|
$
|
148,506
|
|
|
$
|
804,487
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance, December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Goodwill, gross
|
|
$
|
764,120
|
|
|
$
|
376,169
|
|
|
$
|
148,506
|
|
|
$
|
1,288,795
|
|
Accumulated impairment charges
|
|
(368,834
|
)
|
|
(115,474
|
)
|
|
—
|
|
|
(484,308
|
)
|
||||
Goodwill, net of accumulated impairment charges
|
|
$
|
395,286
|
|
|
$
|
260,695
|
|
|
$
|
148,506
|
|
|
$
|
804,487
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
2019
|
|
2018
|
||||
Loans and notes receivable from Safeguard distributors
|
|
$
|
66,872
|
|
|
$
|
78,693
|
|
Postretirement benefit plan asset (Note 14)
|
|
56,743
|
|
|
41,259
|
|
||
Prepaid product discounts
|
|
51,145
|
|
|
54,642
|
|
||
Deferred sales commissions(1)
|
|
9,682
|
|
|
6,482
|
|
||
Other
|
|
13,428
|
|
|
15,032
|
|
||
Other non-current assets
|
|
$
|
197,870
|
|
|
$
|
196,108
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Balance, beginning of year
|
|
$
|
54,642
|
|
|
$
|
63,895
|
|
|
$
|
65,792
|
|
Additions(1)
|
|
21,068
|
|
|
14,023
|
|
|
18,224
|
|
|||
Amortization
|
|
(24,055
|
)
|
|
(22,941
|
)
|
|
(19,969
|
)
|
|||
Other
|
|
(510
|
)
|
|
(335
|
)
|
|
(152
|
)
|
|||
Balance, end of year
|
|
$
|
51,145
|
|
|
$
|
54,642
|
|
|
$
|
63,895
|
|
(in thousands)
|
|
2019
|
|
2018
|
||||
Deferred revenue(1)
|
|
$
|
46,098
|
|
|
$
|
54,313
|
|
Employee cash bonuses
|
|
36,918
|
|
|
31,286
|
|
||
Prepaid product discounts due within one year
|
|
14,709
|
|
|
10,926
|
|
||
Operating lease liabilities
|
|
12,898
|
|
|
—
|
|
||
Customer rebates
|
|
8,944
|
|
|
9,555
|
|
||
Other
|
|
59,771
|
|
|
78,383
|
|
||
Accrued liabilities
|
|
$
|
179,338
|
|
|
$
|
184,463
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents to the consolidated balance sheets:
|
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
|
$
|
73,620
|
|
|
$
|
59,740
|
|
|
$
|
59,240
|
|
Restricted cash and restricted cash equivalents included in funds held for customers
|
|
101,191
|
|
|
85,519
|
|
|
69,579
|
|
|||
Total cash, cash equivalents, restricted cash and restricted cash equivalents
|
|
$
|
174,811
|
|
|
$
|
145,259
|
|
|
$
|
128,819
|
|
Income taxes paid
|
|
$
|
60,764
|
|
|
$
|
88,253
|
|
|
$
|
124,878
|
|
Interest paid
|
|
33,227
|
|
|
25,910
|
|
|
19,465
|
|
|||
Non-cash investing activities:
|
|
|
|
|
|
|
||||||
Proceeds from sales of assets – notes receivable
|
|
1,685
|
|
|
35,616
|
|
|
24,497
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
NOTE 4: (LOSS) EARNINGS PER SHARE
|
(in thousands, except per share amounts)
|
|
2019
|
|
2018
|
|
2017
|
||||||
(Loss) earnings per share – basic:
|
|
|
|
|
|
|
||||||
Net (loss) income
|
|
$
|
(199,897
|
)
|
|
$
|
149,630
|
|
|
$
|
230,155
|
|
Income allocated to participating securities
|
|
(101
|
)
|
|
(617
|
)
|
|
(1,457
|
)
|
|||
(Loss) income available to common shareholders
|
|
$
|
(199,998
|
)
|
|
$
|
149,013
|
|
|
$
|
228,698
|
|
Weighted-average shares outstanding
|
|
43,029
|
|
|
46,842
|
|
|
48,127
|
|
|||
(Loss) earnings per share – basic
|
|
$
|
(4.65
|
)
|
|
$
|
3.18
|
|
|
$
|
4.75
|
|
|
|
|
|
|
|
|
||||||
(Loss) earnings per share – diluted:
|
|
|
|
|
|
|
|
|
||||
Net (loss) income
|
|
$
|
(199,897
|
)
|
|
$
|
149,630
|
|
|
$
|
230,155
|
|
Income allocated to participating securities
|
|
(101
|
)
|
|
(616
|
)
|
|
(1,450
|
)
|
|||
Re-measurement of share-based awards classified as liabilities
|
|
—
|
|
|
(471
|
)
|
|
59
|
|
|||
(Loss) income available to common shareholders
|
|
$
|
(199,998
|
)
|
|
$
|
148,543
|
|
|
$
|
228,764
|
|
Weighted-average shares outstanding
|
|
43,029
|
|
|
46,842
|
|
|
48,127
|
|
|||
Dilutive impact of potential common shares
|
|
—
|
|
|
149
|
|
|
321
|
|
|||
Weighted-average shares and potential common shares outstanding
|
|
43,029
|
|
|
46,991
|
|
|
48,448
|
|
|||
(Loss) earnings per share – diluted
|
|
$
|
(4.65
|
)
|
|
$
|
3.16
|
|
|
$
|
4.72
|
|
Antidilutive options excluded from calculation
|
|
1,347
|
|
|
1,209
|
|
|
262
|
|
NOTE 5: OTHER COMPREHENSIVE INCOME (LOSS)
|
Accumulated other comprehensive loss components
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
Affected line item in consolidated statements of (loss) income
|
||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
|
|
||||||
Realized gains on interest rate swap
|
|
$
|
77
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest expense
|
Tax expense
|
|
(20
|
)
|
|
—
|
|
|
—
|
|
|
Income tax provision
|
|||
Realized gains on interest rate swap, net of tax
|
|
57
|
|
|
—
|
|
|
—
|
|
|
Net (loss) income
|
|||
Amortization of postretirement benefit plan items:
|
|
|
|
|
|
|
|
|
||||||
Prior service credit
|
|
1,421
|
|
|
1,421
|
|
|
1,421
|
|
|
Other income
|
|||
Net actuarial loss
|
|
(3,223
|
)
|
|
(2,884
|
)
|
|
(3,637
|
)
|
|
Other income
|
|||
Total amortization
|
|
(1,802
|
)
|
|
(1,463
|
)
|
|
(2,216
|
)
|
|
Other income
|
|||
Tax benefit
|
|
273
|
|
|
491
|
|
|
372
|
|
|
Income tax provision
|
|||
Amortization of postretirement benefit plan items, net of tax
|
|
(1,529
|
)
|
|
(972
|
)
|
|
(1,844
|
)
|
|
Net (loss) income
|
|||
Total reclassifications, net of tax
|
|
$
|
(1,472
|
)
|
|
$
|
(972
|
)
|
|
$
|
(1,844
|
)
|
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
Postretirement benefit plans
|
|
Net unrealized loss on marketable debt securities
|
|
Net unrealized loss on cash flow hedge
|
|
Currency translation adjustment
|
|
Accumulated other comprehensive loss
|
||||||||||
Balance, December 31, 2016
|
|
$
|
(35,684
|
)
|
|
$
|
(213
|
)
|
|
$
|
—
|
|
|
$
|
(14,474
|
)
|
|
$
|
(50,371
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
7,011
|
|
|
(109
|
)
|
|
—
|
|
|
4,028
|
|
|
10,930
|
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
|
1,844
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,844
|
|
|||||
Net current-period other comprehensive income (loss)
|
|
8,855
|
|
|
(109
|
)
|
|
—
|
|
|
4,028
|
|
|
12,774
|
|
|||||
Balance, December 31, 2017
|
|
(26,829
|
)
|
|
(322
|
)
|
|
—
|
|
|
(10,446
|
)
|
|
(37,597
|
)
|
|||||
Other comprehensive loss before reclassifications
|
|
(3,805
|
)
|
|
(1
|
)
|
|
—
|
|
|
(9,281
|
)
|
|
(13,087
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
|
972
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
972
|
|
|||||
Net current-period other comprehensive loss
|
|
(2,833
|
)
|
|
(1
|
)
|
|
—
|
|
|
(9,281
|
)
|
|
(12,115
|
)
|
|||||
Adoption of ASU No. 2018-02
|
|
(6,867
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,867
|
)
|
|||||
Balance, December 31, 2018
|
|
(36,529
|
)
|
|
(323
|
)
|
|
—
|
|
|
(19,727
|
)
|
|
(56,579
|
)
|
|||||
Other comprehensive income (loss) before reclassifications
|
|
6,594
|
|
|
48
|
|
|
(1,040
|
)
|
|
1,558
|
|
|
7,160
|
|
|||||
Amounts reclassified from accumulated other comprehensive loss
|
|
1,529
|
|
|
—
|
|
|
(57
|
)
|
|
—
|
|
|
1,472
|
|
|||||
Net current-period other comprehensive income (loss)
|
|
8,123
|
|
|
48
|
|
|
(1,097
|
)
|
|
1,558
|
|
|
8,632
|
|
|||||
Balance, December 31, 2019
|
|
$
|
(28,406
|
)
|
|
$
|
(275
|
)
|
|
$
|
(1,097
|
)
|
|
$
|
(18,169
|
)
|
|
$
|
(47,947
|
)
|
NOTE 6: ACQUISITIONS
|
•
|
In December 2019, we acquired selected assets comprising the remittance processing business of Fiserv, Inc., including its lockbox processing services. The preliminary allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $4,174. The acquisition resulted in goodwill as it allows us to extend out expertise and reach with the addition of a reseller arrangement through the banking sales channel of Fiserv. We expect to finalize the allocation of the purchase price by the second quarter of 2020, when our valuation of the acquired intangible assets and various other assets acquired is complete.
|
•
|
In December 2019, we acquired selected assets comprising the remittance processing business of Synchrony Financial. We expect to finalize the allocation of the purchase price by the second quarter of 2020, when our valuation of the acquired intangible assets, as well as various other assets acquired and liabilities assumed, is complete.
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
•
|
In March 2018, we acquired all of the equity of Logomix Inc. (Logomix), a self-service marketing and branding platform that helps small businesses create logos and custom marketing products. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in nondeductible goodwill of $29,451. The acquisition resulted in goodwill as we expected to accelerate revenue growth by combining our capabilities with Logomix's platform.
|
•
|
In June 2018, we acquired selected assets of Velocity Servers, Inc., doing business as ColoCrossing, a data center solutions, cloud hosting and infrastructure colocation provider of dedicated hosting services. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $9,082. The acquisition resulted in goodwill as we expected to accelerate revenue growth by bringing colocation services into our portfolio of hosting services.
|
•
|
In December 2018, we acquired selected assets of My Corporation Business Services, Inc., a provider of business incorporation and organization services. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $20,615. The acquisition resulted in goodwill as we expected to accelerate revenue growth by bringing these services into our portfolio of web services.
|
•
|
During 2018, we acquired the operations of 3 small business distributors. The assets acquired consisted primarily of customer list intangible assets. As these small business distributors were previously part of our Safeguard distributor network, our revenue was not impacted by these acquisitions, and the impact to our costs was not significant.
|
•
|
In February 2017, we acquired selected assets of Panthur Pty Ltd (Panthur), an Australian web hosting and domain registration service provider. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in nondeductible goodwill of $1,198. The acquisition resulted in goodwill as we used Panthur's platform to selectively expand into foreign markets.
|
•
|
In July 2017, we acquired all of the equity of Digital Pacific Group Pty Ltd (Digital Pacific), an Australian web hosting and domain registration service provider. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in nondeductible goodwill of $23,773. The acquisition resulted in goodwill as we acquired enhanced web hosting capabilities that we used to selectively expand into foreign markets.
|
•
|
In September 2017, we acquired all of the equity of j2 Global Australia Pty Ltd, doing business as Web24, an Australian web hosting and domain registration service provider. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in nondeductible goodwill of $2,731. The acquisition resulted in goodwill as we used Web24's platform to selectively expand into foreign markets.
|
•
|
In November 2017, we acquired selected assets of Impact Marketing Specialists, Inc., which provides marketing solutions to real estate agents.
|
•
|
In December 2017, we acquired selected assets of SY Holdings, LLC, doing business as managed.com, a web hosting services provider. The allocation of the purchase price based upon the estimated fair values of the assets acquired and liabilities assumed resulted in tax-deductible goodwill of $266. The acquisition resulted in goodwill as the expertise we acquired improved our customer mix and enhanced our portfolio of web services.
|
•
|
During 2017, we acquired the operations of several small business distributors. The assets acquired consisted primarily of customer list intangible assets. All but 1 of these distributors were previously part of our Safeguard distributor network. As such, our results of operations were not significantly impacted by these acquisitions.
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
NOTE 7: DERIVATIVE FINANCIAL INSTRUMENTS
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
NOTE 8: FAIR VALUE MEASUREMENTS
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
DELUXE CORPORATION
NOTES TO 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
|
|
Asset impairment charge
|
||||||||||
(in thousands)
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
||||||||||||
2019 analyses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Intangible assets (Small Business Services)(1), (2)
|
|
$
|
8,379
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,379
|
|
|
$
|
31,316
|
|
Customer list (Financial Services)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,923
|
|
|||||
Goodwill
|
|
|
|
|
|
|
|
|
|
357,741
|
|
|||||||||
Total
|
|
|
|
|
|
|
|
|
|
$
|
390,980
|
|
||||||||
2018 analyses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Indefinite-lived trade name (Small Business Services)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,100
|
|
Customer list (Small Business Services)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,149
|
|
|||||
Customer lists (Financial Services)(1)
|
|
4,223
|
|
|
—
|
|
|
—
|
|
|
4,223
|
|
|
1,882
|
|
|||||
Goodwill
|
|
|
|
|
|
|
|
|
|
78,188
|
|
|||||||||
Total
|
|
|
|
|
|
|
|
|
|
$
|
101,319
|
|
||||||||
2017 analyses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Trade name (Small Business Services)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,752
|
|
Assets held for sale (Small Business Services)
|
|
3,500
|
|
|
—
|
|
|
—
|
|
|
3,500
|
|
|
8,250
|
|
|||||
Other (Small Business Services)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,499
|
|
|||||
Goodwill
|
|
|
|
|
|
|
|
|
|
28,379
|
|
|||||||||
Total
|
|
|
|
|
|
|
|
|
|
$
|
54,880
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
Fair value measurements using
|
||||||||||||||
|
|
Balance sheet location
|
|
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)
|
|
|
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 7)
|
|
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
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Fair value measurements using
|
||||||||||||||
|
|
Balance sheet location
|
|
December 31, 2018
|
|
Quoted prices in active markets for identical assets
(Level 1)
|
|
Significant other observable inputs
(Level 2)
|
|
Significant unobservable inputs
(Level 3)
|
||||||||||||
(in thousands)
|
|
|
Carrying value
|
|
Fair value
|
|
|
|
||||||||||||||
Measured at fair value through comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash equivalents
|
|
Funds held for customers
|
|
$
|
16,000
|
|
|
$
|
16,000
|
|
|
$
|
16,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale debt securities
|
|
Funds held for customers
|
|
15,463
|
|
|
15,463
|
|
|
—
|
|
|
15,463
|
|
|
—
|
|
|||||
Amortized cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash
|
|
Cash and cash equivalents
|
|
59,740
|
|
|
59,740
|
|
|
59,740
|
|
|
—
|
|
|
—
|
|
|||||
Cash
|
|
Funds held for customers
|
|
69,519
|
|
|
69,519
|
|
|
69,519
|
|
|
—
|
|
|
—
|
|
|||||
Loans and notes receivable from Safeguard distributors
|
|
Other current and non-current assets
|
|
81,560
|
|
|
60,795
|
|
|
—
|
|
|
—
|
|
|
60,795
|
|
|||||
Long-term debt(1)
|
|
Long-term debt
|
|
910,000
|
|
|
910,000
|
|
|
—
|
|
|
910,000
|
|
|
—
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
NOTE 9: RESTRUCTURING AND INTEGRATION EXPENSE
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Total cost of revenue
|
|
$
|
3,562
|
|
|
$
|
1,466
|
|
|
$
|
568
|
|
Operating expenses
|
|
71,248
|
|
|
19,737
|
|
|
8,562
|
|
|||
Restructuring and integration expense
|
|
$
|
74,810
|
|
|
$
|
21,203
|
|
|
$
|
9,130
|
|
(in thousands)
|
|
Small Business Services
|
|
Financial Services
|
|
Direct Checks
|
|
Consolidated
|
||||||||
2019
|
|
$
|
49,634
|
|
|
$
|
20,879
|
|
|
$
|
4,297
|
|
|
$
|
74,810
|
|
2018
|
|
10,837
|
|
|
10,087
|
|
|
279
|
|
|
21,203
|
|
||||
2017
|
|
4,775
|
|
|
3,950
|
|
|
405
|
|
|
9,130
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
External consulting fees
|
|
$
|
45,638
|
|
|
$
|
8,509
|
|
|
$
|
516
|
|
Internal labor
|
|
12,115
|
|
|
4,654
|
|
|
1,127
|
|
|||
Employee severance benefits
|
|
10,865
|
|
|
5,774
|
|
|
7,176
|
|
|||
Other
|
|
6,192
|
|
|
2,266
|
|
|
311
|
|
|||
Restructuring and integration expense
|
|
$
|
74,810
|
|
|
$
|
21,203
|
|
|
$
|
9,130
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
Employee severance benefits
|
|
Operating lease obligations
|
|
Total
|
||||||
Balance, December 31, 2016
|
|
$
|
4,181
|
|
|
$
|
—
|
|
|
$
|
4,181
|
|
Charges
|
|
7,843
|
|
|
23
|
|
|
7,866
|
|
|||
Reversals
|
|
(667
|
)
|
|
—
|
|
|
(667
|
)
|
|||
Payments
|
|
(6,981
|
)
|
|
(19
|
)
|
|
(7,000
|
)
|
|||
Balance, December 31, 2017
|
|
4,376
|
|
|
4
|
|
|
4,380
|
|
|||
Charges
|
|
7,672
|
|
|
597
|
|
|
8,269
|
|
|||
Reversals
|
|
(1,898
|
)
|
|
(71
|
)
|
|
(1,969
|
)
|
|||
Payments
|
|
(6,971
|
)
|
|
(248
|
)
|
|
(7,219
|
)
|
|||
Balance, December 31, 2018
|
|
3,179
|
|
|
282
|
|
|
3,461
|
|
|||
Charges
|
|
11,516
|
|
|
—
|
|
|
11,516
|
|
|||
Reversals
|
|
(651
|
)
|
|
—
|
|
|
(651
|
)
|
|||
Payments
|
|
(10,585
|
)
|
|
—
|
|
|
(10,585
|
)
|
|||
Adoption of ASU No. 2016-02(1)
|
|
—
|
|
|
(282
|
)
|
|
(282
|
)
|
|||
Balance, December 31, 2019
|
|
$
|
3,459
|
|
|
$
|
—
|
|
|
$
|
3,459
|
|
NOTE 10: CHIEF EXECUTIVE OFFICER TRANSITION COSTS
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
NOTE 11: INCOME TAX PROVISION
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
U.S.
|
|
$
|
(161,733
|
)
|
|
$
|
198,727
|
|
|
$
|
299,424
|
|
Foreign
|
|
(23,897
|
)
|
|
13,904
|
|
|
13,403
|
|
|||
(Loss) income before income taxes
|
|
$
|
(185,630
|
)
|
|
$
|
212,631
|
|
|
$
|
312,827
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Current tax provision:
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
36,967
|
|
|
$
|
57,117
|
|
|
$
|
104,079
|
|
State
|
|
7,400
|
|
|
11,319
|
|
|
12,996
|
|
|||
Foreign
|
|
4,850
|
|
|
5,921
|
|
|
4,774
|
|
|||
Total current tax provision
|
|
49,217
|
|
|
74,357
|
|
|
121,849
|
|
|||
Deferred tax provision:
|
|
|
|
|
|
|
||||||
Federal
|
|
(30,095
|
)
|
|
(7,220
|
)
|
|
(37,471
|
)
|
|||
State
|
|
(7,070
|
)
|
|
(1,701
|
)
|
|
(491
|
)
|
|||
Foreign
|
|
2,215
|
|
|
(2,435
|
)
|
|
(1,215
|
)
|
|||
Total deferred tax provision
|
|
(34,950
|
)
|
|
(11,356
|
)
|
|
(39,177
|
)
|
|||
Income tax provision
|
|
$
|
14,267
|
|
|
$
|
63,001
|
|
|
$
|
82,672
|
|
|
|
2019
|
|
2018
|
|
2017
|
|||
Income tax at federal statutory rate
|
|
21.0
|
%
|
|
21.0
|
%
|
|
35.0
|
%
|
Goodwill impairment charge
|
|
(29.3
|
%)
|
|
7.1
|
%
|
|
1.5
|
%
|
Change in valuation allowances(1)
|
|
(4.5
|
%)
|
|
0.1
|
%
|
|
(0.3
|
%)
|
Net tax benefit of share-based compensation
|
|
(1.1
|
%)
|
|
(0.8
|
%)
|
|
(1.6
|
%)
|
State income tax expense, net of federal income tax benefit
|
|
4.9
|
%
|
|
3.0
|
%
|
|
2.7
|
%
|
Foreign tax rate differences
|
|
1.3
|
%
|
|
0.4
|
%
|
|
(0.3
|
%)
|
Impact of Tax Cuts and Jobs Act
|
|
—
|
|
|
(0.8
|
%)
|
|
(6.6
|
%)
|
Qualified production activities deduction
|
|
—
|
|
|
—
|
|
|
(3.2
|
%)
|
Other
|
|
—
|
|
|
(0.4
|
%)
|
|
(0.8
|
%)
|
Effective tax rate
|
|
(7.7
|
%)
|
|
29.6
|
%
|
|
26.4
|
%
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Balance, beginning of year
|
|
$
|
4,801
|
|
|
$
|
3,795
|
|
|
$
|
7,373
|
|
Additions for tax positions of current year
|
|
364
|
|
|
315
|
|
|
378
|
|
|||
Additions for tax positions of prior years
|
|
546
|
|
|
1,177
|
|
|
659
|
|
|||
Reductions for tax positions of prior years
|
|
(887
|
)
|
|
(108
|
)
|
|
(4,389
|
)
|
|||
Settlements
|
|
(341
|
)
|
|
—
|
|
|
—
|
|
|||
Lapse of statutes of limitations
|
|
(314
|
)
|
|
(378
|
)
|
|
(226
|
)
|
|||
Balance, end of year
|
|
$
|
4,169
|
|
|
$
|
4,801
|
|
|
$
|
3,795
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
2019
|
|
2018
|
||||||||||||
(in thousands)
|
|
Deferred tax assets
|
|
Deferred tax liabilities
|
|
Deferred tax assets
|
|
Deferred tax liabilities
|
||||||||
Goodwill(1)
|
|
$
|
—
|
|
|
$
|
16,424
|
|
|
$
|
—
|
|
|
$
|
47,993
|
|
Revenue recognition
|
|
—
|
|
|
4,752
|
|
|
—
|
|
|
3,185
|
|
||||
Prepaid assets
|
|
—
|
|
|
3,830
|
|
|
—
|
|
|
3,469
|
|
||||
Property, plant and equipment
|
|
—
|
|
|
3,200
|
|
|
—
|
|
|
1,739
|
|
||||
Employee benefit plans
|
|
—
|
|
|
2,747
|
|
|
1,420
|
|
|
—
|
|
||||
Installment sales treatment of notes receivable
|
|
—
|
|
|
1,171
|
|
|
—
|
|
|
3,054
|
|
||||
Intangible assets(1)
|
|
14,900
|
|
|
—
|
|
|
—
|
|
|
3,780
|
|
||||
Operating leases
|
|
11,409
|
|
|
10,578
|
|
|
—
|
|
|
—
|
|
||||
Net operating loss, tax credit and capital loss carryforwards
|
|
7,698
|
|
|
—
|
|
|
9,380
|
|
|
—
|
|
||||
Reserves and accruals
|
|
6,154
|
|
|
—
|
|
|
8,893
|
|
|
—
|
|
||||
Inventories
|
|
2,595
|
|
|
—
|
|
|
2,043
|
|
|
—
|
|
||||
All other
|
|
2,756
|
|
|
3,452
|
|
|
3,237
|
|
|
3,858
|
|
||||
Total deferred taxes
|
|
45,512
|
|
|
46,154
|
|
|
24,973
|
|
|
67,078
|
|
||||
Valuation allowances
|
|
(10,349
|
)
|
|
—
|
|
|
(1,689
|
)
|
|
—
|
|
||||
Net deferred taxes
|
|
$
|
35,163
|
|
|
$
|
46,154
|
|
|
$
|
23,284
|
|
|
$
|
67,078
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Balance, beginning of year
|
|
$
|
(1,689
|
)
|
|
$
|
(1,518
|
)
|
|
$
|
(2,545
|
)
|
(Expense) benefit from change in allowances
|
|
(8,336
|
)
|
|
(290
|
)
|
|
1,015
|
|
|||
Foreign currency translation
|
|
(324
|
)
|
|
119
|
|
|
12
|
|
|||
Balance, end of year
|
|
$
|
(10,349
|
)
|
|
$
|
(1,689
|
)
|
|
$
|
(1,518
|
)
|
•
|
state net operating loss carryforwards and tax credit carryforwards of $63,169 that expire at various dates up to 2048;
|
•
|
foreign capital loss carryforwards of $4,891 that do not expire;
|
•
|
foreign research tax credit carryforwards of $2,035 that expire at various dates up to 2036; and
|
•
|
federal net operating loss carryforwards of $1,451 that expire at various dates between 2025 and 2029.
|
NOTE 12: SHARE-BASED COMPENSATION PLANS
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Restricted shares and restricted stock units
|
|
$
|
13,411
|
|
|
$
|
5,232
|
|
|
$
|
6,533
|
|
Performance share awards
|
|
2,907
|
|
|
4,502
|
|
|
4,782
|
|
|||
Stock options
|
|
2,954
|
|
|
3,143
|
|
|
3,270
|
|
|||
Employee stock purchase plan
|
|
430
|
|
|
501
|
|
|
524
|
|
|||
Total share-based compensation expense
|
|
$
|
19,702
|
|
|
$
|
13,378
|
|
|
$
|
15,109
|
|
Income tax benefit
|
|
$
|
(5,350
|
)
|
|
$
|
(3,946
|
)
|
|
$
|
(5,152
|
)
|
|
|
2019
|
|
2018
|
|
2017
|
|||
Risk-free interest rate
|
|
2.3
|
%
|
|
2.7
|
%
|
|
1.6
|
%
|
Dividend yield
|
|
2.7
|
%
|
|
2.0
|
%
|
|
1.6
|
%
|
Expected volatility
|
|
24.5
|
%
|
|
23.0
|
%
|
|
23.7
|
%
|
Weighted-average option life (in years)
|
|
5.3
|
|
|
3.9
|
|
|
3.7
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
Number of options
(in thousands)
|
|
Weighted-average exercise price per option
|
|
Aggregate intrinsic value
(in thousands)
|
|
Weighted-average remaining contractual term
(in years)
|
|||||
Outstanding, December 31, 2016
|
|
1,251
|
|
|
$
|
47.68
|
|
|
|
|
|
||
Granted
|
|
270
|
|
|
75.30
|
|
|
|
|
|
|||
Exercised
|
|
(347
|
)
|
|
38.72
|
|
|
|
|
|
|||
Forfeited or expired
|
|
(35
|
)
|
|
62.19
|
|
|
|
|
|
|||
Outstanding, December 31, 2017
|
|
1,139
|
|
|
56.51
|
|
|
|
|
|
|||
Granted
|
|
519
|
|
|
62.12
|
|
|
|
|
|
|||
Exercised
|
|
(339
|
)
|
|
42.55
|
|
|
|
|
|
|||
Forfeited or expired
|
|
(74
|
)
|
|
66.85
|
|
|
|
|
|
|||
Outstanding, December 31, 2018
|
|
1,245
|
|
|
62.04
|
|
|
|
|
|
|||
Granted
|
|
644
|
|
|
44.72
|
|
|
|
|
|
|||
Exercised
|
|
(21
|
)
|
|
32.42
|
|
|
|
|
|
|||
Forfeited or expired
|
|
(521
|
)
|
|
62.75
|
|
|
|
|
|
|||
Outstanding, December 31, 2019
|
|
1,347
|
|
|
53.92
|
|
|
$
|
3,311
|
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|||||
Exercisable at December 31, 2017
|
|
555
|
|
|
$
|
47.42
|
|
|
|
|
|
||
Exercisable at December 31, 2018
|
|
472
|
|
|
59.90
|
|
|
|
|
|
|||
Exercisable at December 31, 2019
|
|
485
|
|
|
61.44
|
|
|
$
|
292
|
|
|
2.7
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
Number of units
(in thousands)
|
|
Weighted-average grant date fair value per unit
|
|
Weighted-average remaining contractual term
(in years)
|
|||
Outstanding at December 31, 2016
|
|
139
|
|
|
$
|
37.99
|
|
|
|
Granted
|
|
16
|
|
|
73.27
|
|
|
|
|
Vested
|
|
(43
|
)
|
|
43.18
|
|
|
|
|
Forfeited
|
|
(3
|
)
|
|
57.18
|
|
|
|
|
Outstanding at December 31, 2017
|
|
109
|
|
|
38.31
|
|
|
|
|
Granted
|
|
110
|
|
|
52.32
|
|
|
|
|
Vested
|
|
(22
|
)
|
|
48.14
|
|
|
|
|
Forfeited
|
|
(2
|
)
|
|
74.96
|
|
|
|
|
Outstanding at December 31, 2018
|
|
195
|
|
|
45.41
|
|
|
|
|
Granted
|
|
611
|
|
|
44.73
|
|
|
|
|
Vested
|
|
(93
|
)
|
|
49.31
|
|
|
|
|
Forfeited
|
|
(49
|
)
|
|
45.40
|
|
|
|
|
Outstanding at December 31, 2019
|
|
664
|
|
|
44.35
|
|
|
2.3
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
Number of shares
(in thousands)
|
|
Weighted-average grant date fair value per share
|
|
Weighted-average remaining contractual term
(in years)
|
|||
Unvested at December 31, 2016
|
|
220
|
|
|
$
|
56.43
|
|
|
|
Granted
|
|
68
|
|
|
74.84
|
|
|
|
|
Vested
|
|
(99
|
)
|
|
52.41
|
|
|
|
|
Forfeited
|
|
(8
|
)
|
|
61.37
|
|
|
|
|
Unvested at December 31, 2017
|
|
181
|
|
|
65.33
|
|
|
|
|
Granted
|
|
77
|
|
|
71.29
|
|
|
|
|
Vested
|
|
(76
|
)
|
|
69.73
|
|
|
|
|
Forfeited
|
|
(14
|
)
|
|
66.24
|
|
|
|
|
Unvested at December 31, 2018
|
|
168
|
|
|
66.02
|
|
|
|
|
Vested
|
|
(117
|
)
|
|
63.15
|
|
|
|
|
Forfeited
|
|
(25
|
)
|
|
73.62
|
|
|
|
|
Unvested at December 31, 2019
|
|
26
|
|
|
71.61
|
|
|
1.0
|
|
|
2019
|
|
2018
|
|
2017
|
|||
Risk-free interest rate
|
|
2.3
|
%
|
|
2.4
|
%
|
|
1.4
|
%
|
Dividend yield
|
|
3.1
|
%
|
|
1.6
|
%
|
|
1.7
|
%
|
Expected volatility
|
|
26.8
|
%
|
|
21.6
|
%
|
|
21.9
|
%
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
Performance shares
(in thousands)
|
|
Weighted-average grant date fair value per share
|
|
Weighted-average remaining contractual term
(in years)
|
|||
Unvested at December 31, 2016
|
|
236
|
|
|
$
|
55.15
|
|
|
|
Granted(1)
|
|
83
|
|
|
75.31
|
|
|
|
|
Forfeited
|
|
(9
|
)
|
|
64.85
|
|
|
|
|
Vested
|
|
(60
|
)
|
|
50.17
|
|
|
|
|
Adjustment for performance results achieved(2)
|
|
5
|
|
|
50.34
|
|
|
|
|
Unvested at December 31, 2017
|
|
255
|
|
|
63.42
|
|
|
|
|
Granted(1)
|
|
91
|
|
|
74.49
|
|
|
|
|
Forfeited
|
|
(48
|
)
|
|
59.32
|
|
|
|
|
Vested
|
|
(45
|
)
|
|
67.10
|
|
|
|
|
Adjustment for performance results achieved(2)
|
|
(3
|
)
|
|
67.11
|
|
|
|
|
Unvested at December 31, 2018
|
|
250
|
|
|
67.54
|
|
|
|
|
Granted(1)
|
|
151
|
|
|
41.79
|
|
|
|
|
Forfeited
|
|
(38
|
)
|
|
54.42
|
|
|
|
|
Vested
|
|
(118
|
)
|
|
59.67
|
|
|
|
|
Adjustment for performance results achieved(2)
|
|
7
|
|
|
54.42
|
|
|
|
|
Unvested at December 31, 2019
|
|
252
|
|
|
57.64
|
|
|
1.5
|
NOTE 13: EMPLOYEE COMPENSATION PLANS
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Performance-based compensation plans(1)
|
|
$
|
21,143
|
|
|
$
|
20,297
|
|
|
$
|
22,085
|
|
401(k) expense
|
|
10,176
|
|
|
9,686
|
|
|
9,023
|
|
NOTE 14: POSTRETIREMENT BENEFITS
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
Postretirement benefit plan
|
|
Pension plan(1)
|
||||
Change in benefit obligation:
|
|
|
|
|
||||
Benefit obligation, December 31, 2017
|
|
$
|
87,594
|
|
|
$
|
3,398
|
|
Interest cost
|
|
2,529
|
|
|
97
|
|
||
Net actuarial gain
|
|
(9,231
|
)
|
|
(23
|
)
|
||
Benefits paid from plan assets and company funds
|
|
(7,175
|
)
|
|
(324
|
)
|
||
Benefit obligation, December 31, 2018
|
|
73,717
|
|
|
3,148
|
|
||
Interest cost
|
|
2,617
|
|
|
111
|
|
||
Net actuarial loss
|
|
5,012
|
|
|
316
|
|
||
Benefits paid from plan assets and company funds
|
|
(8,171
|
)
|
|
(324
|
)
|
||
Benefit obligation, December 31, 2019
|
|
$
|
73,175
|
|
|
$
|
3,251
|
|
Change in plan assets:
|
|
|
|
|
||||
Fair value of plan assets, December 31, 2017
|
|
$
|
127,443
|
|
|
$
|
—
|
|
Return on plan assets
|
|
(6,663
|
)
|
|
—
|
|
||
Benefits paid
|
|
(5,804
|
)
|
|
—
|
|
||
Fair value of plan assets, December 31, 2018
|
|
114,976
|
|
|
—
|
|
||
Return on plan assets
|
|
21,179
|
|
|
—
|
|
||
Benefits paid
|
|
(6,237
|
)
|
|
—
|
|
||
Fair value of plan assets, December 31, 2019
|
|
$
|
129,918
|
|
|
$
|
—
|
|
|
|
|
|
|
||||
Funded status, December 31, 2018
|
|
$
|
41,259
|
|
|
$
|
(3,148
|
)
|
Funded status, December 31, 2019
|
|
$
|
56,743
|
|
|
$
|
(3,251
|
)
|
|
|
Postretirement benefit plan
|
|
Pension plan
|
||||||||||||
(in thousands)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Other non-current assets
|
|
$
|
56,743
|
|
|
$
|
41,259
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued liabilities
|
|
—
|
|
|
—
|
|
|
324
|
|
|
324
|
|
||||
Other non-current liabilities
|
|
—
|
|
|
—
|
|
|
2,927
|
|
|
2,824
|
|
(in thousands)
|
|
2019
|
|
2018
|
||||
Unrecognized prior service credit
|
|
$
|
12,756
|
|
|
$
|
14,178
|
|
Unrecognized net actuarial loss
|
|
(45,319
|
)
|
|
(57,436
|
)
|
||
Tax effect
|
|
4,157
|
|
|
6,729
|
|
||
Amount recognized in accumulated other comprehensive loss, net of tax
|
|
$
|
(28,406
|
)
|
|
$
|
(36,529
|
)
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Interest cost
|
|
$
|
2,727
|
|
|
$
|
2,626
|
|
|
$
|
2,896
|
|
Expected return on plan assets
|
|
(6,957
|
)
|
|
(7,737
|
)
|
|
(7,128
|
)
|
|||
Amortization of prior service credit
|
|
(1,421
|
)
|
|
(1,421
|
)
|
|
(1,421
|
)
|
|||
Amortization of net actuarial losses
|
|
3,223
|
|
|
2,884
|
|
|
3,637
|
|
|||
Net periodic benefit income
|
|
$
|
(2,428
|
)
|
|
$
|
(3,648
|
)
|
|
$
|
(2,016
|
)
|
|
|
Postretirement benefit plan
|
|
Pension plan
|
||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Discount rate
|
|
3.03
|
%
|
|
4.13
|
%
|
|
2.76
|
%
|
|
4.01
|
%
|
|
|
Postretirement benefit plan
|
|
Pension plan
|
||||||||||||||
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
||||||
Discount rate
|
|
4.13
|
%
|
|
3.46
|
%
|
|
3.81
|
%
|
|
4.01
|
%
|
|
3.35
|
%
|
|
3.66
|
%
|
Expected return on plan assets
|
|
6.25
|
%
|
|
6.25
|
%
|
|
6.25
|
%
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
2019
|
|
2018
|
|
2017
|
||||||||||||
|
|
Participants under age 65
|
|
Participants age 65 and older
|
|
Participants under age 65
|
|
Participants age 65 and older
|
|
Participants under age 65
|
|
Participants age 65 and older
|
||||||
Health care cost trend rate assumed for next year
|
|
7.40
|
%
|
|
8.40
|
%
|
|
7.70
|
%
|
|
8.70
|
%
|
|
7.90
|
%
|
|
9.10
|
%
|
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
|
|
4.50
|
%
|
|
4.50
|
%
|
|
4.50
|
%
|
|
4.50
|
%
|
|
4.50
|
%
|
|
4.50
|
%
|
Year that the rate reaches the ultimate trend rate
|
|
2029
|
|
|
2029
|
|
|
2029
|
|
|
2029
|
|
|
2025
|
|
|
2025
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
Postretirement benefit plan
|
||||
|
|
2019
|
|
2018
|
||
U.S. large capitalization equity securities
|
|
24
|
%
|
|
23
|
%
|
Mortgage-backed securities
|
|
24
|
%
|
|
25
|
%
|
International equity securities
|
|
19
|
%
|
|
18
|
%
|
U.S. corporate debt securities
|
|
15
|
%
|
|
20
|
%
|
Government debt securities
|
|
14
|
%
|
|
11
|
%
|
U.S. small and mid-capitalization equity securities
|
|
4
|
%
|
|
3
|
%
|
Total
|
|
100
|
%
|
|
100
|
%
|
|
|
Fair value measurements using
|
|
|
|
|
||||||||||||||
|
|
Quoted prices in active markets for identical assets
|
|
Significant other observable inputs
|
|
Significant unobservable inputs
|
|
Investments measured at net asset value
|
|
Fair value as of
December 31,
2019
|
||||||||||
(in thousands)
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
||||||||||||
U.S. large capitalization equity securities
|
|
$
|
—
|
|
|
$
|
30,990
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,990
|
|
Mortgage-backed securities
|
|
—
|
|
|
13,060
|
|
|
—
|
|
|
17,768
|
|
|
30,828
|
|
|||||
International equity securities
|
|
20,859
|
|
|
3,173
|
|
|
—
|
|
|
—
|
|
|
24,032
|
|
|||||
U.S. corporate debt securities
|
|
—
|
|
|
14,771
|
|
|
—
|
|
|
5,184
|
|
|
19,955
|
|
|||||
Government debt securities
|
|
—
|
|
|
18,776
|
|
|
—
|
|
|
—
|
|
|
18,776
|
|
|||||
U.S. small and mid-capitalization equity securities
|
|
4,228
|
|
|
363
|
|
|
—
|
|
|
—
|
|
|
4,591
|
|
|||||
Other debt securities
|
|
529
|
|
|
217
|
|
|
—
|
|
|
—
|
|
|
746
|
|
|||||
Plan assets
|
|
$
|
25,616
|
|
|
$
|
81,350
|
|
|
$
|
—
|
|
|
$
|
22,952
|
|
|
$
|
129,918
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
Fair value measurements using
|
|
|
|
|
||||||||||||||
|
|
Quoted prices in active markets for identical assets
|
|
Significant other observable inputs
|
|
Significant unobservable inputs
|
|
Investments measured at net asset value
|
|
Fair value as of
December 31,
2018
|
||||||||||
(in thousands)
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
||||||||||||
U.S. large capitalization equity securities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,240
|
|
|
$
|
26,240
|
|
Mortgage-backed securities
|
|
—
|
|
|
13,593
|
|
|
—
|
|
|
15,138
|
|
|
28,731
|
|
|||||
International equity securities
|
|
20,261
|
|
|
298
|
|
|
—
|
|
|
—
|
|
|
20,559
|
|
|||||
U.S. corporate debt securities
|
|
6,489
|
|
|
12,468
|
|
|
—
|
|
|
3,594
|
|
|
22,551
|
|
|||||
Government debt securities
|
|
—
|
|
|
12,738
|
|
|
—
|
|
|
—
|
|
|
12,738
|
|
|||||
U.S. small and mid-capitalization equity securities
|
|
3,259
|
|
|
27
|
|
|
—
|
|
|
551
|
|
|
3,837
|
|
|||||
Other debt securities
|
|
(6
|
)
|
|
326
|
|
|
—
|
|
|
—
|
|
|
320
|
|
|||||
Plan assets
|
|
$
|
30,003
|
|
|
$
|
39,450
|
|
|
$
|
—
|
|
|
$
|
45,523
|
|
|
$
|
114,976
|
|
(in thousands)
|
|
Postretirement benefit plan
|
Pension plan
|
|||||
2020
|
|
$
|
6,089
|
|
|
$
|
320
|
|
2021
|
|
6,040
|
|
|
320
|
|
||
2022
|
|
5,934
|
|
|
310
|
|
||
2023
|
|
5,767
|
|
|
300
|
|
||
2024
|
|
5,562
|
|
|
290
|
|
||
2025 - 2029
|
|
24,427
|
|
|
1,280
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
NOTE 15: DEBT
|
(in thousands)
|
|
2019
|
|
2018
|
||||
Amount drawn on revolving credit facility
|
|
$
|
883,500
|
|
|
$
|
910,000
|
|
Capital lease obligations(1)
|
|
—
|
|
|
1,864
|
|
||
Long-term debt, principal amount
|
|
883,500
|
|
|
911,864
|
|
||
Less current portion of long-term debt
|
|
—
|
|
|
(791
|
)
|
||
Long-term debt
|
|
883,500
|
|
|
911,073
|
|
||
Current portion of capital lease obligations(1)
|
|
—
|
|
|
791
|
|
||
Long-term debt due within one year
|
|
—
|
|
|
791
|
|
||
Total debt
|
|
$
|
883,500
|
|
|
$
|
911,864
|
|
(in thousands)
|
|
2019
|
|
2018
|
|
2017
|
||||||
Revolving credit facility:
|
|
|
|
|
|
|
||||||
Daily average amount outstanding
|
|
$
|
925,715
|
|
|
$
|
731,110
|
|
|
$
|
436,588
|
|
Weighted-average interest rate
|
|
3.54
|
%
|
|
3.24
|
%
|
|
2.55
|
%
|
|||
Term loan facility:(1)
|
|
|
|
|
|
|
||||||
Daily average amount outstanding
|
|
$
|
—
|
|
|
$
|
63,638
|
|
|
$
|
315,862
|
|
Weighted-average interest rate
|
|
—
|
|
|
2.97
|
%
|
|
2.57
|
%
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
Total available
|
||
Revolving credit facility commitment
|
|
$
|
1,150,000
|
|
Amount drawn on revolving credit facility
|
|
(883,500
|
)
|
|
Outstanding letters of credit(1)
|
|
(5,408
|
)
|
|
Net available for borrowing as of December 31, 2019
|
|
$
|
261,092
|
|
NOTE 16: LEASES
|
(in thousands)
|
|
2019
|
||
Operating cash outflows
|
|
$
|
17,737
|
|
Lease assets obtained during the period in exchange for lease obligations
|
|
11,637
|
|
|
|
|
|
||
|
|
December 31, 2019
|
||
Operating lease assets
|
|
$
|
44,372
|
|
|
|
|
||
Accrued liabilities
|
|
$
|
12,898
|
|
Operating lease liabilities
|
|
33,585
|
|
|
Total operating lease liabilities
|
|
$
|
46,483
|
|
Weighted-average remaining lease term (in years)
|
|
5.1
|
|
|
Weighted-average discount rate
|
|
3.4
|
%
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
Operating lease obligations
|
||
2020
|
|
$
|
13,970
|
|
2021
|
|
11,334
|
|
|
2022
|
|
8,397
|
|
|
2023
|
|
4,527
|
|
|
2024
|
|
3,319
|
|
|
Thereafter
|
|
9,163
|
|
|
Total lease payments
|
|
50,710
|
|
|
Less imputed interest
|
|
(4,227
|
)
|
|
Present value of lease payments
|
|
$
|
46,483
|
|
NOTE 17: OTHER COMMITMENTS AND CONTINGENCIES
|
NOTE 18: SHAREHOLDERS' EQUITY
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
NOTE 19: BUSINESS SEGMENT INFORMATION
|
•
|
Small business marketing solutions – Our marketing products utilize digital printing and web-to-print solutions to provide printed marketing materials and promotional solutions, such as postcards, brochures, retail packaging supplies, apparel, greeting cards and business cards.
|
•
|
Treasury management solutions – These solutions include remittance and lockbox processing, remote deposit capture, receivables management, payment processing and paperless treasury management, as well as software, hardware and digital imaging solutions.
|
•
|
Web services – These service offerings include web hosting and domain name services, logo and web design, payroll services, email marketing, search engine marketing and optimization and business incorporation and organization services.
|
•
|
Data-driven marketing solutions – These offerings include outsourced marketing campaign targeting and execution and marketing analytics solutions that help our customers grow revenue through strategic targeting, lead optimization, retention and cross-selling services.
|
•
|
Fraud, security, risk management and operational services – These service offerings include fraud protection and security services, electronic checks and deposits ("ePayments") and digital engagement solutions, including loyalty and rewards programs and financial management tools.
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
Year Ended December 31, 2019
|
||||||||||||||
(in thousands)
|
|
Small Business Services
|
|
Financial Services
|
|
Direct Checks
|
|
Consolidated
|
||||||||
Marketing solutions and other services:
|
|
|
|
|
|
|
|
|
||||||||
Small business marketing solutions
|
|
$
|
281,552
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
281,552
|
|
Treasury management solutions
|
|
—
|
|
|
193,527
|
|
|
—
|
|
|
193,527
|
|
||||
Web services
|
|
166,025
|
|
|
—
|
|
|
—
|
|
|
166,025
|
|
||||
Data-driven marketing solutions
|
|
—
|
|
|
157,706
|
|
|
—
|
|
|
157,706
|
|
||||
Fraud, security, risk management and operational services
|
|
24,572
|
|
|
49,562
|
|
|
13,209
|
|
|
87,343
|
|
||||
Total MOS
|
|
472,149
|
|
|
400,795
|
|
|
13,209
|
|
|
886,153
|
|
||||
Checks
|
|
462,950
|
|
|
219,695
|
|
|
100,550
|
|
|
783,195
|
|
||||
Forms, accessories and other products
|
|
320,680
|
|
|
13,008
|
|
|
5,679
|
|
|
339,367
|
|
||||
Total revenue
|
|
$
|
1,255,779
|
|
|
$
|
633,498
|
|
|
$
|
119,438
|
|
|
$
|
2,008,715
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Year Ended December 31, 2018
|
||||||||||||||
(in thousands)
|
|
Small Business Services
|
|
Financial Services
|
|
Direct Checks
|
|
Consolidated
|
||||||||
Marketing solutions and other services:
|
|
|
|
|
|
|
|
|
||||||||
Small business marketing solutions
|
|
$
|
292,245
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
292,245
|
|
Treasury management solutions
|
|
—
|
|
|
148,011
|
|
|
—
|
|
|
148,011
|
|
||||
Web services
|
|
161,646
|
|
|
—
|
|
|
—
|
|
|
161,646
|
|
||||
Data-driven marketing solutions
|
|
—
|
|
|
147,893
|
|
|
—
|
|
|
147,893
|
|
||||
Fraud, security, risk management and operational services
|
|
25,460
|
|
|
50,499
|
|
|
14,146
|
|
|
90,105
|
|
||||
Total MOS
|
|
479,351
|
|
|
346,403
|
|
|
14,146
|
|
|
839,900
|
|
||||
Checks
|
|
476,751
|
|
|
226,554
|
|
|
107,084
|
|
|
810,389
|
|
||||
Forms, accessories and other products
|
|
327,518
|
|
|
14,010
|
|
|
6,208
|
|
|
347,736
|
|
||||
Total revenue
|
|
$
|
1,283,620
|
|
|
$
|
586,967
|
|
|
$
|
127,438
|
|
|
$
|
1,998,025
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Year Ended December 31, 2017
|
||||||||||||||
(in thousands)
|
|
Small Business Services
|
|
Financial Services
|
|
Direct Checks
|
|
Consolidated
|
||||||||
Marketing solutions and other services:
|
|
|
|
|
|
|
|
|
||||||||
Small business marketing solutions
|
|
$
|
262,192
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
262,192
|
|
Treasury management solutions
|
|
—
|
|
|
109,240
|
|
|
—
|
|
|
109,240
|
|
||||
Web services
|
|
131,644
|
|
|
—
|
|
|
—
|
|
|
131,644
|
|
||||
Data-driven marketing solutions
|
|
—
|
|
|
150,572
|
|
|
—
|
|
|
150,572
|
|
||||
Fraud, security, risk management and operational services
|
|
25,491
|
|
|
61,185
|
|
|
15,354
|
|
|
102,030
|
|
||||
Total MOS
|
|
419,327
|
|
|
320,997
|
|
|
15,354
|
|
|
755,678
|
|
||||
Checks
|
|
482,928
|
|
|
249,716
|
|
|
118,392
|
|
|
851,036
|
|
||||
Forms, accessories and other products
|
|
337,484
|
|
|
14,562
|
|
|
6,796
|
|
|
358,842
|
|
||||
Total revenue
|
|
$
|
1,239,739
|
|
|
$
|
585,275
|
|
|
$
|
140,542
|
|
|
$
|
1,965,556
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
(in thousands)
|
|
Small Business Services
|
|
Financial Services
|
|
Direct Checks
|
|
Total
|
||||||||
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
||||||||
U.S.
|
|
$
|
1,157,195
|
|
|
$
|
611,403
|
|
|
$
|
119,438
|
|
|
$
|
1,888,036
|
|
Foreign, primarily Canada and Australia
|
|
98,584
|
|
|
22,095
|
|
|
—
|
|
|
120,679
|
|
||||
Total revenue
|
|
$
|
1,255,779
|
|
|
$
|
633,498
|
|
|
$
|
119,438
|
|
|
$
|
2,008,715
|
|
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
||||||||
U.S.
|
|
$
|
1,180,019
|
|
|
$
|
563,918
|
|
|
$
|
127,438
|
|
|
$
|
1,871,375
|
|
Foreign, primarily Canada and Australia
|
|
103,601
|
|
|
23,049
|
|
|
—
|
|
|
126,650
|
|
||||
Total revenue
|
|
$
|
1,283,620
|
|
|
$
|
586,967
|
|
|
$
|
127,438
|
|
|
$
|
1,998,025
|
|
Year Ended December 31, 2017
|
|
|
|
|
|
|
|
|
||||||||
U.S.
|
|
$
|
1,150,055
|
|
|
$
|
568,801
|
|
|
$
|
140,542
|
|
|
$
|
1,859,398
|
|
Foreign, primarily Canada and Australia
|
|
89,684
|
|
|
16,474
|
|
|
—
|
|
|
106,158
|
|
||||
Total revenue
|
|
$
|
1,239,739
|
|
|
$
|
585,275
|
|
|
$
|
140,542
|
|
|
$
|
1,965,556
|
|
DELUXE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
|
|
|
|
|
|
Reportable Business Segments
|
|
|
|
|
||||||||||||||
(in thousands)
|
|
|
|
Small Business Services
|
|
Financial Services
|
|
Direct Checks
|
|
Corporate
|
|
Consolidated
|
||||||||||
Total revenue from external
|
|
2019
|
|
$
|
1,255,779
|
|
|
$
|
633,498
|
|
|
$
|
119,438
|
|
|
$
|
—
|
|
|
$
|
2,008,715
|
|
customers:
|
|
2018
|
|
1,283,620
|
|
|
586,967
|
|
|
127,438
|
|
|
—
|
|
|
1,998,025
|
|
|||||
|
|
2017
|
|
1,239,739
|
|
|
585,275
|
|
|
140,542
|
|
|
—
|
|
|
1,965,556
|
|
|||||
Operating (loss) income:
|
|
2019
|
|
(124,235
|
)
|
|
(67,524
|
)
|
|
33,618
|
|
|
—
|
|
|
(158,141
|
)
|
|||||
|
|
2018
|
|
119,808
|
|
|
69,939
|
|
|
41,474
|
|
|
—
|
|
|
231,221
|
|
|||||
|
|
2017
|
|
181,528
|
|
|
101,047
|
|
|
46,601
|
|
|
—
|
|
|
329,176
|
|
|||||
Depreciation and amortization
|
|
2019
|
|
62,138
|
|
|
60,622
|
|
|
3,276
|
|
|
—
|
|
|
126,036
|
|
|||||
expense:
|
|
2018
|
|
66,031
|
|
|
61,843
|
|
|
3,226
|
|
|
—
|
|
|
131,100
|
|
|||||
|
|
2017
|
|
56,834
|
|
|
62,592
|
|
|
3,226
|
|
|
—
|
|
|
122,652
|
|
|||||
Asset impairment charges:
|
|
2019
|
|
273,583
|
|
|
117,397
|
|
|
—
|
|
|
—
|
|
|
390,980
|
|
|||||
|
|
2018
|
|
99,437
|
|
|
1,882
|
|
|
—
|
|
|
—
|
|
|
101,319
|
|
|||||
|
|
2017
|
|
54,880
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54,880
|
|
|||||
Total assets:
|
|
2019
|
|
841,858
|
|
|
583,555
|
|
|
154,687
|
|
|
363,211
|
|
|
1,943,311
|
|
|||||
|
|
2018
|
|
1,094,262
|
|
|
751,242
|
|
|
157,802
|
|
|
301,790
|
|
|
2,305,096
|
|
|||||
|
|
2017
|
|
1,081,098
|
|
|
679,547
|
|
|
158,827
|
|
|
289,355
|
|
|
2,208,827
|
|
|||||
Capital asset purchases:
|
|
2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66,595
|
|
|
66,595
|
|
|||||
|
|
2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62,238
|
|
|
62,238
|
|
|||||
|
|
2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47,450
|
|
|
47,450
|
|
DELUXE CORPORATION
SUMMARIZED QUARTERLY FINANCIAL DATA (Unaudited)
|
|
|
2019 Quarter Ended
|
||||||||||||||
(in thousands, except per share amounts)
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Total revenue
|
|
$
|
499,065
|
|
|
$
|
493,986
|
|
|
$
|
493,593
|
|
|
$
|
522,071
|
|
Gross profit
|
|
299,442
|
|
|
291,458
|
|
|
289,870
|
|
|
315,010
|
|
||||
Net income (loss)
|
|
41,190
|
|
|
32,582
|
|
|
(318,493
|
)
|
|
44,824
|
|
||||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
0.93
|
|
|
0.75
|
|
|
(7.49
|
)
|
|
1.06
|
|
||||
Diluted
|
|
0.93
|
|
|
0.75
|
|
|
(7.49
|
)
|
|
1.06
|
|
||||
Cash dividends per share
|
|
0.30
|
|
|
0.30
|
|
|
0.30
|
|
|
0.30
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
2018 Quarter Ended
|
||||||||||||||
(in thousands, except per share amounts)
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Total revenue
|
|
$
|
491,914
|
|
|
$
|
488,244
|
|
|
$
|
493,190
|
|
|
$
|
524,677
|
|
Gross profit
|
|
303,156
|
|
|
298,043
|
|
|
295,556
|
|
|
309,522
|
|
||||
Net income (loss)
|
|
63,336
|
|
|
60,207
|
|
|
(31,083
|
)
|
|
57,170
|
|
||||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
1.32
|
|
|
1.26
|
|
|
(0.67
|
)
|
|
1.25
|
|
||||
Diluted
|
|
1.31
|
|
|
1.25
|
|
|
(0.67
|
)
|
|
1.25
|
|
||||
Cash dividends per share
|
|
0.30
|
|
|
0.30
|
|
|
0.30
|
|
|
0.30
|
|
|
2019 Quarter Ended
|
|||||||||||||||
(in thousands)
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Asset impairment charges
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
390,980
|
|
|
$
|
—
|
|
Restructuring and integration expense
|
|
6,283
|
|
|
17,497
|
|
|
27,674
|
|
|
23,356
|
|
||||
Certain legal-related expense
|
|
412
|
|
|
6,005
|
|
|
—
|
|
|
3
|
|
||||
CEO transition costs
|
|
5,488
|
|
|
1,906
|
|
|
1,145
|
|
|
851
|
|
||||
Discrete income tax expense (benefit)(1)
|
|
926
|
|
|
1,194
|
|
|
62,854
|
|
|
(298
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
2018 Quarter Ended
|
||||||||||||||
(in thousands)
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
||||||||
Asset impairment charges
|
|
$
|
2,149
|
|
|
$
|
—
|
|
|
$
|
99,170
|
|
|
$
|
—
|
|
Restructuring and integration expense
|
|
2,322
|
|
|
6,371
|
|
|
5,104
|
|
|
7,406
|
|
||||
Gain on sales of businesses and customer lists
|
|
7,228
|
|
|
3,862
|
|
|
1,765
|
|
|
2,786
|
|
||||
Certain legal-related expense
|
|
297
|
|
|
631
|
|
|
1,805
|
|
|
7,769
|
|
||||
CEO transition costs
|
|
—
|
|
|
1,530
|
|
|
2,622
|
|
|
3,058
|
|
||||
Impact of the Tax Cuts and Jobs Act
|
|
(310
|
)
|
|
441
|
|
|
(1,249
|
)
|
|
(582
|
)
|
||||
Other discrete income tax (benefit) expense(1)
|
|
(579
|
)
|
|
(1,167
|
)
|
|
15,634
|
|
|
(1,987
|
)
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9A. CONTROLS AND PROCEDURES
|
ITEM 9B. OTHER INFORMATION
|
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11. EXECUTIVE COMPENSATION
|
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOKHOLDER MATTERS
|
Plan category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
|
Weighted-average exercise price of outstanding options, warrants and rights
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
|
|
||||
Equity compensation plans approved by shareholders
|
|
2,263,602
|
|
(1)
|
$
|
53.92
|
|
(1)
|
7,498,216
|
|
(2)
|
Equity compensation plans not approved by shareholders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Total
|
|
2,263,602
|
|
|
$
|
53.92
|
|
|
7,498,216
|
|
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
Exhibit Number
|
|
Description
|
3.1
|
|
|
3.2
|
|
|
4.1
|
|
|
4.2
|
|
|
10.1
|
|
|
10.2
|
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
Exhibit Number
|
|
Description
|
10.8
|
|
|
10.9
|
|
|
10.10
|
|
|
10.11
|
|
|
10.12
|
|
|
10.13
|
|
|
10.14
|
|
|
10.15
|
|
|
10.16
|
|
|
10.17
|
|
|
10.18
|
|
|
10.19
|
|
|
10.20
|
|
|
10.21
|
|
|
10.22
|
|
Exhibit Number
|
|
Description
|
10.23
|
|
|
10.24
|
|
|
10.25
|
|
|
10.26
|
|
|
10.27
|
|
|
10.28
|
|
|
10.29
|
|
|
21.1
|
|
|
23.1
|
|
|
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
|
Exhibit Number
|
|
Description
|
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)
|
ITEM 16. FORM 10-K SUMMARY
|
SIGNATURES
|
|
DELUXE CORPORATION
|
Date: February 21, 2020
|
/s/ Barry C. McCarthy
|
|
Barry C. McCarthy, President and Chief Executive Officer
|
Signature
|
Title
|
|
|
/s/ Barry C. McCarthy
|
President and Chief Executive Officer
|
Barry C. McCarthy
|
(Principal Executive Officer)
|
|
|
/s/ Keith A. Bush
|
Senior Vice President, Chief Financial Officer
|
Keith A. Bush
|
(Principal Financial Officer)
|
|
|
/s/ Ronald Van Houwelingen
|
Vice President, Corporate Controller
|
Ronald Van Houwelingen
|
(Principal Accounting Officer)
|
|
|
/s/ Ronald C. Baldwin
|
|
Ronald C. Baldwin
|
Director
|
|
|
/s/ William C. Cobb
|
|
William C. Cobb
|
Director
|
|
|
/s/ Cheryl Mayberry McKissack
|
|
Cheryl Mayberry McKissack
|
Director
|
|
|
/s/ Don J. McGrath
|
|
Don J. McGrath
|
Director
|
|
|
/s/ Neil J. Metviner
|
|
Neil J. Metviner
|
Director
|
|
|
/s/ Stephen P. Nachtsheim
|
|
Stephen P. Nachtsheim
|
Director
|
|
|
/s/ Thomas J. Reddin
|
|
Thomas J. Reddin
|
Director
|
|
|
/s/ Martyn R. Redgrave
|
|
Martyn R. Redgrave
|
Director
|
|
|
/s/ John L. Stauch
|
|
John L. Stauch
|
Director
|
|
|
/s/ Victoria A. Treyger
|
|
Victoria A. Treyger
|
Director
|
|
|
•
|
Director Nomination and Election Procedures. In order to nominate candidates for the Board of Directors, a shareholder must follow the advance notice procedures described in our Bylaws. In general, a shareholder must give written notice of such nomination to our secretary at least 90 calendar days prior to the first anniversary of the preceding year’s annual meeting of shareholders, together with required information regarding the shareholder
|
•
|
Shareholder Proposal Procedures. Shareholders can propose that business other than nominations to the Board of Directors be considered at an annual meeting of shareholders only if a shareholder follows the advance notice procedures described in our Bylaws. In general, a shareholder must submit a written notice of the proposal together with required information regarding the shareholder and the shareholder's interest in the proposal to the Board of Directors or our secretary at least 90 calendar days prior to the first anniversary of the preceding year’s annual meeting of shareholders. Shareholders seeking to have a proposal, other than director nominations, considered for inclusion in our annual proxy statement must comply with the requirements of Rule 14a-8 of the proxy rules under the federal securities laws.
|
•
|
Related Person Transactions. Our Articles of Incorporation contain “fair price” provisions which require that holders of not less than 70% of the outstanding shares of our voting stock shall approve (i) business combinations with a 5% shareholder or its affiliates or associates, including mergers, consolidations, exchanges of shares, or sales of all or substantially all of the assets of our company, and (ii) business combinations involving a subsidiary that require the approval of the shareholders of the subsidiary, unless in the case of either (i) or (ii), specified price criteria and procedural requirements are met or unless the transaction is approved by the majority of our continuing directors. Our Articles of Incorporation also contain “anti-greenmail” provisions which preclude us from making certain purchases of Common Stock from a 5% shareholder unless the purchases are approved by not less than 50% of the outstanding shares of voting stock held by the disinterested shareholders. These “fair price” and “anti-greenmail” provisions of our Articles may not be amended without the affirmative vote of the holders of at least 70% of the outstanding shares of our voting stock.
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: February 21, 2020
|
/s/ Barry C. McCarthy
|
|
Barry C. McCarthy
|
|
President and Chief Executive Officer
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: February 21, 2020
|
/s/ Keith A. Bush
|
|
Keith A. Bush
|
|
Senior Vice President, Chief Financial Officer
|
(1)
|
the Annual Report on Form 10-K of the Company for the year ended December 31, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: February 21, 2020
|
/s/ Barry C. McCarthy
|
|
Barry C. McCarthy
|
|
President and Chief Executive Officer
|
|
/s/ Keith A. Bush
|
|
Keith A. Bush
|
|
Senior Vice President, Chief Financial Officer
|