UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[ x ] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the fiscal year ended DECEMBERDecember 31, 1993.
-----------------1996.
Commission file number 1-7945.
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DELUXE CORPORATION
------------------
(Exact name of registrant as specified in its charter)
MINNESOTAMinnesota 41-0216800
- --------------------------------------- ------------------------------
(State or other jurisdiction of (IRS(I.R.S. Employer
incorporation or organization) Identification No.)
1080 WEST COUNTY ROAD F, SAINT PAUL, MINNESOTA 55126-8201
- ------------------------------------------------ ------------------------------3680 Victoria St. N., Shoreview, Minnesota 55126-2966
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number: (612) 483-7111.
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUECommon Stock, par value New York Stock Exchange
$1.00 PER SHARE NEW YORK STOCK EXCHANGE
- --------------------------------------- -----------------------
(Title of Class)per share (Name of each exchange on which registered)
(Title of Class)
Securities registered pursuant to Section 12(g) of the act:Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. x Yes __ No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405(ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ x ]
AggregateThe aggregate market value of the voting stock held by non-affiliates of the
registrant: $2,728,026,633registrant is $2,680,423,506 based on the closing priceaverage bid and asked prices of the
stock on the New York Stock Exchange on March 14, 1994.10, 1997. The number of
outstanding shares of the registrant's common stock as of March 14, 1994: 82,518,073.
10, 1997, was
82,224,371.
Documents Incorporated by Reference:
1. Portions of the registrant's 1993 Annual Reportannual report to Shareholders (Annual
Report)shareholders for
the fiscal year ended December 31, 1996, are incorporated by
reference in Parts III and IV.II.
2. Portions of theThe registrant's proxy statement, dated March 28, 1994 (Proxy
Statement) are31, 1997, is
incorporated by reference in Part III.
DELUXE CORPORATION
PART I
ItemITEM 1. DescriptionDESCRIPTION OF BUSINESS
Deluxe Corporation (collectively with its subsidiaries, the "Company") is a
leading supplier of Businesspaper-based and electronic payment services to the financial
and retail industries. The Company also provides integrated payment protection
services to the financial and retail markets. The Company is headquartered in
Shoreview, Minnesota, and has facilities in the United States, Puerto Rico,
Canada and the United Kingdom. The Company's products and services are sold
primarily in the United States.
The Company's operations are conducted by Deluxe Corporation and 25
subsidiaries. The marketing operations of the Company are divided between three
market-serving units ("MSUs") or divisions: Deluxe Financial Services, Deluxe
Electronic Payment Systems and Deluxe Direct.
The Company was incorporated under the laws of the State of Minnesota in
1920. From 1920 asuntil 1988, the successor to a business founded in 1915. Unless the context otherwise
requires, the term "Company," as used herein, refers toCompany was named Deluxe CorporationCheck Printers,
Incorporated. The Company's principal executive offices are located at 3680
Victoria St. N., Shoreview, Minnesota 55126-2966, telephone (612) 483-7111.
DELUXE FINANCIAL SERVICES
The Company's Deluxe Financial Services MSU provides check printing, direct
marketing, customer database management, and its seven wholly owned subsidiaries.
The seven wholly owned subsidiaries are: Deluxe Data Systems, Inc., a
supplier of software and processing services for automated teller machines,
point-of-sale systems, automated clearing houses and government benefit
transfers; Chex Systems, Inc., a new-account verification business providingrelated services to the financial
institutions; Electronic Transaction Corporation, a data
base business providingindustry. Deluxe Financial Services also provides payment systems protection
services - including check authorization, informationaccount verification, and collection
services - to retailers; Deluxe
U.K. Limited, a manufacturer offinancial institutions and retailers and short-run computer and
business forms to small businesses. Deluxe Financial Services had net sales of
approximately $1.4 billion in the
United Kingdom; PaperDirect, Inc., a direct mail marketer of specialty paper;
Nelco, Inc., a supplier of tax forms, tax forms software, and electronic tax
filing services ; and Current, Inc., a direct mail marketer of greeting cards,
stationery, bank checks and related consumer specialty products.
The Company has three basic business units: (1) Payment Systems, in which
the Company provides check printing, electronic funds transfer, automated
terminal machine (ATM) card services and credit reporting services; (2) Business
Systems, in which the Company manufactures and supplies computer and business
forms, record-keeping systems, and a variety of related office products and
services; and (3) Consumer Specialty Products, in which the Company manufactures
and distributes, primarily through direct mail, greeting cards, gift wrap,
stationery, bank checks, and other products1996, accounting for household use. With the
exception of a relatively small volume of business forms and paper sales in the
United Kingdom, practically allapproximately 73.3 percent of
the Company's products and services are sold
in the United States.
Reference is made to the information contained in Note 9, Business Segment
Information, in the Notes to Consolidated Financial Statements on page 37 in the
Company's Annual Report.
PAYMENT SYSTEMS
The Company'stotal sales.
Deluxe Paper Payment Systems
DivisionDeluxe Paper Payment Systems ("DPPS") prints and sells checks to banks and other financial
institutions and depositors a variety ofdepositors. DPPS sold checks to more than 10,000 financial
institutions and related banking
forms. It directs its efforts to the production and marketing of checks and
deposit tickets for personal and business
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accounts. Severalfulfilled approximately 110 million check styles are offered; some are designed for desk or office
use; others are designed to be carriedorders in a pocket or purse.
Substantially all of the Company's checks and related banking forms are
imprinted with magnetic ink and are designed to conform with the specifications
of the magnetic ink character recognition (MICR) program currently utilized by
the U.S. banking system.
For several years the banking industry and others have been seeking ways to
improve the payment system and a variety of alternatives to the bank check as a
medium for settling financial transactions have been introduced, including, for
example, charge cards, credit cards, debit cards, telephone bill payment, etc.
Although such alternative means of settling financial transactions may reduce
the demand for checks, the Company is unable to predict the precise extent of
application of such alternatives or their effect on its future operations.
In the case of checks, depositors1996.
Depositors commonly submit initial check orders and reorders to their financial
institutions, which forward them to one of the
Company'sDPPS' printing plants. Completed ordersPrinted checks
are sentshipped directly by the CompanyDPPS to the depositors, typically on the business day
after receipt of the order. The
Company'sDPPS' charges are paid by the financial
institutions, which in turn usually deduct the amountscharges from the depositors'
accounts. Skeleton check forms are lithographed in three of the Company's regional
warehouseDPPS also provides direct mail checks to households and distribution centers, principally on high-speed roll-fed presses.
From these centers, the forms are distributedsmall
businesses. DPPS endeavors to the Company's 48 check
production plants, where names, addresses, financial institution nameproduce and other
information are printed on the documents. The Company's facilities are located
in major metropolitan areas throughout the United States.
The Company has no material backlog of orders. Approximately 96 percent ofship all check orders received by the Company in 1993 were completed and shipped no
later than the first working daywithin two days
after receipt of the order.
The approximate
number of financial institutions (notPayment systems and methods have been changing in the United States in recent
years as banking and other industries have introduced alternatives to the
traditional check, including branches as separate entities)
to which the Company made gross salescharge cards, credit cards, debit cards and
electronic payments, among others. Sales of checks have also been subject to
increased competition and related banking formsconsequent pressure on prices. In addition, the direct
mail segment of the check market is growing as a lower-priced alternative to
financial institution checks and, in excess of $100,000 during the year was 1,926. No single institution, including
its branches, accounted for more than approximately 21996, represented an estimated 20 percent
of the Company's
1993personal check market. These developments have produced a mature market
for checks and have created pricing pressure on DPPS' check sales.
The Company's principal raw materials are safety paperCompany believes that checks will likely remain an important part of
consumers' payment options for many years. To stabilize check printing
operations and special MICR
bond papers.improve profitability, the Company has focused in recent years on
controlling expenses and increasing efficiency (see "Recent Developments"), and
on higher margin products and services, such as specially designed checks and
licensed check designs. At the same time, the growing direct mail check segment
has been an opportunity for DPPS' direct mail personal check operations.
The Company purchases substantially all of its safety paper from
Simpson Paper Company, which finishes and warehouses the paper in its plants in
Warwick, New York, and Burlington, Iowa. Most of the Company's special MICR bond
papers are obtained from Georgia Pacific Corporation, primarily from its
facility in Port Edwards, Wisconsin. The Company has no long-term contract with
any of its suppliers and has never experienced a shortage of either safety paper
or MICR bond papers. In order to assure adequate sources of supply, the Company
is continually experimenting with the use of special MICR bond papers from other
suppliers. Other raw materials used by the Company are of a standard composition
and are purchased from a number of sources at competitive prices.
The Company's primary competitors in the sale of bank checks and related
banking forms are two other large national printers who specialize in check
printing. However, any printer which complies with the American Bankers
Association's specifications for MICR
- 3 -
printing is a potential competitor. The Company is the largest firm engaged
principally in check printing.
The Company is also a major supplier of electronic funds transfer software
and processing services, particularly software and services forsells personalized plastic automated teller machines, processing of ATM interchange transactions withinmachine (ATM)
cards and between regional
shared networks,credit and electronic benefit transactions. Deluxe provides ATM
transaction processing technology and servicesdebit cards to six of the 10 largest ATM
networks. The Company provides electronic benefit transactions services for the
automated payment of aid to dependent children and food stamp benefits in
Maryland and New Jersey.
Competition for the Company's electronic funds transfer software and
processing services comes from several large financial institutions and communications companies.
BUSINESS SYSTEMS
This division directs its primary effortsretailers, and
driver's licenses and other identification cards to the productiongovernment agencies. In
addition, Deluxe Business Forms & Supplies, Inc. produces and marketing
ofmarkets short-run printed
computer and business forms and record-keeping systems for
small businesses and professional practices. In addition, it is a direct mail
marketer of decorated and other specialty papers to users of laser printers and
office copiers. Other products and services marketed by the division include tax
forms, tax forms software, one-write accounting systems, and electronic tax
filing services.
The division has no material backlog of orders and does not carry
significant inventory. Approximately 94 percent of all personalized standard
forms orders were completed and shipped no later than the third working day
after receipt, and all custom forms were completed and shipped no later than the
fifth day after receipt. Orders for specialty papers were typically filled no
later than the first day after receipt.
Business Systems' productsforms. Both product lines are sold primarily through
direct mail and telephone marketing.
Deluxe Payment Protection Systems
The Company offers integrated payment protection services through the
subsidiaries which comprise its Deluxe Payment Protection Systems division: Chex
Systems, Inc. ("ChexSystems"); Deluxe Payment Protection Services, Inc.; and
National Revenue Corporation ("NRC") and its subsidiaries. ChexSystems is the
leader in the account verification market, providing risk management information
to more than 70,000 financial institution offices. Through its Shared Check
Authorization Network ("SCAN"), Deluxe Payment Protection Systems, Inc. operates
the nation's leading check package advertisements. Business Systems'verification service with a network consisting of
thousands of retail locations that share risk-management information. NRC is one
of the five largest U.S. collections agencies, collecting $3 billion in 1996 for
30,000 credit grantors.
Deluxe Direct Response
Deluxe Direct Response develops targeted direct mail marketing campaigns for
financial institutions. It provides database products from the Company's Deluxe
Data Resources and Deluxe MarketWise businesses and fulfillment services that
include printing and mailing direct mail marketing pieces (including letter
checks offered to credit card holders) and tracking customer response rates.
Deluxe Data Resources (purchased in July 1996) provides financial institutions
with a comprehensive database of proprietary homeowner, consumer, and market
research information. Deluxe MarketWise (established June 1996) provides
software that enables financial institutions to develop customer profiles from
their separate databases - including checking, saving, credit card, loans - and
from Deluxe-provided databases.
DELUXE ELECTRONIC PAYMENT SYSTEMS\
The Deluxe Electronic Payment Systems ("DEPS") MSU is comprised of Deluxe
Data Systems, Inc. ("Deluxe Data"), which provides electronic funds transfer
processing and software and is the nation's largest third-party transaction
processor for regional ATM networks. DEPS processed approximately 2.6 billion
transactions in 1996. DEPS also provides services in emerging debit markets,
including electronic benefit transfer ("EBT") and retail point-of-sale ("POS")
transaction processing. EBT programs use ATM and POS terminals to deliver food
stamps and welfare assistance. DEPS currently supports EBT programs for the
state governments of Maryland, New Jersey, Utah and Kansas and has been awarded
contracts to serve Louisiana, Minnesota, Wisconsin, Oregon and two counties in
California. DEPS also provides Medicaid verification services in New York and is
part of coalitions that are produced or inventoriedgoing to support EBT programs in ninethe Northeast
Coalition of States, the Western States EBT Alliance and the Southern Alliance
of States. DEPS had net sales of approximately $130 million in 1996,
representing approximately 6.9% of the Company's plants. Its competition consiststotal sales.
In November 1996, the Company reached an agreement to form a joint venture
with HCL Corporation ("HCL") of a large number of
nationalNew Delhi, India, to help modernize India's
banking industry. When formed, the joint venture will also make HCL's software
and local businessprogramming capabilities available to the Company's U.S. financial
institution customers. This unit is expected to generate its first revenues in
1997.
DELUXE DIRECT
The Company also, through its Deluxe Direct MSU, markets specialty papers,
and other products to small businesses, provides tax forms and office products suppliers andelectronic tax
filing service providers.
CONSUMER SPECIALTY PRODUCTS
This division producesservices to tax preparers, and marketssells direct mail greeting cards, gift
wrap miscellaneous
stationery and bank checks. In addition, it markets a varietyrelated products to households. Deluxe Direct had net sales of
novelty itemsapproximately $375 million in 1996 (such amount includes revenues attributable
to several businesses that were divested in 1996--see "Recent Developments"),
accounting for household use, many of which have been created by the division and are sold
under its proprietary trademarks. All such products are sold to consumers by
means of catalogs and other direct mail advertisements. Many of the division's
promotions are based on holidays, and due to the relative size of the year-end
holiday season, approximately 4019.8 percent of the division'sCompany's total sales. Deluxe
Direct markets its products primarily through the Social Expressions division of
Current, Inc. ("Current"), PaperDirect, Inc. ("PaperDirect"), and Nelco, Inc.
("Nelco").
Current is a direct mail supplier of social expression products, including
greeting cards, gift wrap, small gifts and related products. Current's social
expression business is seasonal and based on holidays. Historically, more than
one-third of Current's annual sales occurhave been made in the fourth quarter.
Consumer Specialty ProductsCurrent's direct mail check business is described under "Deluxe Financial
Services -- Deluxe Paper Payment Systems".
PaperDirect is a direct mail marketer of specialty papers, presentation
products and pre-designed forms for laser printing and desktop publishing.
Deluxe Direct also includes Nelco, a supplier of tax forms, tax forms software,
and electronic tax filing services.
Many of PaperDirect's products are producedsold internationally by Deluxe (UK)
Limited and Deluxe Canada Inc. The Company has indicated its intent to sell its
Deluxe Direct businesses in two1997, but has not entered into any binding sale
agreements.
RECENT DEVELOPMENTS
In late 1995 and early 1996, the Company announced that it had initiated a
major consolidation program, which includes the closing of 26 of the Company's
plants.
The division's competitors are primarily41 printing and warehousing facilities over the national greeting card and
stationery printers that market their products through owned and franchised card
and gift shops, and a large1996-1997 period, significantly
reducing the number of check printers that solicit orders by
direct mail.
- 4 -
its staff and production employees. Twelve plants were
closed in 1996, 13 additional plants are scheduled to close in 1997 and one is
currently scheduled for closing in early 1998.
In 1996, the Company divested T/Maker Company, a publisher of image content
software, its internal bank and health care forms businesses, Financial Alliance
Processing Services, Inc., a credit card processor, and its United Kingdom forms
business. The Company, in addition to its association with HCL, also formed an
alliance with Online Resources & Communications Corporation ("Online") to market
Online's home banking and bill payment software and NRC began a joint venture
with a United Kingdom-based collection company. NRC also acquired two smaller
collections companies in 1996 and the Company purchased the assets of a start-up
employment screening company.
EMPLOYEES
Including its subsidiaries, theThe Company has approximately 17,748 full19,600 full- and part-time employees. It has a
number of employee benefit plans, including (effective January 1, 1997) a 401(k)
plan, a retirement and profit sharing plan and medical hospitalization and retirementhospitalization
plans. The Company has never experienced a work stoppage or strike and considers
its employee relations to be good.
FINANCIAL INFORMATION
The information appearing under the caption "Note 12. Business Segment
Information" on pages 29-30 of the Company's Annual Report (the "Annual Report")
for the year ended December 31, 1996 is incorporated by reference.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are elected by the boardBoard of directorsDirectors
each year. The term of office of each executive officer will expire at the
annual meeting of the boardBoard after the annual shareholders'shareholders meeting on May 9,
1994.6,
1997. The principal occupation of each of the executive officers listed belowofficer is with the Company.
OFFICER
NAME POSITION AGE SINCE
- ---- -------- --- -------
Harold V. HavertyCompany,
and their positions are as follows:
Officer
Name Position Age Since
John A. Blanchard III Chairman of the Board, President 54 1995
and Chief Executive Officer
Gregory J. Bjorndahl Vice President, Sales and Marketing 46 1995
Ronald E. Eilers President, Deluxe Direct, Inc. 49 1996
John H. LeFevre Senior Vice President, Secretary 53 1994
and General Counsel
Lawrence J. Mosner Senior Vice President, President 54 1995
Deluxe Financial Services
Charles M. Osborne Senior Vice President and 43 1981
Chief Financial Officer
Michael F. Reeves Vice President, Human Resources 47 1987
Robert H. Rosseau Senior Vice President, President 49 1996
Deluxe Electronic Payment Systems
Michael R. Schwab Senior Vice President and 51 1994
Chief Information Officer
Jay B. Skutt Senior Vice President, General 53 1988
Manager, Check Printing
MR. BLANCHARD age 54, has served as President and Chief 63 1969
Executive Officer Jerry K. Twogoodof
the Company since May 1, 1995 and as Chairman of the Board of Directors since
May 6, 1996. From January 1994 to April 1995, Mr. Blanchard was executive vice
president of General Instrument Corporation, a supplier of systems and equipment
to the cable and satellite television industry. From 1991 to 1993, Mr. Blanchard
was chairman and chief executive officer of Harbridge Merchant Services, a
national credit card processing company. Previously, Mr. Blanchard was employed
by American Telephone & Telegraph Company for 25 years, most recently as senior
vice president responsible for national business sales. Mr. Blanchard also
serves as a director of Norwest Corporation and Saville Systems PLC.
MR. BJORNDAHL joined the Company in 1995 as a Vice President and is
responsible for Sales and Marketing for its Financial Services Group MSU and
Product Management for its DEPS MSU. Mr. Bjorndahl is also responsible for the
Company's Deluxe Direct Response business. Prior to joining the Company, Mr.
Bjorndahl was vice president of marketing for Citicorp Credit Services, Inc.'s
("Citicorp"), Master Card and Visa operations from January 1994 to July 1995.
Citicorp is a credit card issuer. From 1991 until he joined Citicorp, Mr.
Bjorndahl served as senior vice president, product development, for Visa
International, a credit card processing company.
MR. EILERS joined the Company in March 1988 when it purchased Current. From
1990 to 1995, Mr. Eilers served as Vice President and General Manager of
Current's direct mail checks business. In 1995, Mr. Eilers became President of
PaperDirect and the manager of the Company's business forms division. Mr. Eilers
became a Vice President of Deluxe Direct, Inc. ("DDI"), a subsidiary of the
Company that provides management services to its Deluxe Direct MSU, in October
1996 and he succeeded Mr. Mosner as the President of DDI in February 1997.
MR. LEFEVRE has served as Senior Vice President, General Counsel and
Secretary of the Company since February 1994. From 1978 to February 1994, Mr.
LeFevre was employed by Wang Laboratories, Inc. From 1988 until February 1994,
he held various positions in Wang Laboratories' law department, including
corporate counsel, vice president, general counsel and secretary. Wang
Laboratories was in the business of manufacturing and selling computer hardware
and software and related services.
MR. MOSNER served as Senior Vice President of the Company from November 1995
until October 1996, when he became President of DDI. During such time, Mr.
Mosner served as the Principal Executive Officer of the Company's Deluxe Direct
MSU. In February 1997, Mr. Mosner became a Senior Vice President of the Company
and he currently serves as President of its Financial Services Group MSU. Mr.
Mosner was Executive Vice President 53 1974
Charles M.and Chief Operating Officer of Hanover
Direct, a direct marketing company, with responsibility for non-apparel
products. Previously, he was employed for 28 years by Sears, Roebuck and
Company, where he was Vice President of merchandising from 1991 to 1993.
MR. OSBORNE has been employed by the Company since 1981 and has served as
Chief Financial Officer since 1984 and Senior Vice President since 1989. Mr.
Osborne is expected to leave the employ of the Company in May 1997.
MR. REEVES has been employed by the Company since 1970 and has been a Vice
President since 1987. From 1987 to 1992, Mr. Reeves was regional manager of the
Company's Northeastern printing operations. From 1992 to 1994, Mr. Reeves was
the manager of the Company's financial institution forms production unit, and
since July 1994, Mr. Reeves has had principal responsibility for the Company's
human resources department.
MR. ROSSEAU became a Senior Vice President of the Company and President of
its Deluxe Electronic Payment Systems MSU in August 1996. Prior to joining the
Company, Mr. Rosseau served as President of Diners Club U.S. from November 1990
to May 1996 and Chairman of Diners Club International from January 1992 to May
1996. From February 1989 to October 1990, Mr. Rosseau was Managing Director,
Distribution Marketing for Citibank, N.A. ("Citibank"). Diners Club is a charge
card issuer and Citibank is a financial institution.
MR. SCHWAB has been responsible for the information systems of the Company
and has served as Senior Vice President and Chief FinancialInformation Officer 40 1981
Arnold A. Angelonisince
November 1994. Previously, Mr. Schwab was employed by USAir, a commercial air
carrier, from 1989 to 1991 as senior vice president and chief information
officer, and from 1991 to April 1994 as executive vice president of operations.
MR. SKUTT has been employed by the Company since 1965. Since 1988, Mr. Skutt
has been a Vice President with principal responsibility for manufacturing and
national production operations and he has served as Senior Vice President 53 1985
Kenneth J. Chupita Senior Vice President 52 1981
Eachsince
1994. Mr. Skutt was the Company's Chief Procurement Officer from December 1995
to December 1996, when he became the General Manager of the executive officers has held his current position during the
past five years.
Itemcheck printing
operations.
ITEM 2. PropertiesPROPERTIES
The Company conducts production and service operations in 7381 facilities
located in 3029 states, Puerto Rico, Canada and the United Kingdom aggregatingKingdom. These
buildings total approximately 4,623,0004,721,000 square feet;feet. The Company's headquarters
occupies a 160,000-square-foot building in addition, the Payment Systems Division occupies threeShoreview, Minnesota. Deluxe
Financial Services has two principal facilities in Shoreview, Minnesota,
aggregatingtotaling approximately 433,000251,700 square feet, whichfeet. These sites are devoted to sales,
administration, information systems, research and development,
the Business Systems Division occupiesmarketing. Deluxe Direct's principal facilities are a
156,000 square foot administration156,000-square-foot marketing building in Shoreview, Minnesota, and the Consumer Specialty Products Division
occupies a
148,000 square foot administration148,000-square-foot sales and product design building in Colorado Springs,
Colorado. Deluxe Electronic Payment System's primary administrative facility
occupies a 171,000 square foot building in Milwaukee, Wisconsin and its
principal data processing centers are located in New Berlin, Wisconsin and
Scottsdale, Arizona. All but four of the Company's production facilities are of
one
story constructionhigh and most were constructed and equipped in accordance with the
Company's plans and specifications.
Over one-halfMore than half of the Company's total production area has been constructed
during the past 20 years. The Company owns 5848 of its facilities and leases the
remainder for terms expiring from 19941997 to 2001. Depending upon the
circumstances, when a lease expires, the Company either renews the lease or
constructs a new facility to replace the leased facility.
All facilities are
adequately equipped forThe Company has announced a plan to close 26 of its financial institution
check printing plants over a two-year period. These plant closings were made
possible by advancements in the Company's operations.
- 5 -
Itemtelecommunications, order processing
and printing technologies. Upon the completion of this restructuring, the
Company's 15 remaining plants will be equipped with sufficient capacity to
produce at or above current order volumes. As of December 31, 1996, 12 of the 26
plants had been closed. Also, during the first quarter of 1996, the Company
announced a plan to move the operating and administrative facilities of one of
its direct mail businesses from New Jersey to Colorado. This move was completed
in 1997.
ITEM 3. Legal Proceedings
ThereLEGAL PROCEEDINGS
Other than ordinary routine litigation incidental to its business, there are
no material pending legal proceedings other than ordinary
routine litigation incidental to the business, to which the Company or any of its
subsidiaries is a party or ofto which any of such company'sthe Company's property is the
subject.
ItemITEM 4. Submission of Matters to a Vote of Security HoldersSUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ItemITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
Reference is made to theMARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information containedappearing under the caption "Financial Highlights" on page 1,
and "Shareholder Information" on page 4033 of the Company's
Annual Report.
ItemReport is incorporated by
reference.
ITEM 6. Selected Financial Data
Reference is made to theSELECTED FINANCIAL DATA
The information containedappearing under the caption "Eleven-Year"Eleven-year Summary" on pages 2218
and 2319 in the Company's Annual Report.
ItemReport is incorporated by reference..
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Reference is made to theMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information containedappearing under the caption "Management's Discussion and
Analysis" on pages 2414 through 2617 in the Company's
Annual Report.
ItemReport is incorporated by
reference.
ITEM 8. Financial Statements and Supplementary Data
Reference is made to theFINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements, , notes and independent auditors' report on pages 2120
through 3931 of the Company's Annual Report and the information containedappearing under the caption
"Summarize"Summarized Quarterly Financial Data" (unaudited) on page 3931 in the Company's Annual
Report.
ItemReport is incorporated by reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial DisclosureCHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEMS 10, 11, 12 AND 13. DirectorsDIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
EXECUTIVE COMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT, AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's proxy statement, filed with the Securities and Executive Officers of the Registrant, Compliance with Section
16(a) of the Exchange
Act, Executive Compensation, Security Ownership of Certain
Beneficial Owners and Management, and Certain Relationships and Related
Transactions.
- 6 -
ReferenceCommission on March 31, 1997, is made to the Company's Proxy Statement.incorporated by reference.
PART IV
ItemITEM 14. Exhibits, Financial Statement Schedules, and Reports on FormEXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following financial statements, schedules and independent auditors'
report and consent are filed as part of this report:
Page in
Annual Report
(1) Financial Statements:
Consolidated Balance Sheets at December 31, 1993 and 1992 . . . 28 - 29
Consolidated Statements of Income for the three years in the
period ended December 31, 1993 . . . . . . . . . . . . . . 30
Consolidated Statements of Cash Flows for the three years
in the period ended December 31, 1993. . . . . . . . . . . 31
Notes to Consolidated Financial Statements. . . . . . . . . . . 32 - 38
Independent Auditors' Report. . . . . . . . . . . . . . . . . . 39
(2) Supplemental Financial Information (Unaudited):
Summarized Quarterly Financial Data . . . . . . . . . . . . . . 39
Page in this
Form 10-K
(3) Financial Statement Schedules:
Independent Auditors' Report on the Financial Statement
Schedules. . . . . . . . . . . . . . . . . . . . . . . . . F-1
V - Property, Plant and Equipment. . . . . . . . . . . . . . . S-1
VI - Accumulated Depreciation of Property, Plant and Equipment. S-2
IX - Short-Term Borrowings. . . . . . . . . . . . . . . . . . . S-3
X - Supplementary Income Statement Information . . . . . . . . S-4
(4) Independent Auditors' Consent to the incorporation by reference
of its reports in the Company's Registration Statements Nos.
2-94462, 2-96963, 33-32279 and 33-58510 . . . . . . . . . . . . F-2
Page in
Financial Statements annual report
Consolidated Balance Sheets at December 31, 1996 and 1995........................20
Consolidated Statements of Income for the three years in the
period ended December 31, 1996.................................................21
Consolidated Statements of Cash Flows for the three years in
the period ended December 31, 1996.............................................22
Notes to Consolidated Financial Statements.......................................23 - 30
Independent Auditors' Report ....................................................31
Supplemental Financial Information (Unaudited):
Summarized Quarterly Financial Data .............................................31
Independent Auditors' Consent to the incorporation by reference of its
reports in the Company's registration statements
numbered 2-96963, 33-53585, 33-57261, 33-32279, 33-58510 and 33-62041......F-1
Schedules other than those listed above are not required or are not
applicable, or the required information is shown in the financial statements or
notes.
(b) The Company did not file a reportReports on Form 8-K
during the fourth quarter of
1993.None
(c) The following exhibits are filed as part of or are incorporated in this
report by reference:
- 7 -
(3) A
Exhibit Method Of
Number Description Filing
- ------ ----------- ------
3.1 Articles of Incorporation ( incorporated by reference to the Company's *
Annual Report on Form 10-K for the year ended December 31, 1990).
3.2 Bylaws (incorporated by reference to the Company's Annual Report on Form *
10-K for the year ended December 21, 1994).
4.1 Amended and Restated Rights Agreement, dated as of January 31, 1997, by and *
between the Company and Norwest Bank Minnesota, National Association, as
Rights Agent, which includes as Exhibit A thereto, the form of Rights
Certificate (incorporated by reference to Exhibit 4.1 to the Company's
Amendment No. 1 on Form 8-A/A-1 (File No. 001-07945) filed with the
Securities and Exchange Commission (the "Commission") on February 7, 1997).
4.2 Indenture, relating to up to $150,000,000 of debt securities (incorporated *
by reference to Exhibit 4.1 to the Company's Registration Statement on Form
S-3 (33-32279) filed with the Commission on November 24, 1989).
10.8 Deluxe Corporation 1996 Annual Incentive Plan (as amended August 9, 1996) *
(incorporated by reference to Exhibit 10.4 to the Company's report on Form
10-Q for the Quarter ended September 30, 1996 (the "September 1996 10-Q),
filed with the Commission on November 14, 1996).
10.9 Deluxe Corporation Stock Incentive Plan (as amended August 9, 1996) *
(incorporated by reference to Exhibit 10.5 to the September 1996 10-Q).
10.10 Deluxe Corporation Performance Share Plan (incorporated by reference to *
Exhibit 10.6 to the September 1996 10-Q).
10.11 Deluxe Corporation Employee Stock Purchase Plan (incorporated by reference *
to Exhibit 10.7 to the September 1996 10-Q).
10.12 Deluxe Corporation Deferred Compensation Plan (incorporated by reference to *
Exhibit (10)(A) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 (the "1995 10-K)).
10.13 Deluxe Corporation Supplemental Benefit Plan (incorporated by reference to *
Exhibit (10)(B) to the 1995 10-K).
10.14 Description of Deluxe Corporation Non-employee Director Retirement and Filed herewith
Deferred Compensation Plan.
10.15 Description of Initial Compensation and Employment Arrangement with John A. *
Blanchard III (incorporated by reference to Exhibit 10(G) to the 1995 10-K).
10.16 Description of Supplemental Pension Plan (incorporated by reference to *
Exhibit 10(H) in the 1995 10-K).
10.17 Deferred Compensation Agreement (incorporated by reference to Exhibit 10(I) *
to the 1995 10-K).
10.18 Description of Compensation Agreement with Harold V. Haverty (incorporated *
by reference to Exhibit 10(J) to the 1995 10-K).
10.19 Separation Agreement, made and entered into November 8, 1996, between the Filed herewith
Company and Jerry K. Twogood.
10.20 Separation Agreement, made and entered into February 27, Filed herewith
1997 between the Company and Mark T. Gritton.
10.21 Consulting Agreement, made and entered into as of Filed herewith
November 1, 1996, between the Company and Donald R. Hollis.
10.22 Agreement, dated as of October 24, 1994, between the Filed herewith
Company and Michael R. Schwab.
12.4 Statement re: computation of ratios. Filed herewith
13.1 1996 Annual Report to shareholders. Filed herewith
21.1 Subsidiaries of the Registrant. Filed herewith
23 Consent of Experts and Counsel (incorporated by reference to page F-1 of *
this Annual Report on Form 10-K).
24.1 Power of attorney. Filed herewith
27.1 Financial Data Schedule. Filed herewith
99.1 Risk Factors and Cautionary Statements Filed herewith
- ----------------
* Incorporated by reference
to the
Company's Form 10-K for the year ended December 31, 1990.
B - Bylaws, incorporated by reference to the Company's Form 10-K for
the year ended December 31, 1990.
(4) A - Rights Agreement, incorporated by reference to the Company's Form
8-K dated February 17, 1988.
B - Indenture, incorporated by reference to the Company's Form S-3
dated November 24, 1989.
(10) A - Deferred Compensation Plan, incorporated by reference to the
Company's Form 10-K for the year ended December 31, 1985.
B - Supplemental Benefits Plan, incorporated by reference to the
Company's Form 10-K for the year ended December 31, 1985.
C - Stock Option Plan, incorporated by reference to the Company's
Form 10-K for the year ended December 31, 1989.
(13) 1993 Annual Report to Shareholders
(24) Independent Auditors' Consent, incorporated by reference to page
F-2 of the Company's Form 10-K for the year ended December 31,
1993.
(25) Powers of Attorney of officers and directors signing by an
attorney-in-fact.
(28) Proxy Statement, incorporated by reference to the Company's
definitive proxy statement dated March 28, 1994.
[Note
Note to recipients of Form 10-K: Copies of exhibits will be furnished upon
written request and payment of the Company's reasonable expenses ($.25 per page)
in furnishing such copies.]
- 8 -
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.authorized, in the City of St.
Paul, State of Minnesota on March 31, 1997.
DELUXE CORPORATION
Date: March 28, 199431, 1997 By /s/ Harold V. Haverty
--------------------------
Harold V. HavertyJohn A. Blanchard III
John A. Blanchard III Chairman of the Board of Directors,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities
andindicated on the dates indicated.
Date: March 28, 199431, 1997.
SIGNATURE TITLE
- --------- -----
By /s/ Harold V. Haverty
---------------------------------
Harold V. Haverty for HimselfJohn A. Blanchard III Chairman of the Board of Directors,
John A. Blanchard III President and Harold V. Haverty, Director and as Attorney-In-Fact for the Named
PrincipalChief Executive Officer
Directors and Officers
Eugene R. Olson, Director
Edward W. Asplin, Director
John Schreiner, Director
H. William Lurton, Director
Whitney MacMillan, Director
James J. Renier, Director
Jerry K. Twogood, Director
Barbara B. Grogan, Director
Allen F. Jacobson, Director(Principal Executive Officer)
By /s/ Charles M. Osborne PrincipalSenior Vice President and Chief Financial Officer
Charles M. Osborne (Principal Financial Officer and Principal
Accounting Officer
- 9 -
INDEPENDENT AUDITORS' REPORT
Deluxe Corporation:
We have audited the consolidated financial statements of Deluxe Corporation and
subsidiaries as of December 31, 1993 and 1992, and for each of the three years
in the period ended December 31, 1993, and have issued our report thereon dated
February 10, 1994; such consolidated financial statements and report are
included in your 1993 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the financial statement schedules of
Deluxe Corporation and subsidiaries, listed in Item 14. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.Officer)
*
Harold V. Haverty Director
*
Whitney MacMillan Director
*
James J. Renier Director
*
Barbara B. Grogan Director
*
Allen F. Jacobson Director
*
Stephen P. Nachtsheim Director
*
Calvin W. Aurand, Jr. Director
*
Donald R. Hollis Director
*
Robert C. Salipante Director
*By: /s/ Deloitte & Touche
Deloitte & Touche
Saint Paul, Minnesota
February 10, 1994
F-1
John A. Blanchard III
John A. Blanchard III
Attorney-in-Fact
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
Nos. 2-94462registration statements
2-96963, 33-53585 and 2-9696333-57261 on FormsForm S-8 and Nos. 33-32279, 33-58510 and 33-5851033-62041
on FormsForm S-3 of our reportsreport dated February 10, 1994 appearing in or1997, incorporated by reference in
this Annual Report on Form 10-K of Deluxe Corporation for the year ended
December 31, 1993.1996.
/s/ Deloitte & Touche LLP
Deloitte & Touche Saint Paul,LLP
Minneapolis, Minnesota
March 28,27, 1997
EXHIBIT INDEX
The following exhibits are filed as part of this report:
Exhibit Page
Number Description Number
------ ----------- ------
10.14 Description of Deluxe Corporation Non-employee
Director Retirement and Deferred Compensation Plan.
10.19 Separation Agreement, made and entered into
November 8, 1996, between the Company and Jerry K. Twogood.
10.20 Separation Agreement, made and entered into February 27,
1997 between the Company and Mark T. Gritton.
10.21 Consulting Agreement, made and entered into as of
November 1, 1996, between the Company and Donald R. Hollis.
10.22 Agreement, dated as of October 24, 1994, F-2
SCHEDULE V
DELUXE CORPORATION
PROPERTY, PLANT, AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, and 1991
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE OTHER CHANGES BALANCE
AT BEGINNING ADDITIONS ADD AT END
CLASSIFICATION OF YEAR AT COST RETIREMENTS (DEDUCT) OF YEAR
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993:
Land. . . . . . . . . . . . . . . . . . . . $ 25,812 $ 4,622 $ (68) $ 2,340 $ 32,706
Buildings . . . . . . . . . . . . . . . . . 165,465 18,977 (447) 5,408 189,403
Machinery and Equipment . . . . . . . . . . 455,315 45,675 (19,004) 1,867 483,853
Building and Leasehold Improvements . . . . 69,191 5,565 (2,432) 247 72,571
Construction in Progress. . . . . . . . . . 14,075 (12,729) (A) 14 1,360
--------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . . . . . . . $ 729,858 $ 62,110 (B) $ (21,951) $ 9,876 (C) $ 779,893
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1992:
Land. . . . . . . . . . . . . . . . . . . . $ 25,746 $ $ $ 66 $ 25,812
Buildings . . . . . . . . . . . . . . . . . 164,836 629 165,465
Machinery and Equipment . . . . . . . . . . 435,935 52,598 (30,360) (2,858) 455,315
Building and Leasehold Improvements . . . . 60,313 5,547 (907) 4,238 69,191
Construction in Progress. . . . . . . . . . 609 13,466 (A) 14,075
--------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . . . . . . . $ 687,439 $ 71,611 (B) $ (31,267) $ 2,075 (D) $ 729,858
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1991:
Land. . . . . . . . . . . . . . . . . . . . $ 20,691 $ 5,141 $ (87) $ 25,746
Buildings . . . . . . . . . . . . . . . . . 148,470 16,366 164,836
Machinery and Equipment . . . . . . . . . . 412,180 48,605 (24,849) 435,935
Building and Leasehold Improvements . . . . 52,340 8,055 (82) 60,313
Construction in Progress. . . . . . . . . . 6,275 (5,666) (A) 609
--------------------------------------------------------------------------------
TOTAL . . . . . . . . . . . . . . . . . . . $ 639,956 $ 72,501 (B) $ (25,018) $ 687,439
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE: (A) Represents net change in construction in progress.
(B) Difference from cash flow statement represents immaterial non-cash additions to property, plant and equipment
(C) Tangible property was added during 1993 as a result of two acquisitions. Additionally, a $7.2 million addition was
recorded to reflect the impact of adoption of SFAS No. 109 on assets acquired in 1987 through a purchase business
combination.
(D) Tangible property was added during 1992 as a result of a small acquisition.
S-1
SCHEDULE VI
DELUXE CORPORATION
ACCUMULATED DEPRECIATION
OF PROPERTY, PLANT, AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, and 1991
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------
BALANCE ADDITIONS RETIREMENTS BALANCE
AT BEGINNING CHARGED TO AND OTHER AT END
DESCRIPTION OF YEAR COST AND EXPENSES(A) CHARGES OF YEAR
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1993:
Buildings . . . . . . . . . . . . . . . . . $ 53,497 $ 5,857 $ 563 $ 59,917
Machinery and Equipment . . . . . . . . . . 258,776 45,502 (16,291) 287,987
Building and Leasehold Improvements . . . . 28,568 3,786 (2,006) 30,348
--------------------------------------------------------------------------------
TOTAL $ 340,841 $ 55,145 $ (17,734) $ 378,252
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1992:
Buildings . . . . . . . . . . . . . . . . . $ 47,840 $ 5,657 $ 53,497
Machinery and Equipment . . . . . . . . . . 244,259 45,132 $ (30,615) 258,776
Building and Leasehold Improvements . . . . 22,136 3,211 3,221 28,568
--------------------------------------------------------------------------------
TOTAL $ 314,235 $ 54,000 $ (27,394) $ 340,841
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1991:
Buildings . . . . . . . . . . . . . . . . . $ 42,498 $ 5,342 $ 47,840
Machinery and Equipment . . . . . . . . . . 222,103 44,996 $ (22,840) 244,259
Building and Leasehold Improvements . . . . 19,264 2,890 (18) 22,136
--------------------------------------------------------------------------------
TOTAL $ 283,865 $ 53,228 $ (22,858) $ 314,235
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(A) Buildings with 40-year lives and machinery and equipment with lives of five to 11 years are generally depreciated using
accelerated methods. Buildings and leasehold improvements are depreciated on a straight line basis over the estimated
useful life of the property or the life of the lease, whichever is shorter.
S-2
SCHEDULE IX
DELUXE CORPORATION
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, and 1991
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE MAXIMUM AMOUNT WEIGHTED AVERAGE WEIGHTED AVERAGE
AT END WEIGHTED AVERAGE OUTSTANDING AMOUNT OUTSTANDING INTEREST RATE
DESCRIPTION(A) OF PERIOD INTEREST RATE DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD(B)
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1992:
AMOUNT PAYABLE TO $ -0- N/A $ 184,000 $ 64,044 8.66%
FINANCIAL INSTITUTIONS
FOR BORROWINGS
NOTE: (A) Short-term borrowings consisted of margin financing for short-term investments during the third and fourth quarters
of 1992. There were no short-term borrowings during 1993 or 1991.
(B) The weighted average interest rate during the period represents the average of interest rates for each borrowing
weighted for the amounts of the respective borrowings.
S-3
SCHEDULE X
DELUXE CORPORATION
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(DOLLARS IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B
- -----------------------------------------------------------------------------------------------------------------------------------
CHARGED TO COSTS AND EXPENSES
1993 1992 1991
-----------------------------------------
Maintenance and Repairs $ 26,942 $ 27,339 $ 27,984
Amortization of Intangible Assets $ 17,175 $ 12,615 $ 22,748
All items of supplementary income statement information other than those shown above are less than one percent of net sales as shown
in the consolidated statements of income.
Certain prior year amounts have been restated to conform to the 1993 presentation.
S-4between the
Company and Michael R. Schwab.
12.4 Statement re: computation of ratios.
13.1 1996 Annual Report to shareholders.
21.1 Subsidiaries of the Registrant.
24.1 Power of attorney.
27.1 Financial Data Schedule.
99.1 Risk Factors and Cautionary Statements.