Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Oct. 19, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | DELUXE CORP | |
Entity Central Index Key | 27,996 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 48,596,289 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 80,065 | $ 62,427 |
Trade accounts receivable (net of allowances for uncollectible accounts of $3,161 and $4,816, respectively) | 117,761 | 123,654 |
Inventories and supplies | 41,474 | 41,956 |
Funds held for customers | 92,170 | 53,343 |
Other current assets | 41,038 | 42,605 |
Total current assets | 372,508 | 323,985 |
Deferred income taxes | 1,749 | 1,238 |
Long-term investments (including $1,868 and $2,091 of investments at fair value, respectively) | 41,893 | 41,691 |
Property, plant and equipment (net of accumulated depreciation of $349,856 and $344,785, respectively) | 83,667 | 85,732 |
Assets held for sale | 13,966 | 13,969 |
Intangibles (net of accumulated amortization of $451,214 and $407,747, respectively) | 313,878 | 285,311 |
Goodwill | 989,641 | 976,415 |
Other non-current assets | 123,846 | 113,812 |
Total assets | 1,941,148 | 1,842,153 |
Current liabilities: | ||
Accounts payable | 86,835 | 87,575 |
Accrued liabilities | 240,637 | 228,423 |
Long-term debt due within one year | 951 | 1,045 |
Total current liabilities | 328,423 | 317,043 |
Long-term debt | 616,790 | 627,973 |
Deferred income taxes | 80,754 | 81,076 |
Other non-current liabilities | 65,234 | 70,992 |
Commitments and contingencies (Notes 11 and 12) | ||
Shareholders' equity: | ||
Common shares $1 par value (authorized: 500,000 shares; outstanding: September 30, 2016 - 48,586; December 31, 2015 - 49,019) | 48,586 | 49,019 |
Retained earnings | 851,420 | 751,253 |
Accumulated other comprehensive loss | (50,059) | (55,203) |
Total shareholders' equity | 849,947 | 745,069 |
Total liabilities and shareholders' equity | $ 1,941,148 | $ 1,842,153 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parentheticals) (Unaudited) - USD ($) shares in Thousands, $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Allowances for uncollectible accounts | $ 3,161 | $ 4,816 |
Investments at fair value | 1,868 | 2,091 |
Accumulated depreciation | 349,856 | 344,785 |
Accumulated amortization | $ 451,214 | $ 407,747 |
Shareholders' equity: | ||
Common stock, par value (per share) | $ 1 | $ 1 |
Common stock, shares authorized | 500,000 | 500,000 |
Common stock, shares outstanding | 48,586 | 49,019 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement [Abstract] | ||||
Product revenue | $ 364,680 | $ 361,781 | $ 1,090,686 | $ 1,075,692 |
Service revenue | 94,240 | 78,035 | 278,174 | 233,616 |
Total revenue | 458,920 | 439,816 | 1,368,860 | 1,309,308 |
Cost of products | (133,628) | (132,594) | (391,161) | (384,590) |
Cost of services | (32,642) | (26,708) | (99,246) | (83,332) |
Total cost of revenue | (166,270) | (159,302) | (490,407) | (467,922) |
Gross profit | 292,650 | 280,514 | 878,453 | 841,386 |
Selling, general and administrative expense | (198,365) | (189,641) | (598,563) | (575,110) |
Net restructuring charges | (1,993) | (1,505) | (4,007) | (2,738) |
Operating income | 92,292 | 89,368 | 275,883 | 263,538 |
Loss on early debt extinguishment | 0 | 0 | 0 | (8,917) |
Interest expense | (4,855) | (4,387) | (15,281) | (15,322) |
Other income | 742 | 919 | 1,335 | 2,174 |
Income before income taxes | 88,179 | 85,900 | 261,937 | 241,473 |
Income tax provision | (29,516) | (28,983) | (86,783) | (82,553) |
Net income | 58,663 | 56,917 | 175,154 | 158,920 |
Comprehensive income | $ 57,824 | $ 52,680 | $ 180,298 | $ 150,190 |
Basic earnings per share | $ 1.20 | $ 1.14 | $ 3.57 | $ 3.18 |
Diluted earnings per share | 1.19 | 1.13 | 3.55 | 3.16 |
Cash dividends per share | $ 0.30 | $ 0.30 | $ 0.90 | $ 0.90 |
CONSOLIDATED STATEMENT OF SHARE
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) - 9 months ended Sep. 30, 2016 - USD ($) shares in Thousands, $ in Thousands | Total | Common shares par value [Member] | Additional paid-in capital [Member] | Retained earnings [Member] | Accumulated other comprehensive loss [Member] |
Balance at Dec. 31, 2015 | $ 745,069 | $ 49,019 | $ 0 | $ 751,253 | $ (55,203) |
Balance (in shares) at Dec. 31, 2015 | 49,019 | ||||
Net income | $ 175,154 | 0 | 0 | 175,154 | 0 |
Cash dividends | (44,127) | 0 | 0 | (44,127) | 0 |
Common shares issued | $ 11,482 | 403 | 11,079 | 0 | 0 |
Common shares issued (in shares) | 403 | ||||
Common shares repurchased | $ (44,944) | (733) | (13,351) | (30,860) | 0 |
Common shares repurchased (in shares) | (733) | ||||
Other common shares retired | $ (6,333) | (103) | (6,230) | 0 | 0 |
Other common shares retired (in shares) | (103) | ||||
Fair value of share-based compensation | $ 8,502 | 0 | 8,502 | 0 | 0 |
Other comprehensive income | 5,144 | 0 | 0 | 0 | 5,144 |
Balance at Sep. 30, 2016 | $ 849,947 | $ 48,586 | $ 0 | $ 851,420 | $ (50,059) |
Balance (in shares) at Sep. 30, 2016 | 48,586 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities: | ||
Net income | $ 175,154 | $ 158,920 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 11,347 | 12,006 |
Amortization of intangibles | 56,364 | 42,425 |
Amortization of contract acquisition costs | 14,700 | 14,059 |
Deferred income taxes | (1,477) | (945) |
Employee share-based compensation expense | 9,264 | 8,774 |
Loss on early debt extinguishment | 0 | 8,917 |
Other non-cash items, net | 3,128 | 1,197 |
Changes in assets and liabilities, net of effect of acquisitions: | ||
Trade accounts receivable | 5,320 | 13,970 |
Inventories and supplies | 176 | (1,368) |
Other current assets | (2,379) | 2,377 |
Non-current assets | (3,351) | (560) |
Accounts payable | (1,619) | (12,547) |
Contract acquisition payments | (17,190) | (9,843) |
Other accrued and non-current liabilities | (41,316) | (18,234) |
Net cash provided by operating activities | 208,121 | 219,148 |
Cash flows from investing activities: | ||
Purchases of capital assets | (32,215) | (29,549) |
Payments for acquisitions, net of cash acquired | (64,637) | (50,933) |
Proceeds from company-owned life insurance policies | 4,123 | 3,973 |
Other | 2,330 | 805 |
Net cash used by investing activities | (90,399) | (75,704) |
Cash flows from financing activities: | ||
Proceeds from short-term borrowings | 0 | 50,000 |
Proceeds from issuing long-term debt | 169,000 | 276,500 |
Payments on long-term debt, including costs of debt reacquisition | (185,873) | (375,291) |
Proceeds from issuing shares under employee plans | 6,861 | 5,492 |
Excess tax benefit from share-based employee awards | 0 | 1,816 |
Employee taxes paid for shares withheld | (2,333) | (1,236) |
Payments for common shares repurchased | (44,944) | (46,996) |
Cash dividends paid to shareholders | (44,127) | (44,965) |
Other | (1,634) | (378) |
Net cash used by financing activities | (103,050) | (135,058) |
Effect of exchange rate change on cash | 2,966 | (7,032) |
Net change in cash and cash equivalents | 17,638 | 1,354 |
Cash and cash equivalents, beginning of year | 62,427 | 61,541 |
Cash and cash equivalents, end of period | $ 80,065 | $ 62,895 |
Consolidated financial statemen
Consolidated financial statements | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Consolidated financial statements | Consolidated financial statements The consolidated balance sheet as of September 30, 2016 , the consolidated statements of comprehensive income for the quarters and nine months ended September 30, 2016 and 2015 , the consolidated statement of shareholders’ equity for the nine months ended September 30, 2016 , and the consolidated statements of cash flows for the nine months ended September 30, 2016 and 2015 are unaudited. The consolidated balance sheet as of December 31, 2015 was derived from audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles (GAAP) in the United States of America. In the opinion of management, all adjustments necessary for a fair statement of the consolidated financial statements are included. Adjustments consist only of normal recurring items, except for any discussed in the notes below. Interim results are not necessarily indicative of results for a full year. The consolidated financial statements and notes are presented in accordance with instructions for Form 10-Q, and do not contain certain information included in our annual consolidated financial statements and notes. The consolidated financial statements and notes appearing in this report should be read in conjunction with the consolidated audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Form 10-K”). During the quarter ended June 30, 2016, we identified an error in the balance sheet presentation of borrowings under our credit facility and the related asset for debt issuance costs. These amounts were previously presented as current items in our consolidated balance sheets, and we determined that they should have been presented as non-current. This change also corrects the presentation of the cash flows associated with borrowings under our credit facility. Previously these cash flows were presented on a net basis. The change in the balance sheet presentation requires that they be presented on a gross basis. We assessed the materiality of this error on prior periods' financial statements in accordance with the Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 99, Materiality , codified in Accounting Standards Codification (ASC) 250, Presentation of Financial Statements . We concluded that the error was not material to any prior annual or interim period and therefore, amendments of previously filed reports are not required. In accordance with ASC 250, we have corrected the error for all prior periods presented by revising the consolidated financial statements appearing herein. Periods not presented herein will be revised, as applicable, in future filings. The revisions had no impact on total assets, total liabilities, shareholders' equity, net income or net cash used by financing activities. The impact of this revision on our unaudited consolidated balance sheet as of December 31, 2015 was as follows: December 31, 2015 (in thousands) As Previously Reported Adjustment As Revised Other current assets $ 44,608 $ (2,003 ) $ 42,605 Total current assets 325,988 (2,003 ) 323,985 Other non-current assets 111,809 2,003 113,812 Short-term borrowings 434,000 (434,000 ) — Total current liabilities 751,043 (434,000 ) 317,043 Long-term debt 193,973 434,000 627,973 The impact of this revision on our unaudited consolidated statement of cash flows for the nine months ended September 30, 2015 was as follows: Nine Months Ended September 30, 2015 (in thousands) As Previously Reported Adjustment As Revised Proceeds from short-term borrowings $ 159,000 $ (109,000 ) $ 50,000 Proceeds from issuing long-term debt — 276,500 276,500 Payments on long-term debt, including costs of debt reacquisition (207,791 ) (167,500 ) (375,291 ) |
New accounting pronouncements
New accounting pronouncements | 9 Months Ended |
Sep. 30, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New accounting pronouncements | New accounting pronouncements Recently adopted accounting pronouncements – In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period . The standard requires that a performance target that affects vesting and that could be achieved after the requisite service period should be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. We adopted this standard on January 1, 2016. As our accounting treatment for these awards was in compliance with the new guidance, adoption of this standard had no impact on our consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. The standard requires that debt issuance costs related to a recognized debt liability be presented in the consolidated balance sheets as a direct reduction from the carrying amount of the debt liability. We adopted this standard on January 1, 2016, applying it retrospectively. The consolidated balance sheet as of December 31, 2015 reflects the reclassification of debt issuance costs of $2,249 from other non-current assets to long-term debt. The amount of debt issuance costs included in long-term debt as of September 30, 2016 was $1,906 . In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting . This standard adds SEC paragraphs pursuant to the SEC Staff announcement at the June 18, 2015 Emerging Issues Task Force (EITF) meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Under this guidance, the SEC Staff would not object to presenting such costs as an asset and subsequently amortizing the deferred costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings under the arrangement. Debt issuance costs of $1,528 as of September 30, 2016 and $2,003 as of December 31, 2015 related to our line-of-credit arrangement. We continue to include these costs within other non-current assets, amortizing them over the term of the arrangement. In April 2015, the FASB issued ASU No. 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement . The standard provides guidance to customers about whether a cloud computing arrangement includes a software license. If the arrangement does include a software license, the software license element of the arrangement should be accounted for in the same manner as the acquisition of other software licenses. We adopted this standard on January 1, 2016, applying it prospectively to all arrangements entered into or materially modified on or after January 1, 2016. Adoption of this standard did not have a significant impact on our results of operations or financial position. In May 2015, the FASB issued ASU No. 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent) . Under the standard, investments measured at net asset value (NAV) as a practical expedient for fair value are excluded from the fair value hierarchy. As such, they are not assigned a fair value measurement level in financial statement disclosures of fair value. This standard was effective for us on January 1, 2016. It impacts the disclosures included in our Annual Report on Form 10-K regarding the plan assets of our postretirement benefit plan. As such, we will reflect this new guidance in the disclosures included in our Form 10-K for the year ending December 31, 2016, applying the guidance retrospectively to all periods presented. In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory . The standard requires that inventory within the scope of the guidance be measured at the lower of cost or net realizable value. Previously, inventory was measured at the lower of cost or market. We elected to early adopt this standard on January 1, 2016, applying it prospectively. Application of this standard did not have a significant impact on our results of operations or financial position. In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. When recording the purchase price allocation for a business combination in the financial statements, an acquirer may record preliminary amounts when measurements are incomplete as of the end of a reporting period. When the required information is received to finalize the purchase price allocation, the preliminary amounts are adjusted. These adjustments are referred to as measurement-period adjustments. This standard eliminates the requirement to restate prior period financial statements for measurement-period adjustments. Instead, it requires that the cumulative impact of a measurement-period adjustment be recognized in the reporting period in which the adjustment is identified. We adopted this standard on January 1, 2016, applying it prospectively. Application of this standard did not have a significant impact on our results of operations or financial position. In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting . The standard is intended to simplify various aspects of the accounting and presentation of share-based payments. We elected to early adopt this standard as of January 1, 2016. Adoption of this standard had the following impacts on our consolidated financial statements: • Consolidated statements of comprehensive income – The new standard requires that the tax effects of share-based compensation be recognized in the income tax provision. Previously, these amounts were recognized in additional paid-in capital. Net tax benefits related to share-based compensation awards of $234 for the quarter ended September 30, 2016 and $1,745 for the nine months ended September 30, 2016 were recognized as reductions of income tax expense in the consolidated statements of comprehensive income. These tax benefits reduced our effective income tax rate 0.3 points for the quarter ended September 30, 2016 and 0.7 points for the nine months ended September 30, 2016 . In addition, in calculating potential common shares used to determine diluted earnings per share, GAAP requires us to use the treasury stock method. The new standard requires that assumed proceeds under the treasury stock method be modified to exclude the amount of excess tax benefits that would have been recognized in additional paid-in capital. These changes were applied on a prospective basis and resulted in an increase in diluted earnings per share of $0.03 for the nine months ended September 30, 2016 . These changes had no impact on diluted earnings per share for the quarter ended September 30, 2016 . In recording share-based compensation expense, the standard allows companies to make a policy election as to whether they will include an estimate of awards expected to be forfeited or whether they will account for forfeitures as they occur. We have elected to include an estimate of forfeitures in the computation of our share-based compensation expense. As this treatment is consistent with previous guidance, this election had no impact on our consolidated financial statements. • Consolidated statements of cash flows – The standard requires that excess tax benefits from share-based employee awards be reported as operating activities in the consolidated statements of cash flows. Previously, these cash flows were included in financing activities. We elected to apply this change on a prospective basis, resulting in an increase in net cash provided by operating activities and in net cash used by financing activities of $2,069 for the nine months ended September 30, 2016 . The standard requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the consolidated statements of cash flows. Previously, these cash flows were included in operating activities. This change was required to be applied on a retrospective basis. As such, the consolidated statement of cash flows for the prior period was restated. This change resulted in an increase in net cash provided by operating activities and in net cash used by financing activities of $2,333 for the nine months ended September 30, 2016 and $1,236 for the nine months ended September 30, 2015 . In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments . The standard is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. We elected to early adopt this standard as of July 1, 2016. As our consolidated statement of cash flows presentation was in compliance with the new guidance, adoption of this standard had no impact on our consolidated financial statements. Accounting pronouncements not yet adopted – In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers . The standard provides revenue recognition guidance for any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets, unless those contracts are within the scope of other accounting standards. The standard also expands the required financial statement disclosures regarding revenue recognition. The new guidance is effective for us on January 1, 2018. In addition, in March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , in April 2016, the FASB issued ASU No. 2016-10, Identifying Performance Obligations and Licensing, and in May 2016, the FASB issued ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients . These standards are intended to clarify aspects of ASU No. 2014-09 and are effective for us upon adoption of ASU No. 2014-09. We are currently assessing the impact of these standards on our consolidated financial statements, as well as the method of transition that we will use in adopting the new guidance. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities . The standard is intended to improve the recognition, measurement, presentation and disclosure of financial instruments. The guidance is effective for us on January 1, 2018. We do not expect the application of this standard to have a significant impact on our results of operations or financial position. In February 2016, the FASB issued ASU No. 2016-02, Leasing . The standard is intended to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities for virtually all leases and by requiring the disclosure of key information about leasing arrangements. The guidance is effective for us on January 1, 2019, and requires adoption using a modified retrospective approach. We are currently assessing the impact of this standard on our consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments . The standard introduces new guidance for the accounting for credit losses on instruments within its scope, including trade and loans receivable and available-for-sale debt securities. The guidance is effective for us on January 1, 2020, and requires adoption using a modified retrospective approach. We do not expect the application of this standard to have a significant impact on our results of operations or financial position. |
Supplemental balance sheet info
Supplemental balance sheet information | 9 Months Ended |
Sep. 30, 2016 | |
Balance Sheet Related Disclosures [Abstract] | |
Supplemental balance sheet information | Supplemental balance sheet information Inventories and supplies – Inventories and supplies were comprised of the following: (in thousands) September 30, December 31, Raw materials $ 5,593 $ 5,719 Semi-finished goods 8,857 8,208 Finished goods 23,937 24,955 Supplies 3,087 3,074 Inventories and supplies $ 41,474 $ 41,956 Available-for-sale securities – Available-for-sale securities included within funds held for customers and other current assets were comprised of the following: September 30, 2016 (in thousands) Cost Gross unrealized gains Gross unrealized losses Fair value Funds held for customers: (1) Canadian and provincial government securities $ 8,491 $ — $ (43 ) $ 8,448 Canadian guaranteed investment certificates 7,618 — — 7,618 Available-for-sale securities $ 16,109 $ — $ (43 ) $ 16,066 (1) Funds held for customers, as reported on the consolidated balance sheet as of September 30, 2016 , also included cash of $76,104 . This cash included amounts related to FISC Solutions, which was acquired in December 2015. This business provides cash receipt processing services. A portion of the cash receipts are remitted to our clients the business day following receipt. As such, the amounts on-hand are reported as funds held for customers in the consolidated balance sheets, with a corresponding liability included in accrued liabilities. The asset and liability of $18,743 were recorded as acquisition measurement-period balance sheet adjustments during 2016. In addition, this cash included $12,532 related to the September 2016 acquisition of Payce, Inc., a payroll services provider (see Note 6). December 31, 2015 (in thousands) Cost Gross unrealized gains Gross unrealized losses Fair value Canadian and provincial government securities $ 7,932 $ — $ (91 ) $ 7,841 Canadian guaranteed investment certificates 7,226 — — 7,226 Available-for-sale securities (funds held for customers) (1) 15,158 — (91 ) 15,067 Canadian money market fund (other current assets) 1,616 — — 1,616 Available-for-sale securities $ 16,774 $ — $ (91 ) $ 16,683 (1) Funds held for customers, as reported on the consolidated balance sheet as of December 31, 2015 , also included cash of $38,276 . Expected maturities of available-for-sale securities as of September 30, 2016 were as follows: (in thousands) Fair value Due in one year or less $ 9,629 Due in two to five years 4,190 Due in six to ten years 2,247 Available-for-sale securities $ 16,066 Further information regarding the fair value of available-for-sale securities can be found in Note 8. Assets held for sale – Assets held for sale as of September 30, 2016 and December 31, 2015 included the operations of a small business distributor that we previously acquired. This business is included in our Small Business Services segment and the assets acquired consisted primarily of a customer list intangible asset. We are actively marketing the business and expect the selling price will exceed its carrying value. Net assets held for sale consisted of the following: (in thousands) September 30, December 31, Balance sheet caption Current assets $ 4 $ 3 Other current assets Intangibles 13,533 13,533 Assets held for sale Other non-current assets 433 436 Assets held for sale Accrued liabilities (112 ) (366 ) Accrued liabilities Deferred income tax liabilities (5,775 ) (5,777 ) Other non-current liabilities Net assets held for sale $ 8,083 $ 7,829 Intangibles – Intangibles were comprised of the following: September 30, 2016 December 31, 2015 (in thousands) Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount Indefinite-lived intangibles: Trade name $ 19,100 $ — $ 19,100 $ 19,100 $ — $ 19,100 Amortizable intangibles: Internal-use software 410,231 (336,356 ) 73,875 375,037 (310,665 ) 64,372 Customer lists/relationships 239,972 (67,366 ) 172,606 202,682 (54,990 ) 147,692 Trade names 65,481 (40,029 ) 25,452 64,881 (36,325 ) 28,556 Software to be sold 28,500 (6,141 ) 22,359 28,500 (3,765 ) 24,735 Other 1,808 (1,322 ) 486 2,858 (2,002 ) 856 Amortizable intangibles 745,992 (451,214 ) 294,778 673,958 (407,747 ) 266,211 Intangibles $ 765,092 $ (451,214 ) $ 313,878 $ 693,058 $ (407,747 ) $ 285,311 Amortization of intangibles was $19,273 for the quarter ended September 30, 2016 and $14,686 for the quarter ended September 30, 2015 . Amortization of intangibles was $56,364 for the nine months ended September 30, 2016 and $42,425 for the nine months ended September 30, 2015 . Based on the intangibles in service as of September 30, 2016 , estimated future amortization expense is as follows: (in thousands) Estimated amortization expense Remainder of 2016 $ 18,260 2017 65,293 2018 51,235 2019 37,788 2020 31,737 During the nine months ended September 30, 2016 , we acquired internal-use software in the normal course of business. We also acquired intangible assets in conjunction with acquisitions (Note 6). The following intangible assets were acquired during the nine months ended September 30, 2016 : (in thousands) Amount Weighted-average amortization period (in years) Internal-use software $ 34,970 4 Customer lists/relationships 48,982 7 Trade names 600 5 Acquired intangibles $ 84,552 6 Goodwill – Changes in goodwill during the nine months ended September 30, 2016 were as follows: (in thousands) Small Business Services Financial Services Direct Checks Total Balance, December 31, 2015: Goodwill, gross $ 671,295 $ 176,614 $ 148,506 $ 996,415 Accumulated impairment charges (20,000 ) — — (20,000 ) Goodwill, net of accumulated impairment charges 651,295 176,614 148,506 976,415 Acquisition of 180 Fusion (Note 6) 575 — — 575 Acquisition of Inkhead (Note 6) 4,421 — — 4,421 Acquisition of Payce (Note 6) 7,979 — — 7,979 Adjustment for acquisition of Datamyx (Note 6) — 172 — 172 Currency translation adjustment 79 — — 79 Balance, September 30, 2016: Goodwill, gross 684,349 176,786 148,506 1,009,641 Accumulated impairment charges (20,000 ) — — (20,000 ) Goodwill, net of accumulated impairment charges $ 664,349 $ 176,786 $ 148,506 $ 989,641 Other non-current assets – Other non-current assets were comprised of the following: (in thousands) September 30, December 31, Contract acquisition costs $ 67,488 $ 58,792 Loans and notes receivable from distributors 21,531 23,957 Postretirement benefit plan asset 20,260 16,250 Deferred advertising costs 6,660 7,500 Other 7,907 7,313 Other non-current assets $ 123,846 $ 113,812 Changes in contract acquisition costs during the nine months ended September 30, 2016 and 2015 were as follows: Nine Months Ended (in thousands) 2016 2015 Balance, beginning of year $ 58,792 $ 74,101 Additions (1) 23,471 4,828 Amortization (14,700 ) (14,059 ) Other (75 ) (3,458 ) Balance, end of period $ 67,488 $ 61,412 (1) Contract acquisition costs are accrued upon contract execution. Cash payments made for contract acquisition costs were $17,190 for the nine months ended September 30, 2016 and $9,843 for the nine months ended September 30, 2015 . Accrued liabilities – Accrued liabilities were comprised of the following: (in thousands) September 30, December 31, Funds held for customers $ 90,960 $ 52,366 Deferred revenue 32,418 48,119 Employee profit sharing/cash bonus 24,771 40,683 Customer rebates 17,077 18,900 Contract acquisition costs due within one year 11,980 9,045 Wages, including vacation 11,260 5,731 Restructuring due within one year (Note 9) 2,648 3,864 Other 49,523 49,715 Accrued liabilities $ 240,637 $ 228,423 |
Earnings per share
Earnings per share | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per share | Earnings per share The following table reflects the calculation of basic and diluted earnings per share. During each period, certain stock options, as noted below, were excluded from the calculation of diluted earnings per share because their effect would have been antidilutive. Quarter Ended Nine Months Ended (dollars and shares in thousands, except per share amounts) 2016 2015 2016 2015 Earnings per share – basic: Net income $ 58,663 $ 56,917 $ 175,154 $ 158,920 Income allocated to participating securities (491 ) (386 ) (1,445 ) (1,054 ) Income available to common shareholders $ 58,172 $ 56,531 $ 173,709 $ 157,866 Weighted-average shares outstanding 48,493 49,396 48,634 49,592 Earnings per share – basic $ 1.20 $ 1.14 $ 3.57 $ 3.18 Earnings per share – diluted: Net income $ 58,663 $ 56,917 $ 175,154 $ 158,920 Income allocated to participating securities (487 ) (384 ) (1,436 ) (1,049 ) Re-measurement of share-based awards classified as liabilities (64 ) (114 ) 230 (67 ) Income available to common shareholders $ 58,112 $ 56,419 $ 173,948 $ 157,804 Weighted-average shares outstanding 48,493 49,396 48,634 49,592 Dilutive impact of potential common shares 455 366 427 391 Weighted-average shares and potential common shares outstanding 48,948 49,762 49,061 49,983 Earnings per share – diluted $ 1.19 $ 1.13 $ 3.55 $ 3.16 Antidilutive options excluded from calculation 223 255 223 255 |
Other comprehensive income
Other comprehensive income | 9 Months Ended |
Sep. 30, 2016 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Other comprehensive income | Other comprehensive income Reclassification adjustments – Information regarding amounts reclassified from accumulated other comprehensive loss to net income was as follows: Accumulated other comprehensive loss components Amounts reclassified from accumulated other comprehensive loss Affected line item in consolidated statements of comprehensive income Quarter Ended Nine Months Ended (in thousands) 2016 2015 2016 2015 Amortization of postretirement benefit plan items: Prior service credit $ 355 $ 355 1,066 1,066 (1) Net actuarial loss (949 ) (780 ) (2,848 ) (2,340 ) (1) Total amortization (594 ) (425 ) (1,782 ) (1,274 ) (1) Tax benefit 181 113 544 339 (1) Total reclassifications, net of tax $ (413 ) $ (312 ) $ (1,238 ) $ (935 ) (1) Amortization of postretirement benefit plan items is included in the computation of net periodic benefit income. Additional details can be found in Note 10. Accumulated other comprehensive loss – Changes in the components of accumulated other comprehensive loss during the nine months ended September 30, 2016 were as follows: (in thousands) Postretirement benefit plans, net of tax Net unrealized loss on marketable securities, net of tax (1) Currency translation adjustment Accumulated other comprehensive loss Balance, December 31, 2015 $ (38,822 ) $ (114 ) $ (16,267 ) $ (55,203 ) Other comprehensive income before reclassifications — 40 3,866 3,906 Amounts reclassified from accumulated other comprehensive loss 1,238 — — 1,238 Net current-period other comprehensive income 1,238 40 3,866 5,144 Balance, September 30, 2016 $ (37,584 ) $ (74 ) $ (12,401 ) $ (50,059 ) (1) Other comprehensive income before reclassifications is net of income tax expense of $14 . |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Acquisitions | Acquisitions We periodically complete business combinations that align with our business strategy. The assets and liabilities acquired are recorded at their estimated fair values and the results of operations of each acquired business are included in our consolidated statements of comprehensive income from their acquisition dates. Transaction costs related to acquisitions were expensed as incurred and were not significant to the consolidated statements of comprehensive income for the quarters or nine months ended September 30, 2016 and 2015 . During the nine months ended September 30, 2016 , we completed the following acquisitions which are included within our Small Business Services segment and for which the allocation of the purchase price to the assets acquired and liabilities assumed has been finalized: • In February 2016, we acquired selected assets of Category 99, Inc., doing business as MacHighway®, a web hosting and domain registration service provider. • In March 2016, we acquired selected assets of New England Art Publishers, Inc., doing business as Birchcraft Studios, a supplier of personalized invitations, holiday cards, all-occasion cards and social announcements. • In June 2016, we acquired selected assets of L.A.M. Enterprises, Inc., a provider of printed and promotional products. During the nine months ended September 30, 2016 , we completed several acquisitions which are included within our Small Business Services segment and for which we expect to finalize the allocation of the purchase price by the end of 2016 when our valuation of all of the acquired assets and liabilities is completed, as well as the determination of the estimated useful lives of the acquired customer lists. These acquisitions were as follows: • In April 2016, we acquired selected assets of 180 Fusion LLC, a digital marketing services provider. 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 $575 . The acquisition resulted in goodwill as we expect it will enhance our Small Business Services product set by providing valuable marketing tools to our customers, thus, enhancing customer acquisition and loyalty. • In June 2016, we acquired selected assets of Liquid Web, LLC, a web hosting services provider. • In June 2016, we acquired selected assets of National Document Solutions, LLC, a provider of printing, promotional products, office products, scanning and document management solutions. • In July 2016, we acquired selected assets of Inkhead, Inc., a provider of customized promotional products. 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 $4,421 . The acquisition resulted in goodwill as it enables us to diversify our promotional product offerings and bring these offerings to our customer base. • In August 2016, we acquired selected assets of BNBS, Inc., doing business as B&B Solutions, a provider of printing, promotional and office products and services. • In September 2016, we acquired all of the outstanding capital stock of Payce, Inc., a provider of payroll processing, payroll tax filing and related payroll 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 $7,979 . The acquisition resulted in goodwill as we expect Payce's expertise, customer mix and operational strength to enhance our existing portfolio of small business services. Also during the nine months ended September 30, 2016 , we acquired the operations of several small business distributors which are included in our Small Business Services segment. The assets acquired consisted primarily of customer list intangible assets. As these 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. We expect to finalize the allocations of the purchase price by the end of 2016 when our valuations of the acquired customer lists are completed, including the determination of the related estimated useful lives. As our acquisitions were not significant to our operating results both individually and in the aggregate, pro forma results of operations are not provided. The following illustrates the preliminary allocation as of September 30, 2016 of the aggregate purchase price for the above acquisitions to the assets acquired and liabilities assumed: (in thousands) 2016 acquisitions Net tangible assets acquired and liabilities assumed $ (784 ) Identifiable intangible assets: Customer lists/relationships 48,982 Internal-use software 10,250 Trade names 600 Total intangible assets 59,832 Goodwill 12,975 Total aggregate purchase price 72,023 Liabilities for holdback payments (6,900 ) Non-cash consideration (1) (2,020 ) Net cash paid for 2016 acquisitions 63,103 Holdback payments for prior year acquisitions 1,534 Payments for acquisitions, net of cash acquired $ 64,637 (1) Consists of pre-acquisition amounts owed to us by certain of the acquired businesses. Further information regarding the calculation of the estimated fair values of the intangibles acquired can be found in Note 8. During the quarter ended September 30, 2016 , we finalized purchase accounting for the acquisition of Datamyx LLC, which was acquired in October 2015. Further information regarding this acquisition can be found under the caption “Note 5: Acquisitions” in the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K. The adjustments recorded during the quarter ended September 30, 2016 increased goodwill $172 from the preliminary amount recorded as of December 31, 2015, with the offset to various assets and liabilities, primarily property, plant and equipment and other current assets. During the nine months ended September 30, 2015 , we acquired selected assets of Range, Inc., a marketing services provider; Verify Valid LLC, a provider of electronic check payment services; Tech Assets, Inc., a provider of shared hosting websites to small businesses using cPanel web hosting technology; and FMC Resource Management Corporation, a marketing services provider, as well as the operations of eight small business distributors, five of which were previously part of our Safeguard distributor network. The assets acquired consisted primarily of customer list intangible assets and goodwill. Payments for acquisitions, net of cash acquired, as presented on the consolidated statement of cash flows for the nine months ended September 30, 2015 , included payments of $46,796 for these acquisitions and $4,137 for holdback payments for prior year acquisitions. Further information regarding our 2015 acquisitions can be found under the caption “Note 5: Acquisitions” in the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K. |
Derivative financial instrument
Derivative financial instruments | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative financial instruments | Derivative financial instruments We have entered into interest rate swaps, which we designated as fair value hedges, to hedge against changes in the fair value of a portion of our long-term debt. At the time we entered into these swaps in 2012, we were targeting a mix of fixed and variable rate debt, where we receive a fixed rate and pay a variable rate based on the London Interbank Offered Rate (LIBOR). The interest rate swaps related to our long-term debt due in 2020 have a notional amount of $200,000 and meet the criteria for using the short-cut method for a fair value hedge based on the structure of the hedging relationship. As such, changes in the fair value of the derivatives and the related long-term debt are equal. The fair value of these interest rate swaps was included in other non-current liabilities in the consolidated balance sheets and was $109 as of September 30, 2016 and $4,842 as of December 31, 2015 . As the short-cut method is being used to account for these hedges, the consolidated balance sheets included a decrease in long-term debt of $109 as of September 30, 2016 and $4,842 as of December 31, 2015 due to fair value adjustments. |
Fair value measurements
Fair value measurements | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair value measurements | Fair value measurements Annual asset impairment analyses – We evaluate the carrying value of goodwill and our indefinite-lived trade name as of July 31 of each year and between annual evaluations if events occur or circumstances change that would indicate a possible impairment. Our policy on impairment of indefinite-lived intangibles and goodwill, which is included under the caption "Note 1: Significant accounting policies" in the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K, explains our methodology for assessing impairment of these assets. In completing the 2016 annual goodwill impairment analysis, we elected to perform a qualitative assessment for all of our reporting units to which goodwill is assigned, with one exception. We elected to perform a quantitative analysis for our Financial Services Commercial reporting unit as the previous quantitative analysis completed as of July 31, 2015 indicated that the estimated fair value of this reporting unit exceeded its carrying value by approximately 13% . This relatively small percentage was primarily due to the fact that the reporting unit had been recently acquired. Our qualitative analysis evaluated factors including, but not limited to, economic, market and industry conditions, cost factors and the overall financial performance of the reporting units. We also considered the quantitative analysis we completed as of July 31, 2014. In completing the 2016 qualitative analysis, we noted no changes in events or circumstances which would have required us to complete the two-step quantitative goodwill impairment analysis for any of the reporting units analyzed. The quantitative analysis completed for the Financial Services Commercial reporting unit indicated that its estimated fair value exceeded its carrying value by approximately 49% as of July 31, 2016. Total goodwill for this reporting unit was approximately $45,000 as of September 30, 2016. In completing the 2016 annual impairment analysis of our indefinite-lived trade name, we elected to perform a quantitative assessment which indicated that the calculated fair value of the asset exceeded its carrying value of $19,100 by approximately $32,000 as of July 31, 2016. We recorded no impairment charges as a result of our 2016 annual impairment analyses. 2016 acquisitions – For all acquisitions, we are required to measure the fair value of the net identifiable tangible and intangible assets and liabilities acquired, excluding goodwill and deferred income taxes. Information regarding the acquisitions completed during the nine months ended September 30, 2016 can be found in Note 6. The identifiable net assets acquired during the nine months ended September 30, 2016 were comprised primarily of customer lists with an aggregate fair value of $48,982 and internal-use software with an aggregate fair value of $10,250 . Fair value of the customer lists was estimated by discounting the estimated cash flows expected to be generated by the assets. Assumptions used in the calculations included same-customer revenue growth rates and estimated customer retention rates based on the acquirees' historical information. A portion of the fair value of the acquired software was estimated using the cost of reproduction method. The primary components of the software were identified and the estimated cost to reproduce the software was calculated based on data provided by the acquirees. The fair value of the remainder of the software was estimated using the relief from royalty method, which calculates the cost savings associated with owning rather than licensing the technology. Assumed royalty rates were applied to projected revenue for the remaining useful life of the software to estimate the royalty savings. Information regarding the useful lives of acquired intangibles can be found in Note 3. Recurring fair value measurements – Funds held for customers included available-for-sale marketable securities (Note 3). These securities consisted of a mutual fund investment that invests in Canadian and provincial government securities, as well as investments in Canadian guaranteed investment certificates (GICs) with maturities of one year or less. The mutual fund is not traded in an active market and its fair value is determined by obtaining quoted prices in active markets for the underlying securities held by the fund. The fair value of the GICs approximated cost due to their relatively short duration. Unrealized gains and losses, net of tax, are included in accumulated other comprehensive loss in the consolidated balance sheets. The cost of securities sold is determined using the average cost method. Realized gains and losses are included in revenue in the consolidated statements of comprehensive income and were not significant for the quarters or nine months ended September 30, 2016 and 2015 . Other current assets as of December 31, 2015 included available-for-sale marketable securities (Note 3). These securities were sold during the first quarter of 2016, and consisted of a Canadian money market fund that was not traded in an active market. As such, the fair value of this investment was determined by obtaining quoted prices in active markets for the underlying securities held by the fund. Because of the short-term nature of the underlying investments, the cost of these securities approximated their fair value. No gains or losses on sales of these marketable securities were realized during the nine months ended September 30, 2016 and 2015 . We have elected to account for a long-term investment in domestic mutual funds under the fair value option for financial assets and financial liabilities. The fair value option provides companies an irrevocable option to measure many financial assets and liabilities at fair value with changes in fair value recognized in earnings. The investment is included in long-term investments in the consolidated balance sheets. Long-term investments also include the cash surrender values of company-owned life insurance policies. Realized and unrealized gains and losses, as well as dividends earned by the mutual fund investment, are included in selling, general and administrative (SG&A) expense in the consolidated statements of comprehensive income. This investment corresponds to a liability under an officers’ deferred compensation plan that is not available to new participants and is fully funded by the investment in mutual funds. The liability under the plan equals the fair value of the investment in mutual funds. Thus, as the value of the investment changes, the value of the liability changes accordingly. As changes in the liability are reflected within SG&A expense in the consolidated statements of comprehensive income, the fair value option of accounting for the investment in mutual funds allows us to net changes in the investment and the related liability in the statements of comprehensive income. The cost of securities sold is determined using the average cost method. During the nine months ended September 30, 2016 and 2015 , net realized gains were not significant. We recognized net unrealized losses of $160 during the nine months ended September 30, 2016 and $333 during the nine months ended September 30, 2015 . The fair value of interest rate swaps (Note 7) is determined at each reporting date by means of a pricing model utilizing readily observable market interest rates. The change in fair value is determined as the change in the present value of estimated future cash flows discounted using the LIBOR rate. Our interest rate swaps relate to our long-term debt due in 2020 and meet the criteria for using the short-cut method for a fair value hedge based on the structure of the hedging relationship. As such, the changes in the fair value of the derivative and related long-term debt are equal. Liabilities for contingent consideration relate to acquisitions completed during 2015. Information concerning these acquisitions can be found under the caption "Note 5: Acquisitions" in the Notes to Consolidated Financial Statements included in the 2015 Form 10-K. Under the agreement related to the acquisition of Verify Valid, we are required to make annual contingent payments over a period of up to eight years , based on the revenue generated by the business. A specified payment percentage for each year is applied to the revenue generated by the business in that year to determine the amount of the payment. There is no maximum amount of contingent payments specified in the agreement . Under the agreement related to the acquisition of a small business distributor, we are required to make annual contingent payments over a period of up to three years , based on the gross profit generated by the business. A specified payment percentage for each year is applied to the gross profit generated by the business in that year to determine the amount of the payment. The maximum contingent payment in any year of the agreement is $925 . The fair value of the liabilities for contingent payments is estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in the calculations include the discount rate, projected revenue or gross profit based on our most recent internal forecast, and factors indicating the probability of achieving the forecasted revenue or gross profit. The liabilities are remeasured each reporting period. Increases or decreases in projected revenue or gross profit and the related probabilities may result in a higher or lower fair value measurement. Changes in fair value resulting from changes in the timing, amount of, or likelihood of contingent payments are included in SG&A expense in the consolidated statements of comprehensive income. Changes in fair value resulting from accretion for the passage of time are included in interest expense in the consolidated statements of comprehensive income. Information regarding recurring fair value measurements completed during each period was as follows: Fair value measurements using Fair value as of September 30, 2016 Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs (in thousands) (Level 1) (Level 2) (Level 3) Available-for-sale marketable securities (funds held for customers) $ 16,066 $ — $ 16,066 $ — Long-term investment in mutual funds 1,868 1,868 — — Derivative liabilities (109 ) — (109 ) — Accrued contingent consideration (4,276 ) — — (4,276 ) Fair value measurements using Fair value as of December 31, 2015 Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs (in thousands) (Level 1) (Level 2) (Level 3) Available-for-sale marketable securities (funds held for customers) $ 15,067 $ — $ 15,067 $ — Available-for-sale marketable securities (other current assets) 1,616 — 1,616 — Long-term investment in mutual funds 2,091 2,091 — — Derivative liabilities (4,842 ) — (4,842 ) — Accrued contingent consideration (5,861 ) — — (5,861 ) Our policy is to recognize transfers between fair value levels as of the end of the reporting period in which the transfer occurred. There were no transfers between fair value levels during the nine months ended September 30, 2016 . Changes in accrued contingent consideration during the nine months ended September 30, 2016 were as follows: (in thousands) Nine Months Ended September 30, 2016 Balance, December 31, 2015 $ 5,861 Change in fair value (448 ) Payments (1,137 ) Balance, September 30, 2016 $ 4,276 Fair value measurements of other financial instruments – The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate fair value. Cash and cash included within funds held for customers – The carrying amounts reported in the consolidated balance sheets approximate fair value because of the short-term nature of these items. Loans and notes receivable from distributors – We have receivables for loans made to certain of our Safeguard distributors. In addition, we have acquired the operations of several small business distributors, which we then sold to our Safeguard distributors. In most cases, we entered into notes receivable upon the sale of the assets to the distributors. The fair value of these loans and notes receivable is calculated as the present value of expected future cash flows, discounted using an estimated interest rate based on published bond yields for companies of similar risk. Long-term debt – The carrying amounts reported in the consolidated balance sheets for the amount drawn on our credit facility approximates fair value because our interest rate is variable and reflects current market rates. The fair value of our long-term notes due in 2020 is based on significant observable market inputs other than quoted prices in active markets. The fair value of long-term debt included in the table below does not reflect the impact of hedging activity or debt issuance costs. The carrying amount of long-term debt includes the change in fair value of hedged long-term debt, as well as unamortized debt issuance costs related to our notes due in 2020 (Note 11). The estimated fair values of these financial instruments were as follows: Fair value measurements using September 30, 2016 Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs (in thousands) Carrying value Fair value (Level 1) (Level 2) (Level 3) Cash $ 80,065 $ 80,065 $ 80,065 $ — $ — Cash (funds held for customers) 76,104 76,104 76,104 — — Loans and notes receivable from distributors 23,329 21,290 — — 21,290 Long-term debt (1) 615,985 624,758 — 624,758 — (1) Amounts exclude capital lease obligations. Fair value measurements using December 31, 2015 Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs (in thousands) Carrying value Fair value (Level 1) (Level 2) (Level 3) Cash $ 62,427 $ 62,427 $ 62,427 $ — $ — Cash (funds held for customers) 38,276 38,276 38,276 — — Loans and notes receivable from distributors 25,745 23,383 — — 23,383 Long-term debt (1) 626,909 641,000 — 641,000 — (1) Amounts exclude capital lease obligations. |
Restructuring charges
Restructuring charges | 9 Months Ended |
Sep. 30, 2016 | |
Restructuring and Related Activities [Abstract] | |
Restructuring charges | Restructuring charges Net restructuring charges for each period consisted of the following components: Quarter Ended Nine Months Ended (in thousands, except number of employees) 2016 2015 2016 2015 Severance accruals $ 1,824 $ 1,443 $ 3,870 $ 3,493 Severance reversals (198 ) (282 ) (666 ) (976 ) Operating lease obligations — 88 — 88 Net restructuring accruals 1,626 1,249 3,204 2,605 Other costs 432 489 939 551 Net restructuring charges $ 2,058 $ 1,738 $ 4,143 $ 3,156 Number of employees included in severance accruals 55 50 120 200 The net restructuring charges are reflected in the consolidated statements of comprehensive income as follows: Quarter Ended Nine Months Ended (in thousands) 2016 2015 2016 2015 Total cost of revenue $ 65 $ 233 $ 136 $ 418 Operating expenses 1,993 1,505 4,007 2,738 Net restructuring charges $ 2,058 $ 1,738 $ 4,143 $ 3,156 During the nine months ended September 30, 2016 and September 30, 2015 , the net restructuring accruals included severance charges related to employee reductions across functional areas as we continue to reduce costs, primarily within our sales and marketing, information technology and fulfillment functions. These charges were reduced by the reversal of restructuring accruals recorded in previous periods, as fewer employees received severance benefits than originally estimated. Other restructuring costs, which were expensed as incurred, included items such as information technology costs, employee and equipment moves, training and travel related to our restructuring activities. Restructuring accruals of $2,648 as of September 30, 2016 and $3,864 as of December 31, 2015 are included in accrued liabilities in the consolidated balance sheets. The majority of the employee reductions are expected to be completed by the fourth quarter of 2016, and we expect most of the related severance payments to be paid by mid-2017, utilizing cash from operations. The remaining payments due under operating lease obligations will be paid by the end of 2016. As of September 30, 2016 , approximately 25 employees had not yet started to receive severance benefits. Accruals for our restructuring initiatives, summarized by year, were as follows: (in thousands) 2014 initiatives 2015 initiatives 2016 initiatives Total Balance, December 31, 2015 $ 176 $ 3,688 $ — $ 3,864 Restructuring charges — 78 3,792 3,870 Restructuring reversals (111 ) (465 ) (90 ) (666 ) Payments (65 ) (2,989 ) (1,366 ) (4,420 ) Balance, September 30, 2016 $ — $ 312 $ 2,336 $ 2,648 Cumulative amounts: Restructuring charges $ 8,242 $ 6,205 $ 3,792 $ 18,239 Restructuring reversals (1,444 ) (923 ) (90 ) (2,457 ) Payments (6,798 ) (4,970 ) (1,366 ) (13,134 ) Balance, September 30, 2016 $ — $ 312 $ 2,336 $ 2,648 The components of our restructuring accruals, by segment, were as follows: Employee severance benefits Operating lease obligations (in thousands) Small Business Services Financial Services Direct Checks Corporate Small Business Services Financial Services Total Balance, December 31, 2015 $ 1,023 $ 884 $ — $ 1,859 $ 56 $ 42 $ 3,864 Restructuring charges 1,979 768 135 929 59 — 3,870 Restructuring reversals (255 ) (50 ) (2 ) (359 ) — — (666 ) Payments (1,457 ) (922 ) (85 ) (1,811 ) (103 ) (42 ) (4,420 ) Balance, September 30, 2016 $ 1,290 $ 680 $ 48 $ 618 $ 12 $ — $ 2,648 Cumulative amounts (1) : Restructuring charges $ 7,704 $ 5,027 $ 171 $ 4,940 $ 344 $ 53 $ 18,239 Restructuring reversals (1,455 ) (361 ) (4 ) (637 ) — — (2,457 ) Inter-segment transfer 41 (14 ) — (27 ) — — — Payments (5,000 ) (3,972 ) (119 ) (3,658 ) (332 ) (53 ) (13,134 ) Balance, September 30, 2016 $ 1,290 $ 680 $ 48 $ 618 $ 12 $ — $ 2,648 (1) Includes accruals related to our cost reduction initiatives for 2014 through 2016. |
Postretirement benefits
Postretirement benefits | 9 Months Ended |
Sep. 30, 2016 | |
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |
Postretirement benefits | Postretirement benefits We have historically provided certain health care benefits for a portion of our retired U.S. employees. In addition to our retiree health care plan, we also have a supplemental executive retirement plan in the United States. Further information regarding our postretirement benefit plans can be found under the caption “Note 12: Postretirement benefits” in the Notes to Consolidated Financial Statements appearing in the 2015 Form 10-K. Postretirement benefit income for each period consisted of the following components: Quarter Ended Nine Months Ended (in thousands) 2016 2015 2016 2015 Interest cost $ 780 $ 859 $ 2,339 $ 2,578 Expected return on plan assets (1,834 ) (1,958 ) (5,501 ) (5,875 ) Amortization of prior service credit (355 ) (355 ) (1,066 ) (1,066 ) Amortization of net actuarial losses 949 780 2,848 2,340 Net periodic benefit income $ (460 ) $ (674 ) $ (1,380 ) $ (2,023 ) |
Debt
Debt | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Debt | Debt Debt outstanding was comprised of the following: (in thousands) September 30, December 31, 6.0% senior notes due November 15, 2020, principal amount $ 200,000 $ 200,000 Less unamortized debt issuance costs (1,906 ) (2,249 ) Cumulative change in fair value of hedged debt (Note 7) (109 ) (4,842 ) 6.0% senior notes, carrying value 197,985 192,909 Amount drawn on credit facility 418,000 434,000 Long-term portion of capital lease obligations 805 1,064 Long-term portion of debt 616,790 627,973 Capital lease obligations due within one year 951 1,045 Total debt $ 617,741 $ 629,018 Our senior notes due in 2020 include covenants that place certain restrictions on the issuance of additional debt and limitations on certain liens. If our ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) to interest expense, as defined in such instruments, falls below two to one, there would be additional limitations on our ability to issue additional debt. The notes due in 2020 also include limitations on our ability to issue redeemable stock and preferred stock, make loans and investments, and consolidate, merge or sell all or substantially all of our assets. Absent certain defined events of default under our debt instruments, and as long as our ratio of EBITDA to interest expense is in excess of two to one, our debt covenants do not restrict our ability to pay cash dividends at our current rate. There are currently no limitations on the amount of dividends and share repurchases under the terms of our credit facility agreement. However, if our leverage ratio, defined as total debt less unrestricted cash to EBITDA, should exceed 2.75 to one, there would be an annual limitation on the amount of dividends and share repurchases under the terms of this agreement. In November 2012 , we issued $200,000 of 6.0% senior notes maturing on November 15, 2020 . The notes were issued via a private placement under Rule 144A of the Securities Act of 1933. These notes were subsequently registered with the SEC via a registration statement that became effective on April 3, 2013. Interest payments are due each May and November. The notes are guaranteed by certain of our subsidiaries and place a limitation on restricted payments, including share repurchases and increases in dividend levels. The limitation on restricted payments does not apply if the notes are upgraded to an investment-grade credit rating. Financial information for the guarantor subsidiaries can be found in Note 15. Proceeds from the offering, net of offering costs, were $196,340 . These proceeds were used to retire our senior notes that were due in June 2015. In October 2016, we issued a notice to redeem all of these notes on November 15, 2016 at a redemption price of 103% of the principal amount. The fair value of these notes was $206,758 as of September 30, 2016 , based on quoted prices that are directly observable. As discussed in Note 7, we entered into interest rate swaps to hedge these notes. In March 2011 , we issued $200,000 of 7.0% senior notes that were scheduled to mature on March 15, 2019 . The notes were issued via a private placement under Rule 144A of the Securities Act of 1933. These notes were subsequently registered with the SEC via a registration statement that became effective on January 10, 2012. Proceeds from the offering, net of offering costs, were $196,195 . These proceeds were used to retire a portion of our senior, unsecured notes due in 2012. In March 2015, we retired all of these notes, realizing a loss on early debt extinguishment of $8,917 during the nine months ended September 30, 2015 , consisting of a contractual call premium and the write-off of related debt issuance costs. This retirement was funded utilizing our credit facility and a short-term bank loan that we have since repaid. We had capital lease obligations of $1,756 as of September 30, 2016 and $2,109 as of December 31, 2015 related to information technology hardware. The lease obligations will be paid through August 2020 . The related assets are included in property, plant and equipment in the consolidated balance sheets. Depreciation of the leased assets is included in depreciation expense in the consolidated statements of cash flows. As of September 30, 2016 , we had a $525,000 revolving credit facility, which is scheduled to expire in February 2019 . Our quarterly commitment fee ranges from 0.20% to 0.40% based on our leverage ratio. As of September 30, 2016 , $418,000 was drawn on our revolving credit facility at a weighted-average interest rate of 1.95% . As of December 31, 2015 , $434,000 was drawn on our revolving credit facility at a weighted-average interest rate of 1.89% . In September 2016, we amended the credit agreement governing our credit facility to include a new term loan facility in the aggregate principal amount of $200,000 in order to retire our senior notes due in 2020, which we expect to redeem on November 15, 2016. The term loan facility will be fully drawn on the date that it is funded and amounts repaid may not be reborrowed. Interest will be calculated at a variable rate and will be paid quarterly. Aggregate principal payments of $21,250 will be due in 2017 and $26,250 will be due in 2018, with the remainder due in February 2019 at the expiration of the credit agreement. We may prepay the term loan in full or in part at our discretion. All borrowings under our credit agreement are collateralized by substantially all of our personal and intangible property. The credit agreement governing our credit facility contains customary covenants regarding limits on levels of subsidiary indebtedness and capital expenditures, liens, investments, acquisitions, certain mergers, certain asset sales outside the ordinary course of business, and change in control as defined in the agreement. The agreement also contains financial covenants regarding our leverage ratio, interest coverage and liquidity. In March 2015 , we entered into a $75,000 short-term variable rate bank loan. Proceeds from this loan, net of related costs, were $74,880 and were used, along with a draw on our credit facility, to retire all $200,000 of our 7.0% senior notes that were scheduled to mature on March 15, 2019 . During December 2015, we elected to repay this loan in full. Daily average amounts outstanding under our credit facility and short-term borrowings were as follows: (in thousands) Nine Months Ended September 30, 2016 Year Ended December 31, 2015 Revolving credit facility: Daily average amount outstanding $ 416,814 $ 270,063 Weighted-average interest rate 1.91 % 1.66 % Short-term bank loan: Daily average amount outstanding $ — $ 47,178 Weighted-average interest rate — 1.59 % As of September 30, 2016 , amounts were available for borrowing under our revolving credit facility as follows: (in thousands) Total available Revolving credit facility commitment $ 525,000 Amount drawn on revolving credit facility (418,000 ) Outstanding letters of credit (1) (12,795 ) Net available for borrowing as of September 30, 2016 $ 94,205 (1) We use standby letters of credit to collateralize certain obligations related primarily to our self-insured workers’ compensation claims, as well as claims for environmental matters, as required by certain states. These letters of credit reduce the amount available for borrowing under our revolving credit facility. |
Other commitments and contingen
Other commitments and contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Other commitments and contingencies | Other commitments and contingencies Indemnifications – In the normal course of business, we periodically enter into agreements that incorporate general indemnification language. These indemnifications encompass third-party claims arising from our products and services, including, without limitation, service failures, breach of security, intellectual property rights, governmental regulations and/or employment-related matters. Performance under these indemnities would generally be triggered by our breach of the terms of the contract. In disposing of assets or businesses, we often provide representations, warranties and/or indemnities to cover various risks, including, for example, unknown damage to the assets, environmental risks involved in the sale of real estate, liability to investigate and remediate environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not have the ability to estimate the potential liability from such indemnities because they relate to unknown conditions. While we do not believe that any liability under these indemnities would likely have a material adverse effect on our financial position, annual results of operations or annual cash flows, inherent uncertainties exist regarding the scope and nature of such indemnities that could lead to material unfavorable outcomes. We have recorded liabilities for known indemnifications related to environmental matters. Environmental matters – We are currently involved in environmental compliance, investigation and remediation activities at some of our current and former sites, primarily printing facilities of our Financial Services and Small Business Services segments that have been sold. Remediation costs are accrued on an undiscounted basis when the obligations are either known or considered probable and can be reasonably estimated. Remediation or testing costs that result directly from the sale of an asset and which we would not have otherwise incurred are considered direct costs of the sale of the asset. As such, they are included in our measurement of the carrying value of the asset sold. Accruals for environmental matters were $3,329 as of September 30, 2016 and $5,952 as of December 31, 2015 , primarily related to facilities that have been sold. These accruals are included in accrued liabilities and other non-current liabilities in the consolidated balance sheets. Accrued costs consist of direct costs of the remediation activities, primarily fees that will be paid to outside engineering and consulting firms. Although recorded accruals include our best estimates, our total costs cannot be predicted with certainty due to various factors such as the extent of corrective action that may be required, evolving environmental laws and regulations and advances in environmental technology. Where the available information is sufficient to estimate the amount of the liability, that estimate is used. Where the information is only sufficient to establish a range of probable liability and no point within the range is more likely than any other, the lower end of the range is recorded. We do not believe that the range of possible outcomes could have a material effect on our financial condition, results of operations or liquidity. The consolidated statement of comprehensive income for the nine months ended September 30, 2016 included a benefit from environmental matters of $1,759 . During the quarter ended June 30, 2016, we reversed a portion of the liability for one of our sold facilities as we determined that it was no longer probable that a portion of the estimated environmental remediation costs for this location would be incurred. Environmental expense was $915 for the nine months ended September 30, 2015 . We purchased an insurance policy during 2002 that covers up to $10,000 of third-party pollution claims through 2032 at certain owned, leased and divested sites. We also purchased an insurance policy during 2009 that covers up to $15,000 of third-party pollution claims through April 2019. This policy covers liability for claims of bodily injury or property damage arising from pollution events at the covered facilities. The policy also provides remediation coverage should we be required by a governing authority to perform remediation activities at the covered sites. No accruals have been recorded in our consolidated financial statements for any of the events contemplated in these insurance policies. We do not anticipate significant net cash outlays for environmental matters during 2016. Self-insurance – We are self-insured for certain costs, primarily workers' compensation claims and medical and dental benefits for active employees and those employees on long-term disability. The liabilities associated with these items represent our best estimate of the ultimate obligations for reported claims plus those incurred, but not reported, and totaled $6,766 as of September 30, 2016 and $6,457 as of December 31, 2015 . These accruals are included in accrued liabilities and other non-current liabilities in the consolidated balance sheets. Our workers' compensation liability is accounted for on a present value basis. The difference between the discounted and undiscounted liability was not significant as of September 30, 2016 or December 31, 2015 . Our self-insurance liabilities are estimated, in part, by considering historical claims experience, demographic factors and other actuarial assumptions. The estimated accruals for these liabilities could be significantly affected if future events and claims differ from these assumptions and historical trends. Litigation – On September 2, 2014, one of our suppliers filed a petition for binding arbitration under the Commercial Rules of the American Arbitration Association, alleging that it is entitled to additional payment from us under our reseller agreement and seeking damages of up to approximately $43,000 . We did not record a liability for damages in connection with this matter in our consolidated balance sheets. In March 2016, the arbitrator rejected all of the supplier's claims and ruled in our favor. Recorded liabilities for legal matters were not material to our financial position, results of operations or liquidity, and we do not believe that any of the currently identified claims or litigation will materially affect our financial position, results of operations or liquidity upon resolution. However, litigation is subject to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur, it may cause a material adverse impact on our financial position, results of operations or liquidity for the period in which the ruling occurs or in future periods. |
Shareholders' equity
Shareholders' equity | 9 Months Ended |
Sep. 30, 2016 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' equity | Shareholders’ equity We have an outstanding authorization from our board of directors to purchase up to 10,000 shares of our common stock. This authorization has no expiration date, and 233 shares remained available for purchase under this authorization as of September 30, 2016 . During the nine months ended September 30, 2016 , we repurchased 733 shares for $44,944 . In May 2016, our board of directors approved an additional authorization for the repurchase of up to $300,000 of our common stock, effective at the conclusion of our previous authorization. The additional authorization also has no expiration date. |
Business segment information
Business segment information | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Business segment information | Business segment information We operate three reportable business segments: Small Business Services, Financial Services and Direct Checks. Our business segments are generally organized by type of customer served and reflect the way we manage the company. Small Business Services promotes and sells products and services to small businesses via direct response mail and internet advertising; referrals from financial institutions, telecommunications clients and other partners; networks of distributors and independent dealers; a direct sales force that focuses on selling to and through major accounts; and an outbound telemarketing group. Financial Services' products and services are sold primarily through a direct sales force, which executes product and service supply contracts with our financial institution clients nationwide, including banks, credit unions and financial services companies. In the case of check supply contracts, once the financial institution relationship is established, consumers may submit their check orders through their financial institution or over the phone or internet. Direct Checks sells products and services directly to consumers using direct marketing, including print advertising and search engine marketing and optimization strategies. All three segments operate primarily in the United States. Small Business Services also has operations in Canada and portions of Europe. Our product and service offerings are comprised of the following: Checks – We remain one of the largest providers of checks in the United States. During 2015, checks represented 40.1% of our Small Business Services segment's revenue, 59.7% of our Financial Services segment's revenue and 84.6% of our Direct Checks segment's revenue. Marketing solutions and other services – We offer products and services that help small businesses and/or financial institutions promote their businesses and acquire customers, as well as various other service offerings. Our Small Business Services segment offers services designed to fulfill the marketing and sales needs of small businesses, including logo and web design; hosting and other web services; search engine optimization; marketing programs, including email, mobile, social media and other self-service marketing solutions; and digital printing services. In addition, Small Business Services offers specialized services, including fraud protection and security, payroll services and electronic checks, as well as promotional solutions such as postcards, brochures, retail packaging supplies, apparel, greeting cards and business cards. Financial Services offers a suite of financial technology ("FinTech") solutions focused on enabling financial institutions to better manage the customer life cycle for their retail and commercial customers. These FinTech solutions include outsourced marketing campaign targeting and execution, digital channel onboarding, loyalty and rewards, technology-enabled treasury services, financial performance management, and fraud protection and security services. Our Direct Checks segment provides fraud protection and security services, as well as package insert programs under which companies' marketing materials are included in our check packages. Forms – Our Small Business Services segment provides printed forms to small businesses, including deposit tickets, billing forms, work orders, job proposals, purchase orders, invoices and personnel forms. This segment also offers computer forms compatible with accounting software packages commonly used by small businesses. Forms sold by our Financial Services and Direct Checks segments include deposit tickets and check registers. Accessories and other products – Small Business Services offers products designed to supply small business owners with the customized documents necessary to efficiently manage their business, including envelopes, office supplies, stamps and labels. Our Financial Services and Direct Checks segments offer checkbook covers and stamps. The accounting policies of the segments are the same as those described in the Notes to Consolidated Financial Statements included in the 2015 Form 10-K. We allocate corporate costs for our shared services functions to our business segments, including costs of our executive management, human resources, supply chain, finance, information technology and legal functions. Generally, where costs incurred are directly attributable to a business segment, primarily within the areas of information technology, supply chain, finance and legal, those costs are charged directly to that segment. Because we use a shared services approach for many of our functions, certain costs are not directly attributable to a business segment. These costs are allocated to our business segments based on segment revenue, as revenue is a measure of the relative size and magnitude of each segment and indicates the level of corporate shared services consumed by each segment. Corporate assets are not allocated to the segments and consist of property, plant and equipment; internal-use software; and inventories and supplies related to our corporate shared services functions of manufacturing, information technology and real estate, as well as long-term investments. We are an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations and the sharing of assets. Therefore, we do not represent that these segments, if operated independently, would report the operating income and other financial information shown. The following is our segment information as of and for the quarters ended September 30, 2016 and 2015 : Reportable Business Segments (in thousands) Small Business Services Financial Services Direct Checks Corporate Consolidated Total revenue from external 2016 $ 298,931 $ 123,033 $ 36,956 $ — $ 458,920 customers: 2015 288,966 110,894 39,956 — 439,816 Operating income: 2016 50,670 28,708 12,914 — 92,292 2015 51,873 23,364 14,131 — 89,368 Depreciation and amortization 2016 13,315 8,876 868 — 23,059 expense: 2015 11,825 5,979 949 — 18,753 Total assets: 2016 1,075,661 434,374 160,624 270,489 1,941,148 2015 990,282 270,421 161,636 267,718 1,690,057 Capital asset purchases: 2016 — — — 10,031 10,031 2015 — — — 10,242 10,242 The following is our segment information as of and for the nine months ended September 30, 2016 and 2015 : Reportable Business Segments (in thousands) Small Business Services Financial Services Direct Checks Corporate Consolidated Total revenue from external 2016 $ 877,384 $ 374,511 $ 116,965 $ — $ 1,368,860 customers: 2015 848,216 335,134 125,958 — 1,309,308 Operating income: 2016 150,776 84,467 40,640 — 275,883 2015 149,545 69,280 44,713 — 263,538 Depreciation and amortization 2016 38,195 26,888 2,628 — 67,711 expense: 2015 33,265 17,760 3,406 — 54,431 Total assets: 2016 1,075,661 434,374 160,624 270,489 1,941,148 2015 990,282 270,421 161,636 267,718 1,690,057 Capital asset purchases: 2016 — — — 32,215 32,215 2015 — — — 29,549 29,549 |
Supplemental guarantor financia
Supplemental guarantor financial information | 9 Months Ended |
Sep. 30, 2016 | |
Supplemental guarantor financial information [Abstract] | |
Supplemental guarantor financial information | Supplemental guarantor financial information Our long-term notes due in 2020 (Note 11), as well as obligations under our credit facility, are jointly and severally guaranteed on a full and unconditional basis, subject to the release provisions described herein, by certain 100%-owned subsidiaries. The subsidiary guarantees with respect to our long-term notes are subject to release upon the occurrence of certain events: the sale of all or substantially all of a subsidiary's assets, when the requirements for defeasance of the guaranteed securities have been satisfied, when the subsidiary is declared an unrestricted subsidiary, or upon satisfaction and discharge of the indenture. The following supplemental condensed consolidating financial information reflects the summarized financial information of Deluxe Corporation, the guarantors on a combined basis and the non-guarantor subsidiaries on a combined basis. Separate financial statements of the guarantors are not presented because the guarantors are jointly, severally, fully and unconditionally liable under the guarantees, subject to the release provisions described herein, and we believe that the condensed consolidating financial statements presented are sufficient to provide an understanding of the financial position, results of operations and cash flows of the guarantors. During the quarter ended June 30, 2016, we identified an error in the balance sheet presentation of borrowings under our credit facility and the related asset for debt issuance costs. These amounts were previously presented as current items in our consolidated balance sheets, and we have determined that they should have been presented as non-current. This change also corrects the presentation of the cash flows associated with borrowings under our credit facility. Previously these cash flows were presented on a net basis. The change in the balance sheet presentation requires that they be presented on a gross basis. Prior period consolidated amounts, as well as those for Deluxe Corporation, have been revised to reflect these changes. Further information about the revision can be found in Note 1. We are an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations and the sharing of assets. Therefore, we do not represent that the financial information presented is indicative of the financial position, results of operations or cash flows that the entities would have reported if they had operated independently. The condensed consolidating financial statements should be read in conjunction with our consolidated financial statements. Condensed Consolidating Balance Sheet (Unaudited) September 30, 2016 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total ASSETS Current assets: Cash and cash equivalents $ 14,019 $ 902 $ 66,903 $ (1,759 ) $ 80,065 Trade accounts receivable, net — 109,326 8,435 — 117,761 Inventories and supplies — 39,175 2,299 — 41,474 Funds held for customers — 24,031 68,139 — 92,170 Other current assets 6,718 32,934 1,386 — 41,038 Total current assets 20,737 206,368 147,162 (1,759 ) 372,508 Deferred income taxes 14,754 — 1,749 (14,754 ) 1,749 Long-term investments 34,156 7,737 — — 41,893 Property, plant and equipment, net 11,914 66,833 4,920 — 83,667 Assets held for sale — — 13,966 — 13,966 Intangibles, net 19,119 283,237 11,522 — 313,878 Goodwill — 980,142 9,499 — 989,641 Investments in consolidated subsidiaries 1,395,804 108,954 — (1,504,758 ) — Intercompany receivable 23,164 — — (23,164 ) — Other non-current assets 6,549 117,215 82 — 123,846 Total assets $ 1,526,197 $ 1,770,486 $ 188,900 $ (1,544,435 ) $ 1,941,148 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 25,328 $ 60,456 $ 2,810 $ (1,759 ) $ 86,835 Accrued liabilities 20,577 149,507 70,553 — 240,637 Long-term debt due within one year 906 — 45 — 951 Total current liabilities 46,811 209,963 73,408 (1,759 ) 328,423 Long-term debt 616,697 — 93 — 616,790 Deferred income taxes — 95,508 — (14,754 ) 80,754 Intercompany payable — 22,494 670 (23,164 ) — Other non-current liabilities 12,742 46,717 5,775 — 65,234 Total shareholders' equity 849,947 1,395,804 108,954 (1,504,758 ) 849,947 Total liabilities and shareholders' equity $ 1,526,197 $ 1,770,486 $ 188,900 $ (1,544,435 ) $ 1,941,148 Condensed Consolidating Balance Sheet (Unaudited) December 31, 2015 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total ASSETS Current assets: Cash and cash equivalents $ 5,187 $ 940 $ 56,422 $ (122 ) $ 62,427 Trade accounts receivable, net — 115,951 7,703 — 123,654 Inventories and supplies — 39,758 2,198 — 41,956 Funds held for customers — — 53,343 — 53,343 Other current assets 7,230 32,765 2,610 — 42,605 Total current assets 12,417 189,414 122,276 (122 ) 323,985 Deferred income taxes 13,498 — 1,238 (13,498 ) 1,238 Long-term investments 34,304 7,387 — — 41,691 Property, plant and equipment, net 10,111 71,017 4,604 — 85,732 Assets held for sale — — 13,969 — 13,969 Intangibles, net 9,066 273,051 3,194 — 285,311 Goodwill — 974,973 1,442 — 976,415 Investments in consolidated subsidiaries 1,248,549 81,099 — (1,329,648 ) — Intercompany receivable 99,506 — — (99,506 ) — Other non-current assets 5,861 107,767 184 — 113,812 Total assets $ 1,433,312 $ 1,704,708 $ 146,907 $ (1,442,774 ) $ 1,842,153 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 15,625 $ 69,809 $ 2,263 $ (122 ) $ 87,575 Accrued liabilities 23,567 148,279 56,577 — 228,423 Long-term debt due within one year 1,026 — 19 — 1,045 Total current liabilities 40,218 218,088 58,859 (122 ) 317,043 Long-term debt 627,942 — 31 — 627,973 Deferred income taxes — 94,574 — (13,498 ) 81,076 Intercompany payable — 98,365 1,141 (99,506 ) — Other non-current liabilities 20,083 45,132 5,777 — 70,992 Total shareholders' equity 745,069 1,248,549 81,099 (1,329,648 ) 745,069 Total liabilities and shareholders' equity $ 1,433,312 $ 1,704,708 $ 146,907 $ (1,442,774 ) $ 1,842,153 Condensed Consolidating Statement of Comprehensive Income (Unaudited) Quarter Ended September 30, 2016 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Product revenue $ — $ 350,454 $ 14,226 $ — $ 364,680 Service revenue 36,078 89,355 6,006 (37,199 ) 94,240 Total revenue 36,078 439,809 20,232 (37,199 ) 458,920 Cost of products — (127,210 ) (6,418 ) — (133,628 ) Cost of services (40,487 ) (30,363 ) (1,934 ) 40,142 (32,642 ) Total cost of revenue (40,487 ) (157,573 ) (8,352 ) 40,142 (166,270 ) Gross profit (4,409 ) 282,236 11,880 2,943 292,650 Operating expenses — (188,768 ) (8,647 ) (2,943 ) (200,358 ) Operating (loss) income (4,409 ) 93,468 3,233 — 92,292 Interest expense (5,019 ) (4,206 ) (1 ) 4,371 (4,855 ) Other income 3,994 919 200 (4,371 ) 742 (Loss) income before income taxes (5,434 ) 90,181 3,432 — 88,179 Income tax benefit (provision) 4,592 (33,138 ) (970 ) — (29,516 ) (Loss) income before equity in earnings of consolidated subsidiaries (842 ) 57,043 2,462 — 58,663 Equity in earnings of consolidated subsidiaries 59,505 2,462 — (61,967 ) — Net income $ 58,663 $ 59,505 $ 2,462 $ (61,967 ) $ 58,663 Comprehensive income $ 57,824 $ 58,614 $ 1,212 $ (59,826 ) $ 57,824 Condensed Consolidating Statement of Comprehensive Income (Unaudited) Quarter Ended September 30, 2015 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Product revenue $ — $ 345,820 $ 15,961 $ — $ 361,781 Service revenue 28,005 72,419 6,709 (29,098 ) 78,035 Total revenue 28,005 418,239 22,670 (29,098 ) 439,816 Cost of products — (124,910 ) (7,684 ) — (132,594 ) Cost of services (29,218 ) (24,016 ) (2,272 ) 28,798 (26,708 ) Total cost of revenue (29,218 ) (148,926 ) (9,956 ) 28,798 (159,302 ) Gross profit (1,213 ) 269,313 12,714 (300 ) 280,514 Operating expenses — (182,823 ) (8,623 ) 300 (191,146 ) Operating (loss) income (1,213 ) 86,490 4,091 — 89,368 Interest expense (4,126 ) (4,126 ) — 3,865 (4,387 ) Other income 3,737 746 301 (3,865 ) 919 (Loss) income before income taxes (1,602 ) 83,110 4,392 — 85,900 Income tax benefit (provision) 3,382 (31,341 ) (1,024 ) — (28,983 ) (Loss) income before equity in earnings of consolidated subsidiaries 1,780 51,769 3,368 — 56,917 Equity in earnings of consolidated subsidiaries 55,137 3,368 — (58,505 ) — Net income $ 56,917 $ 55,137 $ 3,368 $ (58,505 ) $ 56,917 Comprehensive income $ 52,680 $ 50,857 $ (1,181 ) $ (49,676 ) $ 52,680 Condensed Consolidating Statement of Comprehensive Income (Unaudited) Nine Months Ended September 30, 2016 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Product revenue $ — $ 1,048,288 $ 42,398 $ — $ 1,090,686 Service revenue 103,173 263,292 18,241 (106,532 ) 278,174 Total revenue 103,173 1,311,580 60,639 (106,532 ) 1,368,860 Cost of products — (372,165 ) (18,996 ) — (391,161 ) Cost of services (115,810 ) (95,125 ) (5,600 ) 117,289 (99,246 ) Total cost of revenue (115,810 ) (467,290 ) (24,596 ) 117,289 (490,407 ) Gross profit (12,637 ) 844,290 36,043 10,757 878,453 Operating expenses — (566,081 ) (25,732 ) (10,757 ) (602,570 ) Operating (loss) income (12,637 ) 278,209 10,311 — 275,883 Interest expense (14,920 ) (11,171 ) (2 ) 10,812 (15,281 ) Other income 10,302 1,786 59 (10,812 ) 1,335 (Loss) income before income taxes (17,255 ) 268,824 10,368 — 261,937 Income tax benefit (provision) 11,431 (95,924 ) (2,290 ) — (86,783 ) (Loss) income before equity in earnings of consolidated subsidiaries (5,824 ) 172,900 8,078 — 175,154 Equity in earnings of consolidated subsidiaries 180,978 8,078 — (189,056 ) — Net income $ 175,154 $ 180,978 $ 8,078 $ (189,056 ) $ 175,154 Comprehensive income $ 180,298 $ 185,966 $ 11,989 $ (197,955 ) $ 180,298 Condensed Consolidating Statement of Comprehensive Income (Unaudited) Nine Months Ended September 30, 2015 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Product revenue $ — $ 1,018,518 $ 57,174 $ — $ 1,075,692 Service revenue 83,116 217,412 19,638 (86,550 ) 233,616 Total revenue 83,116 1,235,930 76,812 (86,550 ) 1,309,308 Cost of products — (355,690 ) (28,900 ) — (384,590 ) Cost of services (89,348 ) (78,770 ) (6,192 ) 90,978 (83,332 ) Total cost of revenue (89,348 ) (434,460 ) (35,092 ) 90,978 (467,922 ) Gross profit (6,232 ) 801,470 41,720 4,428 841,386 Operating expenses — (544,450 ) (28,970 ) (4,428 ) (577,848 ) Operating (loss) income (6,232 ) 257,020 12,750 — 263,538 Loss on early debt extinguishment (8,917 ) — — — (8,917 ) Interest expense (14,727 ) (10,121 ) (1 ) 9,527 (15,322 ) Other income 9,680 1,355 666 (9,527 ) 2,174 (Loss) income before income taxes (20,196 ) 248,254 13,415 — 241,473 Income tax benefit (provision) 10,671 (89,743 ) (3,481 ) — (82,553 ) (Loss) income before equity in earnings of consolidated subsidiaries (9,525 ) 158,511 9,934 — 158,920 Equity in earnings of consolidated subsidiaries 168,445 9,934 — (178,379 ) — Net income $ 158,920 $ 168,445 $ 9,934 $ (178,379 ) $ 158,920 Comprehensive income $ 150,190 $ 159,587 $ 269 $ (159,856 ) $ 150,190 Condensed Consolidating Statement of Cash Flows (Unaudited) Nine Months Ended September 30, 2016 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Net cash provided by operating activities $ 3,734 $ 196,493 $ 9,531 $ (1,637 ) $ 208,121 Cash flows from investing activities: Purchases of capital assets (18,463 ) (11,777 ) (1,975 ) — (32,215 ) Payments for acquisitions, net of cash acquired — (64,637 ) — — (64,637 ) Proceeds from company-owned life insurance policies 4,123 — — — 4,123 Other (290 ) 965 1,655 — 2,330 Net cash used by investing activities (14,630 ) (75,449 ) (320 ) — (90,399 ) Cash flows from financing activities: Proceeds from issuing long-term debt 169,000 — — — 169,000 Payments on long-term debt, including costs of debt reacquisition (185,849 ) — (24 ) — (185,873 ) Proceeds from issuing shares under employee plans 6,861 — — — 6,861 Employee taxes paid for shares withheld (2,333 ) — — — (2,333 ) Payments for common shares repurchased (44,944 ) — — — (44,944 ) Cash dividends paid to shareholders (44,127 ) — — — (44,127 ) Advances from (to) consolidated subsidiaries 121,653 (119,981 ) (1,672 ) — — Other (533 ) (1,101 ) — — (1,634 ) Net cash provided (used) by financing activities 19,728 (121,082 ) (1,696 ) — (103,050 ) Effect of exchange rate change on cash — — 2,966 — 2,966 Net change in cash and cash equivalents 8,832 (38 ) 10,481 (1,637 ) 17,638 Cash and cash equivalents, beginning of year 5,187 940 56,422 (122 ) 62,427 Cash and cash equivalents, end of period $ 14,019 $ 902 $ 66,903 $ (1,759 ) $ 80,065 Condensed Consolidating Statement of Cash Flows (Unaudited) Nine Months Ended September 30, 2015 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Net cash (used) provided by operating activities $ (820 ) $ 205,987 $ 10,852 $ 3,129 $ 219,148 Cash flows from investing activities: Purchases of capital assets (1,317 ) (26,094 ) (2,138 ) — (29,549 ) Payments for acquisitions, net of cash acquired (26 ) (50,907 ) — — (50,933 ) Proceeds from company-owned life insurance policies 3,973 — — — 3,973 Other (387 ) 1,182 10 — 805 Net cash provided (used) by investing activities 2,243 (75,819 ) (2,128 ) — (75,704 ) Cash flows from financing activities: Proceeds from short-term borrowings 50,000 — — — 50,000 Proceeds from issuing long-term debt 276,500 — — — 276,500 Payments on long-term debt, including costs of debt reacquisition (375,279 ) — (12 ) — (375,291 ) Proceeds from issuing shares under employee plans 5,492 — — — 5,492 Excess tax benefit from share-based employee awards 1,816 — — — 1,816 Employee taxes paid for shares withheld (1,236 ) — — — (1,236 ) Payments for common shares repurchased (46,996 ) — — — (46,996 ) Cash dividends paid to shareholders (44,965 ) — — — (44,965 ) Advances from (to) consolidated subsidiaries 132,878 (133,077 ) 199 — — Other (136 ) (92 ) (150 ) — (378 ) Net cash (used) provided by financing activities (1,926 ) (133,169 ) 37 — (135,058 ) Effect of exchange rate change on cash — — (7,032 ) — (7,032 ) Net change in cash and cash equivalents (503 ) (3,001 ) 1,729 3,129 1,354 Cash and cash equivalents, beginning of year 8,335 4,342 52,193 (3,329 ) 61,541 Cash and cash equivalents, end of period $ 7,832 $ 1,341 $ 53,922 $ (200 ) $ 62,895 |
Subsequent events
Subsequent events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent events | Subsequent events In October 2016, we issued a notice to redeem all $200,000 of our senior notes due in 2020 on November 15, 2016 at a redemption price of 103% of the principal amount. We plan to utilize borrowings under our recently expanded credit facility to fund the redemption (see Note 11). In conjunction with the redemption, we plan to terminate our $200,000 of interest rate swaps (see Note 7). In October 2016, we acquired selected assets of Data Support Systems, Inc. for aggregate estimated cash payments of $21,000 , subject to post-closing adjustments, and including estimated contingent consideration. Data Support Systems is a provider of image-based software for payments reconciliation and back-office case management and will be included in our Financial Services segment. The allocation of the purchase price to the assets acquired and liabilities assumed has not yet been determined. |
New accounting pronouncements (
New accounting pronouncements (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New accounting pronouncements | New accounting pronouncements Recently adopted accounting pronouncements – In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period . The standard requires that a performance target that affects vesting and that could be achieved after the requisite service period should be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. We adopted this standard on January 1, 2016. As our accounting treatment for these awards was in compliance with the new guidance, adoption of this standard had no impact on our consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. The standard requires that debt issuance costs related to a recognized debt liability be presented in the consolidated balance sheets as a direct reduction from the carrying amount of the debt liability. We adopted this standard on January 1, 2016, applying it retrospectively. The consolidated balance sheet as of December 31, 2015 reflects the reclassification of debt issuance costs of $2,249 from other non-current assets to long-term debt. The amount of debt issuance costs included in long-term debt as of September 30, 2016 was $1,906 . In August 2015, the FASB issued ASU No. 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting . This standard adds SEC paragraphs pursuant to the SEC Staff announcement at the June 18, 2015 Emerging Issues Task Force (EITF) meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. Under this guidance, the SEC Staff would not object to presenting such costs as an asset and subsequently amortizing the deferred costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings under the arrangement. Debt issuance costs of $1,528 as of September 30, 2016 and $2,003 as of December 31, 2015 related to our line-of-credit arrangement. We continue to include these costs within other non-current assets, amortizing them over the term of the arrangement. In April 2015, the FASB issued ASU No. 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement . The standard provides guidance to customers about whether a cloud computing arrangement includes a software license. If the arrangement does include a software license, the software license element of the arrangement should be accounted for in the same manner as the acquisition of other software licenses. We adopted this standard on January 1, 2016, applying it prospectively to all arrangements entered into or materially modified on or after January 1, 2016. Adoption of this standard did not have a significant impact on our results of operations or financial position. In May 2015, the FASB issued ASU No. 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent) . Under the standard, investments measured at net asset value (NAV) as a practical expedient for fair value are excluded from the fair value hierarchy. As such, they are not assigned a fair value measurement level in financial statement disclosures of fair value. This standard was effective for us on January 1, 2016. It impacts the disclosures included in our Annual Report on Form 10-K regarding the plan assets of our postretirement benefit plan. As such, we will reflect this new guidance in the disclosures included in our Form 10-K for the year ending December 31, 2016, applying the guidance retrospectively to all periods presented. In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory . The standard requires that inventory within the scope of the guidance be measured at the lower of cost or net realizable value. Previously, inventory was measured at the lower of cost or market. We elected to early adopt this standard on January 1, 2016, applying it prospectively. Application of this standard did not have a significant impact on our results of operations or financial position. In September 2015, the FASB issued ASU No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. When recording the purchase price allocation for a business combination in the financial statements, an acquirer may record preliminary amounts when measurements are incomplete as of the end of a reporting period. When the required information is received to finalize the purchase price allocation, the preliminary amounts are adjusted. These adjustments are referred to as measurement-period adjustments. This standard eliminates the requirement to restate prior period financial statements for measurement-period adjustments. Instead, it requires that the cumulative impact of a measurement-period adjustment be recognized in the reporting period in which the adjustment is identified. We adopted this standard on January 1, 2016, applying it prospectively. Application of this standard did not have a significant impact on our results of operations or financial position. In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting . The standard is intended to simplify various aspects of the accounting and presentation of share-based payments. We elected to early adopt this standard as of January 1, 2016. Adoption of this standard had the following impacts on our consolidated financial statements: • Consolidated statements of comprehensive income – The new standard requires that the tax effects of share-based compensation be recognized in the income tax provision. Previously, these amounts were recognized in additional paid-in capital. Net tax benefits related to share-based compensation awards of $234 for the quarter ended September 30, 2016 and $1,745 for the nine months ended September 30, 2016 were recognized as reductions of income tax expense in the consolidated statements of comprehensive income. These tax benefits reduced our effective income tax rate 0.3 points for the quarter ended September 30, 2016 and 0.7 points for the nine months ended September 30, 2016 . In addition, in calculating potential common shares used to determine diluted earnings per share, GAAP requires us to use the treasury stock method. The new standard requires that assumed proceeds under the treasury stock method be modified to exclude the amount of excess tax benefits that would have been recognized in additional paid-in capital. These changes were applied on a prospective basis and resulted in an increase in diluted earnings per share of $0.03 for the nine months ended September 30, 2016 . These changes had no impact on diluted earnings per share for the quarter ended September 30, 2016 . In recording share-based compensation expense, the standard allows companies to make a policy election as to whether they will include an estimate of awards expected to be forfeited or whether they will account for forfeitures as they occur. We have elected to include an estimate of forfeitures in the computation of our share-based compensation expense. As this treatment is consistent with previous guidance, this election had no impact on our consolidated financial statements. • Consolidated statements of cash flows – The standard requires that excess tax benefits from share-based employee awards be reported as operating activities in the consolidated statements of cash flows. Previously, these cash flows were included in financing activities. We elected to apply this change on a prospective basis, resulting in an increase in net cash provided by operating activities and in net cash used by financing activities of $2,069 for the nine months ended September 30, 2016 . The standard requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the consolidated statements of cash flows. Previously, these cash flows were included in operating activities. This change was required to be applied on a retrospective basis. As such, the consolidated statement of cash flows for the prior period was restated. This change resulted in an increase in net cash provided by operating activities and in net cash used by financing activities of $2,333 for the nine months ended September 30, 2016 and $1,236 for the nine months ended September 30, 2015 . In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments . The standard is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. We elected to early adopt this standard as of July 1, 2016. As our consolidated statement of cash flows presentation was in compliance with the new guidance, adoption of this standard had no impact on our consolidated financial statements. Accounting pronouncements not yet adopted – In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers . The standard provides revenue recognition guidance for any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets, unless those contracts are within the scope of other accounting standards. The standard also expands the required financial statement disclosures regarding revenue recognition. The new guidance is effective for us on January 1, 2018. In addition, in March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) , in April 2016, the FASB issued ASU No. 2016-10, Identifying Performance Obligations and Licensing, and in May 2016, the FASB issued ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients . These standards are intended to clarify aspects of ASU No. 2014-09 and are effective for us upon adoption of ASU No. 2014-09. We are currently assessing the impact of these standards on our consolidated financial statements, as well as the method of transition that we will use in adopting the new guidance. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities . The standard is intended to improve the recognition, measurement, presentation and disclosure of financial instruments. The guidance is effective for us on January 1, 2018. We do not expect the application of this standard to have a significant impact on our results of operations or financial position. In February 2016, the FASB issued ASU No. 2016-02, Leasing . The standard is intended to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities for virtually all leases and by requiring the disclosure of key information about leasing arrangements. The guidance is effective for us on January 1, 2019, and requires adoption using a modified retrospective approach. We are currently assessing the impact of this standard on our consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments . The standard introduces new guidance for the accounting for credit losses on instruments within its scope, including trade and loans receivable and available-for-sale debt securities. The guidance is effective for us on January 1, 2020, and requires adoption using a modified retrospective approach. We do not expect the application of this standard to have a significant impact on our results of operations or financial position. |
Long-term investments (Policies
Long-term investments (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Long-term investments | We have elected to account for a long-term investment in domestic mutual funds under the fair value option for financial assets and financial liabilities. The fair value option provides companies an irrevocable option to measure many financial assets and liabilities at fair value with changes in fair value recognized in earnings. The investment is included in long-term investments in the consolidated balance sheets. Long-term investments also include the cash surrender values of company-owned life insurance policies. Realized and unrealized gains and losses, as well as dividends earned by the mutual fund investment, are included in selling, general and administrative (SG&A) expense in the consolidated statements of comprehensive income. This investment corresponds to a liability under an officers’ deferred compensation plan that is not available to new participants and is fully funded by the investment in mutual funds. The liability under the plan equals the fair value of the investment in mutual funds. Thus, as the value of the investment changes, the value of the liability changes accordingly. As changes in the liability are reflected within SG&A expense in the consolidated statements of comprehensive income, the fair value option of accounting for the investment in mutual funds allows us to net changes in the investment and the related liability in the statements of comprehensive income. The cost of securities sold is determined using the average cost method. |
Recurring fair value measuremen
Recurring fair value measurements (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair value level transfers | Our policy is to recognize transfers between fair value levels as of the end of the reporting period in which the transfer occurred. |
Consolidated financial statem26
Consolidated financial statements (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Impact of revision | The impact of this revision on our unaudited consolidated balance sheet as of December 31, 2015 was as follows: December 31, 2015 (in thousands) As Previously Reported Adjustment As Revised Other current assets $ 44,608 $ (2,003 ) $ 42,605 Total current assets 325,988 (2,003 ) 323,985 Other non-current assets 111,809 2,003 113,812 Short-term borrowings 434,000 (434,000 ) — Total current liabilities 751,043 (434,000 ) 317,043 Long-term debt 193,973 434,000 627,973 The impact of this revision on our unaudited consolidated statement of cash flows for the nine months ended September 30, 2015 was as follows: Nine Months Ended September 30, 2015 (in thousands) As Previously Reported Adjustment As Revised Proceeds from short-term borrowings $ 159,000 $ (109,000 ) $ 50,000 Proceeds from issuing long-term debt — 276,500 276,500 Payments on long-term debt, including costs of debt reacquisition (207,791 ) (167,500 ) (375,291 ) |
Supplemental balance sheet in27
Supplemental balance sheet information (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Balance Sheet Related Disclosures [Abstract] | |
Inventories and supplies | Inventories and supplies – Inventories and supplies were comprised of the following: (in thousands) September 30, December 31, Raw materials $ 5,593 $ 5,719 Semi-finished goods 8,857 8,208 Finished goods 23,937 24,955 Supplies 3,087 3,074 Inventories and supplies $ 41,474 $ 41,956 |
Available-for-sale securities | Available-for-sale securities – Available-for-sale securities included within funds held for customers and other current assets were comprised of the following: September 30, 2016 (in thousands) Cost Gross unrealized gains Gross unrealized losses Fair value Funds held for customers: (1) Canadian and provincial government securities $ 8,491 $ — $ (43 ) $ 8,448 Canadian guaranteed investment certificates 7,618 — — 7,618 Available-for-sale securities $ 16,109 $ — $ (43 ) $ 16,066 (1) Funds held for customers, as reported on the consolidated balance sheet as of September 30, 2016 , also included cash of $76,104 . This cash included amounts related to FISC Solutions, which was acquired in December 2015. This business provides cash receipt processing services. A portion of the cash receipts are remitted to our clients the business day following receipt. As such, the amounts on-hand are reported as funds held for customers in the consolidated balance sheets, with a corresponding liability included in accrued liabilities. The asset and liability of $18,743 were recorded as acquisition measurement-period balance sheet adjustments during 2016. In addition, this cash included $12,532 related to the September 2016 acquisition of Payce, Inc., a payroll services provider (see Note 6). December 31, 2015 (in thousands) Cost Gross unrealized gains Gross unrealized losses Fair value Canadian and provincial government securities $ 7,932 $ — $ (91 ) $ 7,841 Canadian guaranteed investment certificates 7,226 — — 7,226 Available-for-sale securities (funds held for customers) (1) 15,158 — (91 ) 15,067 Canadian money market fund (other current assets) 1,616 — — 1,616 Available-for-sale securities $ 16,774 $ — $ (91 ) $ 16,683 (1) Funds held for customers, as reported on the consolidated balance sheet as of December 31, 2015 , also included cash of $38,276 . |
Expected maturities of available-for-sale securities | Expected maturities of available-for-sale securities as of September 30, 2016 were as follows: (in thousands) Fair value Due in one year or less $ 9,629 Due in two to five years 4,190 Due in six to ten years 2,247 Available-for-sale securities $ 16,066 |
Assets held for sale | Net assets held for sale consisted of the following: (in thousands) September 30, December 31, Balance sheet caption Current assets $ 4 $ 3 Other current assets Intangibles 13,533 13,533 Assets held for sale Other non-current assets 433 436 Assets held for sale Accrued liabilities (112 ) (366 ) Accrued liabilities Deferred income tax liabilities (5,775 ) (5,777 ) Other non-current liabilities Net assets held for sale $ 8,083 $ 7,829 |
Intangibles | Intangibles – Intangibles were comprised of the following: September 30, 2016 December 31, 2015 (in thousands) Gross carrying amount Accumulated amortization Net carrying amount Gross carrying amount Accumulated amortization Net carrying amount Indefinite-lived intangibles: Trade name $ 19,100 $ — $ 19,100 $ 19,100 $ — $ 19,100 Amortizable intangibles: Internal-use software 410,231 (336,356 ) 73,875 375,037 (310,665 ) 64,372 Customer lists/relationships 239,972 (67,366 ) 172,606 202,682 (54,990 ) 147,692 Trade names 65,481 (40,029 ) 25,452 64,881 (36,325 ) 28,556 Software to be sold 28,500 (6,141 ) 22,359 28,500 (3,765 ) 24,735 Other 1,808 (1,322 ) 486 2,858 (2,002 ) 856 Amortizable intangibles 745,992 (451,214 ) 294,778 673,958 (407,747 ) 266,211 Intangibles $ 765,092 $ (451,214 ) $ 313,878 $ 693,058 $ (407,747 ) $ 285,311 |
Estimated future amortization expense | Based on the intangibles in service as of September 30, 2016 , estimated future amortization expense is as follows: (in thousands) Estimated amortization expense Remainder of 2016 $ 18,260 2017 65,293 2018 51,235 2019 37,788 2020 31,737 |
Acquired intangibles | The following intangible assets were acquired during the nine months ended September 30, 2016 : (in thousands) Amount Weighted-average amortization period (in years) Internal-use software $ 34,970 4 Customer lists/relationships 48,982 7 Trade names 600 5 Acquired intangibles $ 84,552 6 |
Goodwill | Goodwill – Changes in goodwill during the nine months ended September 30, 2016 were as follows: (in thousands) Small Business Services Financial Services Direct Checks Total Balance, December 31, 2015: Goodwill, gross $ 671,295 $ 176,614 $ 148,506 $ 996,415 Accumulated impairment charges (20,000 ) — — (20,000 ) Goodwill, net of accumulated impairment charges 651,295 176,614 148,506 976,415 Acquisition of 180 Fusion (Note 6) 575 — — 575 Acquisition of Inkhead (Note 6) 4,421 — — 4,421 Acquisition of Payce (Note 6) 7,979 — — 7,979 Adjustment for acquisition of Datamyx (Note 6) — 172 — 172 Currency translation adjustment 79 — — 79 Balance, September 30, 2016: Goodwill, gross 684,349 176,786 148,506 1,009,641 Accumulated impairment charges (20,000 ) — — (20,000 ) Goodwill, net of accumulated impairment charges $ 664,349 $ 176,786 $ 148,506 $ 989,641 |
Other non-current assets | Other non-current assets – Other non-current assets were comprised of the following: (in thousands) September 30, December 31, Contract acquisition costs $ 67,488 $ 58,792 Loans and notes receivable from distributors 21,531 23,957 Postretirement benefit plan asset 20,260 16,250 Deferred advertising costs 6,660 7,500 Other 7,907 7,313 Other non-current assets $ 123,846 $ 113,812 |
Changes in contract acquisition costs | Changes in contract acquisition costs during the nine months ended September 30, 2016 and 2015 were as follows: Nine Months Ended (in thousands) 2016 2015 Balance, beginning of year $ 58,792 $ 74,101 Additions (1) 23,471 4,828 Amortization (14,700 ) (14,059 ) Other (75 ) (3,458 ) Balance, end of period $ 67,488 $ 61,412 (1) Contract acquisition costs are accrued upon contract execution. Cash payments made for contract acquisition costs were $17,190 for the nine months ended September 30, 2016 and $9,843 for the nine months ended September 30, 2015 . |
Accrued liabilities | Accrued liabilities – Accrued liabilities were comprised of the following: (in thousands) September 30, December 31, Funds held for customers $ 90,960 $ 52,366 Deferred revenue 32,418 48,119 Employee profit sharing/cash bonus 24,771 40,683 Customer rebates 17,077 18,900 Contract acquisition costs due within one year 11,980 9,045 Wages, including vacation 11,260 5,731 Restructuring due within one year (Note 9) 2,648 3,864 Other 49,523 49,715 Accrued liabilities $ 240,637 $ 228,423 |
Earnings per share (Tables)
Earnings per share (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per share | The following table reflects the calculation of basic and diluted earnings per share. During each period, certain stock options, as noted below, were excluded from the calculation of diluted earnings per share because their effect would have been antidilutive. Quarter Ended Nine Months Ended (dollars and shares in thousands, except per share amounts) 2016 2015 2016 2015 Earnings per share – basic: Net income $ 58,663 $ 56,917 $ 175,154 $ 158,920 Income allocated to participating securities (491 ) (386 ) (1,445 ) (1,054 ) Income available to common shareholders $ 58,172 $ 56,531 $ 173,709 $ 157,866 Weighted-average shares outstanding 48,493 49,396 48,634 49,592 Earnings per share – basic $ 1.20 $ 1.14 $ 3.57 $ 3.18 Earnings per share – diluted: Net income $ 58,663 $ 56,917 $ 175,154 $ 158,920 Income allocated to participating securities (487 ) (384 ) (1,436 ) (1,049 ) Re-measurement of share-based awards classified as liabilities (64 ) (114 ) 230 (67 ) Income available to common shareholders $ 58,112 $ 56,419 $ 173,948 $ 157,804 Weighted-average shares outstanding 48,493 49,396 48,634 49,592 Dilutive impact of potential common shares 455 366 427 391 Weighted-average shares and potential common shares outstanding 48,948 49,762 49,061 49,983 Earnings per share – diluted $ 1.19 $ 1.13 $ 3.55 $ 3.16 Antidilutive options excluded from calculation 223 255 223 255 |
Other comprehensive income (Tab
Other comprehensive income (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Reclassification adjustments | Reclassification adjustments – Information regarding amounts reclassified from accumulated other comprehensive loss to net income was as follows: Accumulated other comprehensive loss components Amounts reclassified from accumulated other comprehensive loss Affected line item in consolidated statements of comprehensive income Quarter Ended Nine Months Ended (in thousands) 2016 2015 2016 2015 Amortization of postretirement benefit plan items: Prior service credit $ 355 $ 355 1,066 1,066 (1) Net actuarial loss (949 ) (780 ) (2,848 ) (2,340 ) (1) Total amortization (594 ) (425 ) (1,782 ) (1,274 ) (1) Tax benefit 181 113 544 339 (1) Total reclassifications, net of tax $ (413 ) $ (312 ) $ (1,238 ) $ (935 ) (1) Amortization of postretirement benefit plan items is included in the computation of net periodic benefit income. Additional details can be found in Note 10. |
Accumulated other comprehensive loss | Accumulated other comprehensive loss – Changes in the components of accumulated other comprehensive loss during the nine months ended September 30, 2016 were as follows: (in thousands) Postretirement benefit plans, net of tax Net unrealized loss on marketable securities, net of tax (1) Currency translation adjustment Accumulated other comprehensive loss Balance, December 31, 2015 $ (38,822 ) $ (114 ) $ (16,267 ) $ (55,203 ) Other comprehensive income before reclassifications — 40 3,866 3,906 Amounts reclassified from accumulated other comprehensive loss 1,238 — — 1,238 Net current-period other comprehensive income 1,238 40 3,866 5,144 Balance, September 30, 2016 $ (37,584 ) $ (74 ) $ (12,401 ) $ (50,059 ) (1) Other comprehensive income before reclassifications is net of income tax expense of $14 . |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Business Combinations [Abstract] | |
Allocation of the aggregate purchase price for acquisitions completed during the current period | The following illustrates the preliminary allocation as of September 30, 2016 of the aggregate purchase price for the above acquisitions to the assets acquired and liabilities assumed: (in thousands) 2016 acquisitions Net tangible assets acquired and liabilities assumed $ (784 ) Identifiable intangible assets: Customer lists/relationships 48,982 Internal-use software 10,250 Trade names 600 Total intangible assets 59,832 Goodwill 12,975 Total aggregate purchase price 72,023 Liabilities for holdback payments (6,900 ) Non-cash consideration (1) (2,020 ) Net cash paid for 2016 acquisitions 63,103 Holdback payments for prior year acquisitions 1,534 Payments for acquisitions, net of cash acquired $ 64,637 (1) Consists of pre-acquisition amounts owed to us by certain of the acquired businesses. |
Fair value measurements (Tables
Fair value measurements (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
Recurring fair value measurements | Information regarding recurring fair value measurements completed during each period was as follows: Fair value measurements using Fair value as of September 30, 2016 Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs (in thousands) (Level 1) (Level 2) (Level 3) Available-for-sale marketable securities (funds held for customers) $ 16,066 $ — $ 16,066 $ — Long-term investment in mutual funds 1,868 1,868 — — Derivative liabilities (109 ) — (109 ) — Accrued contingent consideration (4,276 ) — — (4,276 ) Fair value measurements using Fair value as of December 31, 2015 Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs (in thousands) (Level 1) (Level 2) (Level 3) Available-for-sale marketable securities (funds held for customers) $ 15,067 $ — $ 15,067 $ — Available-for-sale marketable securities (other current assets) 1,616 — 1,616 — Long-term investment in mutual funds 2,091 2,091 — — Derivative liabilities (4,842 ) — (4,842 ) — Accrued contingent consideration (5,861 ) — — (5,861 ) |
Changes in accrued contingent consideration | Changes in accrued contingent consideration during the nine months ended September 30, 2016 were as follows: (in thousands) Nine Months Ended September 30, 2016 Balance, December 31, 2015 $ 5,861 Change in fair value (448 ) Payments (1,137 ) Balance, September 30, 2016 $ 4,276 |
Estimated fair value of other financial instruments | The estimated fair values of these financial instruments were as follows: Fair value measurements using September 30, 2016 Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs (in thousands) Carrying value Fair value (Level 1) (Level 2) (Level 3) Cash $ 80,065 $ 80,065 $ 80,065 $ — $ — Cash (funds held for customers) 76,104 76,104 76,104 — — Loans and notes receivable from distributors 23,329 21,290 — — 21,290 Long-term debt (1) 615,985 624,758 — 624,758 — (1) Amounts exclude capital lease obligations. Fair value measurements using December 31, 2015 Quoted prices in active markets for identical assets Significant other observable inputs Significant unobservable inputs (in thousands) Carrying value Fair value (Level 1) (Level 2) (Level 3) Cash $ 62,427 $ 62,427 $ 62,427 $ — $ — Cash (funds held for customers) 38,276 38,276 38,276 — — Loans and notes receivable from distributors 25,745 23,383 — — 23,383 Long-term debt (1) 626,909 641,000 — 641,000 — (1) Amounts exclude capital lease obligations. |
Restructuring charges (Tables)
Restructuring charges (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Restructuring and Related Activities [Abstract] | |
Components of net restructuring charges | Net restructuring charges for each period consisted of the following components: Quarter Ended Nine Months Ended (in thousands, except number of employees) 2016 2015 2016 2015 Severance accruals $ 1,824 $ 1,443 $ 3,870 $ 3,493 Severance reversals (198 ) (282 ) (666 ) (976 ) Operating lease obligations — 88 — 88 Net restructuring accruals 1,626 1,249 3,204 2,605 Other costs 432 489 939 551 Net restructuring charges $ 2,058 $ 1,738 $ 4,143 $ 3,156 Number of employees included in severance accruals 55 50 120 200 The net restructuring charges are reflected in the consolidated statements of comprehensive income as follows: Quarter Ended Nine Months Ended (in thousands) 2016 2015 2016 2015 Total cost of revenue $ 65 $ 233 $ 136 $ 418 Operating expenses 1,993 1,505 4,007 2,738 Net restructuring charges $ 2,058 $ 1,738 $ 4,143 $ 3,156 |
Restructuring accruals, initiatives summarized by year | Accruals for our restructuring initiatives, summarized by year, were as follows: (in thousands) 2014 initiatives 2015 initiatives 2016 initiatives Total Balance, December 31, 2015 $ 176 $ 3,688 $ — $ 3,864 Restructuring charges — 78 3,792 3,870 Restructuring reversals (111 ) (465 ) (90 ) (666 ) Payments (65 ) (2,989 ) (1,366 ) (4,420 ) Balance, September 30, 2016 $ — $ 312 $ 2,336 $ 2,648 Cumulative amounts: Restructuring charges $ 8,242 $ 6,205 $ 3,792 $ 18,239 Restructuring reversals (1,444 ) (923 ) (90 ) (2,457 ) Payments (6,798 ) (4,970 ) (1,366 ) (13,134 ) Balance, September 30, 2016 $ — $ 312 $ 2,336 $ 2,648 |
Restructuring accruals, by segment | The components of our restructuring accruals, by segment, were as follows: Employee severance benefits Operating lease obligations (in thousands) Small Business Services Financial Services Direct Checks Corporate Small Business Services Financial Services Total Balance, December 31, 2015 $ 1,023 $ 884 $ — $ 1,859 $ 56 $ 42 $ 3,864 Restructuring charges 1,979 768 135 929 59 — 3,870 Restructuring reversals (255 ) (50 ) (2 ) (359 ) — — (666 ) Payments (1,457 ) (922 ) (85 ) (1,811 ) (103 ) (42 ) (4,420 ) Balance, September 30, 2016 $ 1,290 $ 680 $ 48 $ 618 $ 12 $ — $ 2,648 Cumulative amounts (1) : Restructuring charges $ 7,704 $ 5,027 $ 171 $ 4,940 $ 344 $ 53 $ 18,239 Restructuring reversals (1,455 ) (361 ) (4 ) (637 ) — — (2,457 ) Inter-segment transfer 41 (14 ) — (27 ) — — — Payments (5,000 ) (3,972 ) (119 ) (3,658 ) (332 ) (53 ) (13,134 ) Balance, September 30, 2016 $ 1,290 $ 680 $ 48 $ 618 $ 12 $ — $ 2,648 (1) Includes accruals related to our cost reduction initiatives for 2014 through 2016. |
Postretirement benefits (Tables
Postretirement benefits (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |
Components of net periodic benefit income | Postretirement benefit income for each period consisted of the following components: Quarter Ended Nine Months Ended (in thousands) 2016 2015 2016 2015 Interest cost $ 780 $ 859 $ 2,339 $ 2,578 Expected return on plan assets (1,834 ) (1,958 ) (5,501 ) (5,875 ) Amortization of prior service credit (355 ) (355 ) (1,066 ) (1,066 ) Amortization of net actuarial losses 949 780 2,848 2,340 Net periodic benefit income $ (460 ) $ (674 ) $ (1,380 ) $ (2,023 ) |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Debt outstanding | Debt outstanding was comprised of the following: (in thousands) September 30, December 31, 6.0% senior notes due November 15, 2020, principal amount $ 200,000 $ 200,000 Less unamortized debt issuance costs (1,906 ) (2,249 ) Cumulative change in fair value of hedged debt (Note 7) (109 ) (4,842 ) 6.0% senior notes, carrying value 197,985 192,909 Amount drawn on credit facility 418,000 434,000 Long-term portion of capital lease obligations 805 1,064 Long-term portion of debt 616,790 627,973 Capital lease obligations due within one year 951 1,045 Total debt $ 617,741 $ 629,018 |
Daily average amounts outstanding | Daily average amounts outstanding under our credit facility and short-term borrowings were as follows: (in thousands) Nine Months Ended September 30, 2016 Year Ended December 31, 2015 Revolving credit facility: Daily average amount outstanding $ 416,814 $ 270,063 Weighted-average interest rate 1.91 % 1.66 % Short-term bank loan: Daily average amount outstanding $ — $ 47,178 Weighted-average interest rate — 1.59 % |
Revolving credit facility, amount available for borrowing | As of September 30, 2016 , amounts were available for borrowing under our revolving credit facility as follows: (in thousands) Total available Revolving credit facility commitment $ 525,000 Amount drawn on revolving credit facility (418,000 ) Outstanding letters of credit (1) (12,795 ) Net available for borrowing as of September 30, 2016 $ 94,205 (1) We use standby letters of credit to collateralize certain obligations related primarily to our self-insured workers’ compensation claims, as well as claims for environmental matters, as required by certain states. These letters of credit reduce the amount available for borrowing under our revolving credit facility. |
Business segment information (T
Business segment information (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segment Reporting [Abstract] | |
Business segment information | The following is our segment information as of and for the quarters ended September 30, 2016 and 2015 : Reportable Business Segments (in thousands) Small Business Services Financial Services Direct Checks Corporate Consolidated Total revenue from external 2016 $ 298,931 $ 123,033 $ 36,956 $ — $ 458,920 customers: 2015 288,966 110,894 39,956 — 439,816 Operating income: 2016 50,670 28,708 12,914 — 92,292 2015 51,873 23,364 14,131 — 89,368 Depreciation and amortization 2016 13,315 8,876 868 — 23,059 expense: 2015 11,825 5,979 949 — 18,753 Total assets: 2016 1,075,661 434,374 160,624 270,489 1,941,148 2015 990,282 270,421 161,636 267,718 1,690,057 Capital asset purchases: 2016 — — — 10,031 10,031 2015 — — — 10,242 10,242 The following is our segment information as of and for the nine months ended September 30, 2016 and 2015 : Reportable Business Segments (in thousands) Small Business Services Financial Services Direct Checks Corporate Consolidated Total revenue from external 2016 $ 877,384 $ 374,511 $ 116,965 $ — $ 1,368,860 customers: 2015 848,216 335,134 125,958 — 1,309,308 Operating income: 2016 150,776 84,467 40,640 — 275,883 2015 149,545 69,280 44,713 — 263,538 Depreciation and amortization 2016 38,195 26,888 2,628 — 67,711 expense: 2015 33,265 17,760 3,406 — 54,431 Total assets: 2016 1,075,661 434,374 160,624 270,489 1,941,148 2015 990,282 270,421 161,636 267,718 1,690,057 Capital asset purchases: 2016 — — — 32,215 32,215 2015 — — — 29,549 29,549 |
Supplemental guarantor financ36
Supplemental guarantor financial information (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Supplemental guarantor financial information [Abstract] | |
Condensed Consolidating Balance Sheets | Condensed Consolidating Balance Sheet (Unaudited) September 30, 2016 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total ASSETS Current assets: Cash and cash equivalents $ 14,019 $ 902 $ 66,903 $ (1,759 ) $ 80,065 Trade accounts receivable, net — 109,326 8,435 — 117,761 Inventories and supplies — 39,175 2,299 — 41,474 Funds held for customers — 24,031 68,139 — 92,170 Other current assets 6,718 32,934 1,386 — 41,038 Total current assets 20,737 206,368 147,162 (1,759 ) 372,508 Deferred income taxes 14,754 — 1,749 (14,754 ) 1,749 Long-term investments 34,156 7,737 — — 41,893 Property, plant and equipment, net 11,914 66,833 4,920 — 83,667 Assets held for sale — — 13,966 — 13,966 Intangibles, net 19,119 283,237 11,522 — 313,878 Goodwill — 980,142 9,499 — 989,641 Investments in consolidated subsidiaries 1,395,804 108,954 — (1,504,758 ) — Intercompany receivable 23,164 — — (23,164 ) — Other non-current assets 6,549 117,215 82 — 123,846 Total assets $ 1,526,197 $ 1,770,486 $ 188,900 $ (1,544,435 ) $ 1,941,148 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 25,328 $ 60,456 $ 2,810 $ (1,759 ) $ 86,835 Accrued liabilities 20,577 149,507 70,553 — 240,637 Long-term debt due within one year 906 — 45 — 951 Total current liabilities 46,811 209,963 73,408 (1,759 ) 328,423 Long-term debt 616,697 — 93 — 616,790 Deferred income taxes — 95,508 — (14,754 ) 80,754 Intercompany payable — 22,494 670 (23,164 ) — Other non-current liabilities 12,742 46,717 5,775 — 65,234 Total shareholders' equity 849,947 1,395,804 108,954 (1,504,758 ) 849,947 Total liabilities and shareholders' equity $ 1,526,197 $ 1,770,486 $ 188,900 $ (1,544,435 ) $ 1,941,148 Condensed Consolidating Balance Sheet (Unaudited) December 31, 2015 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total ASSETS Current assets: Cash and cash equivalents $ 5,187 $ 940 $ 56,422 $ (122 ) $ 62,427 Trade accounts receivable, net — 115,951 7,703 — 123,654 Inventories and supplies — 39,758 2,198 — 41,956 Funds held for customers — — 53,343 — 53,343 Other current assets 7,230 32,765 2,610 — 42,605 Total current assets 12,417 189,414 122,276 (122 ) 323,985 Deferred income taxes 13,498 — 1,238 (13,498 ) 1,238 Long-term investments 34,304 7,387 — — 41,691 Property, plant and equipment, net 10,111 71,017 4,604 — 85,732 Assets held for sale — — 13,969 — 13,969 Intangibles, net 9,066 273,051 3,194 — 285,311 Goodwill — 974,973 1,442 — 976,415 Investments in consolidated subsidiaries 1,248,549 81,099 — (1,329,648 ) — Intercompany receivable 99,506 — — (99,506 ) — Other non-current assets 5,861 107,767 184 — 113,812 Total assets $ 1,433,312 $ 1,704,708 $ 146,907 $ (1,442,774 ) $ 1,842,153 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 15,625 $ 69,809 $ 2,263 $ (122 ) $ 87,575 Accrued liabilities 23,567 148,279 56,577 — 228,423 Long-term debt due within one year 1,026 — 19 — 1,045 Total current liabilities 40,218 218,088 58,859 (122 ) 317,043 Long-term debt 627,942 — 31 — 627,973 Deferred income taxes — 94,574 — (13,498 ) 81,076 Intercompany payable — 98,365 1,141 (99,506 ) — Other non-current liabilities 20,083 45,132 5,777 — 70,992 Total shareholders' equity 745,069 1,248,549 81,099 (1,329,648 ) 745,069 Total liabilities and shareholders' equity $ 1,433,312 $ 1,704,708 $ 146,907 $ (1,442,774 ) $ 1,842,153 |
Condensed Consolidating Statements of Comprehensive Income | Condensed Consolidating Statement of Comprehensive Income (Unaudited) Quarter Ended September 30, 2016 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Product revenue $ — $ 350,454 $ 14,226 $ — $ 364,680 Service revenue 36,078 89,355 6,006 (37,199 ) 94,240 Total revenue 36,078 439,809 20,232 (37,199 ) 458,920 Cost of products — (127,210 ) (6,418 ) — (133,628 ) Cost of services (40,487 ) (30,363 ) (1,934 ) 40,142 (32,642 ) Total cost of revenue (40,487 ) (157,573 ) (8,352 ) 40,142 (166,270 ) Gross profit (4,409 ) 282,236 11,880 2,943 292,650 Operating expenses — (188,768 ) (8,647 ) (2,943 ) (200,358 ) Operating (loss) income (4,409 ) 93,468 3,233 — 92,292 Interest expense (5,019 ) (4,206 ) (1 ) 4,371 (4,855 ) Other income 3,994 919 200 (4,371 ) 742 (Loss) income before income taxes (5,434 ) 90,181 3,432 — 88,179 Income tax benefit (provision) 4,592 (33,138 ) (970 ) — (29,516 ) (Loss) income before equity in earnings of consolidated subsidiaries (842 ) 57,043 2,462 — 58,663 Equity in earnings of consolidated subsidiaries 59,505 2,462 — (61,967 ) — Net income $ 58,663 $ 59,505 $ 2,462 $ (61,967 ) $ 58,663 Comprehensive income $ 57,824 $ 58,614 $ 1,212 $ (59,826 ) $ 57,824 Condensed Consolidating Statement of Comprehensive Income (Unaudited) Quarter Ended September 30, 2015 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Product revenue $ — $ 345,820 $ 15,961 $ — $ 361,781 Service revenue 28,005 72,419 6,709 (29,098 ) 78,035 Total revenue 28,005 418,239 22,670 (29,098 ) 439,816 Cost of products — (124,910 ) (7,684 ) — (132,594 ) Cost of services (29,218 ) (24,016 ) (2,272 ) 28,798 (26,708 ) Total cost of revenue (29,218 ) (148,926 ) (9,956 ) 28,798 (159,302 ) Gross profit (1,213 ) 269,313 12,714 (300 ) 280,514 Operating expenses — (182,823 ) (8,623 ) 300 (191,146 ) Operating (loss) income (1,213 ) 86,490 4,091 — 89,368 Interest expense (4,126 ) (4,126 ) — 3,865 (4,387 ) Other income 3,737 746 301 (3,865 ) 919 (Loss) income before income taxes (1,602 ) 83,110 4,392 — 85,900 Income tax benefit (provision) 3,382 (31,341 ) (1,024 ) — (28,983 ) (Loss) income before equity in earnings of consolidated subsidiaries 1,780 51,769 3,368 — 56,917 Equity in earnings of consolidated subsidiaries 55,137 3,368 — (58,505 ) — Net income $ 56,917 $ 55,137 $ 3,368 $ (58,505 ) $ 56,917 Comprehensive income $ 52,680 $ 50,857 $ (1,181 ) $ (49,676 ) $ 52,680 Condensed Consolidating Statement of Comprehensive Income (Unaudited) Nine Months Ended September 30, 2016 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Product revenue $ — $ 1,048,288 $ 42,398 $ — $ 1,090,686 Service revenue 103,173 263,292 18,241 (106,532 ) 278,174 Total revenue 103,173 1,311,580 60,639 (106,532 ) 1,368,860 Cost of products — (372,165 ) (18,996 ) — (391,161 ) Cost of services (115,810 ) (95,125 ) (5,600 ) 117,289 (99,246 ) Total cost of revenue (115,810 ) (467,290 ) (24,596 ) 117,289 (490,407 ) Gross profit (12,637 ) 844,290 36,043 10,757 878,453 Operating expenses — (566,081 ) (25,732 ) (10,757 ) (602,570 ) Operating (loss) income (12,637 ) 278,209 10,311 — 275,883 Interest expense (14,920 ) (11,171 ) (2 ) 10,812 (15,281 ) Other income 10,302 1,786 59 (10,812 ) 1,335 (Loss) income before income taxes (17,255 ) 268,824 10,368 — 261,937 Income tax benefit (provision) 11,431 (95,924 ) (2,290 ) — (86,783 ) (Loss) income before equity in earnings of consolidated subsidiaries (5,824 ) 172,900 8,078 — 175,154 Equity in earnings of consolidated subsidiaries 180,978 8,078 — (189,056 ) — Net income $ 175,154 $ 180,978 $ 8,078 $ (189,056 ) $ 175,154 Comprehensive income $ 180,298 $ 185,966 $ 11,989 $ (197,955 ) $ 180,298 Condensed Consolidating Statement of Comprehensive Income (Unaudited) Nine Months Ended September 30, 2015 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Product revenue $ — $ 1,018,518 $ 57,174 $ — $ 1,075,692 Service revenue 83,116 217,412 19,638 (86,550 ) 233,616 Total revenue 83,116 1,235,930 76,812 (86,550 ) 1,309,308 Cost of products — (355,690 ) (28,900 ) — (384,590 ) Cost of services (89,348 ) (78,770 ) (6,192 ) 90,978 (83,332 ) Total cost of revenue (89,348 ) (434,460 ) (35,092 ) 90,978 (467,922 ) Gross profit (6,232 ) 801,470 41,720 4,428 841,386 Operating expenses — (544,450 ) (28,970 ) (4,428 ) (577,848 ) Operating (loss) income (6,232 ) 257,020 12,750 — 263,538 Loss on early debt extinguishment (8,917 ) — — — (8,917 ) Interest expense (14,727 ) (10,121 ) (1 ) 9,527 (15,322 ) Other income 9,680 1,355 666 (9,527 ) 2,174 (Loss) income before income taxes (20,196 ) 248,254 13,415 — 241,473 Income tax benefit (provision) 10,671 (89,743 ) (3,481 ) — (82,553 ) (Loss) income before equity in earnings of consolidated subsidiaries (9,525 ) 158,511 9,934 — 158,920 Equity in earnings of consolidated subsidiaries 168,445 9,934 — (178,379 ) — Net income $ 158,920 $ 168,445 $ 9,934 $ (178,379 ) $ 158,920 Comprehensive income $ 150,190 $ 159,587 $ 269 $ (159,856 ) $ 150,190 |
Condensed Consolidating Statements of Cash Flows | Condensed Consolidating Statement of Cash Flows (Unaudited) Nine Months Ended September 30, 2016 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Net cash provided by operating activities $ 3,734 $ 196,493 $ 9,531 $ (1,637 ) $ 208,121 Cash flows from investing activities: Purchases of capital assets (18,463 ) (11,777 ) (1,975 ) — (32,215 ) Payments for acquisitions, net of cash acquired — (64,637 ) — — (64,637 ) Proceeds from company-owned life insurance policies 4,123 — — — 4,123 Other (290 ) 965 1,655 — 2,330 Net cash used by investing activities (14,630 ) (75,449 ) (320 ) — (90,399 ) Cash flows from financing activities: Proceeds from issuing long-term debt 169,000 — — — 169,000 Payments on long-term debt, including costs of debt reacquisition (185,849 ) — (24 ) — (185,873 ) Proceeds from issuing shares under employee plans 6,861 — — — 6,861 Employee taxes paid for shares withheld (2,333 ) — — — (2,333 ) Payments for common shares repurchased (44,944 ) — — — (44,944 ) Cash dividends paid to shareholders (44,127 ) — — — (44,127 ) Advances from (to) consolidated subsidiaries 121,653 (119,981 ) (1,672 ) — — Other (533 ) (1,101 ) — — (1,634 ) Net cash provided (used) by financing activities 19,728 (121,082 ) (1,696 ) — (103,050 ) Effect of exchange rate change on cash — — 2,966 — 2,966 Net change in cash and cash equivalents 8,832 (38 ) 10,481 (1,637 ) 17,638 Cash and cash equivalents, beginning of year 5,187 940 56,422 (122 ) 62,427 Cash and cash equivalents, end of period $ 14,019 $ 902 $ 66,903 $ (1,759 ) $ 80,065 Condensed Consolidating Statement of Cash Flows (Unaudited) Nine Months Ended September 30, 2015 (in thousands) Deluxe Corporation Guarantor subsidiaries Non-guarantor subsidiaries Eliminations Total Net cash (used) provided by operating activities $ (820 ) $ 205,987 $ 10,852 $ 3,129 $ 219,148 Cash flows from investing activities: Purchases of capital assets (1,317 ) (26,094 ) (2,138 ) — (29,549 ) Payments for acquisitions, net of cash acquired (26 ) (50,907 ) — — (50,933 ) Proceeds from company-owned life insurance policies 3,973 — — — 3,973 Other (387 ) 1,182 10 — 805 Net cash provided (used) by investing activities 2,243 (75,819 ) (2,128 ) — (75,704 ) Cash flows from financing activities: Proceeds from short-term borrowings 50,000 — — — 50,000 Proceeds from issuing long-term debt 276,500 — — — 276,500 Payments on long-term debt, including costs of debt reacquisition (375,279 ) — (12 ) — (375,291 ) Proceeds from issuing shares under employee plans 5,492 — — — 5,492 Excess tax benefit from share-based employee awards 1,816 — — — 1,816 Employee taxes paid for shares withheld (1,236 ) — — — (1,236 ) Payments for common shares repurchased (46,996 ) — — — (46,996 ) Cash dividends paid to shareholders (44,965 ) — — — (44,965 ) Advances from (to) consolidated subsidiaries 132,878 (133,077 ) 199 — — Other (136 ) (92 ) (150 ) — (378 ) Net cash (used) provided by financing activities (1,926 ) (133,169 ) 37 — (135,058 ) Effect of exchange rate change on cash — — (7,032 ) — (7,032 ) Net change in cash and cash equivalents (503 ) (3,001 ) 1,729 3,129 1,354 Cash and cash equivalents, beginning of year 8,335 4,342 52,193 (3,329 ) 61,541 Cash and cash equivalents, end of period $ 7,832 $ 1,341 $ 53,922 $ (200 ) $ 62,895 |
Consolidated financial statem37
Consolidated financial statements (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Impact of revision [Line Items] | |||
Other current assets | $ 41,038 | $ 42,605 | |
Total current assets | 372,508 | 323,985 | |
Other non-current assets | 123,846 | 113,812 | |
Short-term borrowings | 0 | ||
Total current liabilities | 328,423 | 317,043 | |
Long-term debt | 616,790 | 627,973 | |
Proceeds from short-term borrowings | 0 | $ 50,000 | |
Proceeds from issuing long-term debt | 169,000 | 276,500 | |
Payments on long-term debt, including costs of debt reacquisition | $ (185,873) | (375,291) | |
As Previously Reported [Member] | |||
Impact of revision [Line Items] | |||
Other current assets | 44,608 | ||
Total current assets | 325,988 | ||
Other non-current assets | 111,809 | ||
Short-term borrowings | 434,000 | ||
Total current liabilities | 751,043 | ||
Long-term debt | 193,973 | ||
Proceeds from short-term borrowings | 159,000 | ||
Proceeds from issuing long-term debt | 0 | ||
Payments on long-term debt, including costs of debt reacquisition | (207,791) | ||
Adjustment [Member] | |||
Impact of revision [Line Items] | |||
Other current assets | (2,003) | ||
Total current assets | (2,003) | ||
Other non-current assets | 2,003 | ||
Short-term borrowings | (434,000) | ||
Total current liabilities | (434,000) | ||
Long-term debt | $ 434,000 | ||
Proceeds from short-term borrowings | (109,000) | ||
Proceeds from issuing long-term debt | 276,500 | ||
Payments on long-term debt, including costs of debt reacquisition | $ (167,500) |
New accounting pronouncements38
New accounting pronouncements (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Senior notes due 2020 [Member] | ||||
New accounting pronouncements [Line Items] | ||||
Debt issuance costs | $ 1,906 | $ 1,906 | $ 2,249 | |
Revolving credit facility [Member] | Other non-current assets [Member] | ||||
New accounting pronouncements [Line Items] | ||||
Debt issuance costs | 1,528 | 1,528 | 2,003 | |
Accounting Standards Update No. 2015-03 [Member] | Senior notes due 2020 [Member] | Other non-current assets [Member] | ||||
New accounting pronouncements [Line Items] | ||||
Debt issuance costs | (2,249) | |||
Accounting Standards Update No. 2015-03 [Member] | Senior notes due 2020 [Member] | Long-term debt [Member] | ||||
New accounting pronouncements [Line Items] | ||||
Debt issuance costs | 1,906 | 1,906 | $ 2,249 | |
Accounting Standards Update No. 2016-09 [Member] | ||||
New accounting pronouncements [Line Items] | ||||
New accounting pronouncement, effect of change on net income | $ 234 | $ 1,745 | ||
New accounting pronouncement effect of change on effective income tax rate | 0.30% | 0.70% | ||
New accounting pronouncement, effect of change on diluted earnings per share | $ 0 | $ 0.03 | ||
New accounting pronouncement, effect on net cash provided by operating activities, excess tax benefits | $ 2,069 | |||
New accounting pronouncement, effect on net cash used by financing activities, excess tax benefits | 2,069 | |||
New accounting pronouncement, effect on net cash provided by operating activities. shares withheld | 2,333 | $ 1,236 | ||
New accounting pronouncement effect on net cash used by financing activities, shares withheld | $ 2,333 | $ 1,236 |
Supplemental balance sheet in39
Supplemental balance sheet information (inventories and supplies) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Inventories and supplies | ||
Raw materials | $ 5,593 | $ 5,719 |
Semi-finished goods | 8,857 | 8,208 |
Finished goods | 23,937 | 24,955 |
Supplies | 3,087 | 3,074 |
Inventories and supplies | $ 41,474 | $ 41,956 |
Supplemental balance sheet in40
Supplemental balance sheet information (available-for-sale securities) (Details) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2016 | Dec. 31, 2015 | ||||
Available-for-sale securities [Line Items] | ||||||
Cost | $ 16,109 | $ 16,109 | $ 16,774 | |||
Gross unrealized gains | 0 | 0 | 0 | |||
Gross unrealized losses | (43) | (43) | (91) | |||
Fair value | 16,066 | 16,066 | 16,683 | |||
Measurement period adjustment, liability for funds held for customers | 18,743 | |||||
Expected maturities of available-for-sale securities | ||||||
Due in one year or less | 9,629 | 9,629 | ||||
Due in two to five years | 4,190 | 4,190 | ||||
Due in six to ten years | 2,247 | 2,247 | ||||
Fair value | 16,066 | 16,066 | 16,683 | |||
FISC Solutions [Member] | ||||||
Available-for-sale securities [Line Items] | ||||||
Measurement period adjustment, funds held for customers | 18,743 | |||||
Payce, Inc. [Member] | ||||||
Available-for-sale securities [Line Items] | ||||||
Acquired funds held for customers | 12,532 | |||||
Funds held for customers [Member] | ||||||
Available-for-sale securities [Line Items] | ||||||
Cost | 16,109 | [1] | 16,109 | [1] | 15,158 | [2] |
Gross unrealized gains | 0 | [1] | 0 | [1] | 0 | [2] |
Gross unrealized losses | (43) | [1] | (43) | [1] | (91) | [2] |
Fair value | 16,066 | [1] | 16,066 | [1] | 15,067 | [2] |
Cash | 76,104 | 76,104 | 38,276 | |||
Expected maturities of available-for-sale securities | ||||||
Fair value | 16,066 | [1] | 16,066 | [1] | 15,067 | [2] |
Funds held for customers [Member] | Canadian and provincial government securities [Member] | ||||||
Available-for-sale securities [Line Items] | ||||||
Cost | 8,491 | [1] | 8,491 | [1] | 7,932 | |
Gross unrealized gains | 0 | [1] | 0 | [1] | 0 | |
Gross unrealized losses | (43) | [1] | (43) | [1] | (91) | |
Fair value | 8,448 | [1] | 8,448 | [1] | 7,841 | |
Expected maturities of available-for-sale securities | ||||||
Fair value | 8,448 | [1] | 8,448 | [1] | 7,841 | |
Funds held for customers [Member] | Canadian guaranteed investment certificates [Member] | ||||||
Available-for-sale securities [Line Items] | ||||||
Cost | 7,618 | [1] | 7,618 | [1] | 7,226 | |
Gross unrealized gains | 0 | [1] | 0 | [1] | 0 | |
Gross unrealized losses | 0 | [1] | 0 | [1] | 0 | |
Fair value | 7,618 | [1] | 7,618 | [1] | 7,226 | |
Expected maturities of available-for-sale securities | ||||||
Fair value | $ 7,618 | [1] | $ 7,618 | [1] | 7,226 | |
Other current assets [Member] | Money market securities [Member] | Canadian [Member] | ||||||
Available-for-sale securities [Line Items] | ||||||
Cost | 1,616 | |||||
Gross unrealized gains | 0 | |||||
Gross unrealized losses | 0 | |||||
Fair value | 1,616 | |||||
Expected maturities of available-for-sale securities | ||||||
Fair value | $ 1,616 | |||||
[1] | Funds held for customers, as reported on the consolidated balance sheet as of September 30, 2016, also included cash of $76,104. This cash included amounts related to FISC Solutions, which was acquired in December 2015. This business provides cash receipt processing services. A portion of the cash receipts are remitted to our clients the business day following receipt. As such, the amounts on-hand are reported as funds held for customers in the consolidated balance sheets, with a corresponding liability included in accrued liabilities. The asset and liability of $18,743 were recorded as acquisition measurement-period balance sheet adjustments during 2016. In addition, this cash included $12,532 related to the September 2016 acquisition of Payce, Inc., a payroll services provider (see Note 6). | |||||
[2] | Funds held for customers, as reported on the consolidated balance sheet as of December 31, 2015, also included cash of $38,276. |
Supplemental balance sheet in41
Supplemental balance sheet information (assets held for sale) (Details) - Assets held for sale [Member] - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Assets held for sale [Line Items] | ||
Current assets | $ 4 | $ 3 |
Intangibles | 13,533 | 13,533 |
Other non-current assets | 433 | 436 |
Accrued liabilities | (112) | (366) |
Deferred income tax liabilities | (5,775) | (5,777) |
Net assets held for sale | $ 8,083 | $ 7,829 |
Supplemental balance sheet in42
Supplemental balance sheet information (intangibles) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Intangibles [Line Items] | |||||
Amortizable intangibles, gross carrying amount | $ 745,992 | $ 745,992 | $ 673,958 | ||
Accumulated amortization | (451,214) | (451,214) | (407,747) | ||
Amortizable intangibles, net carrying amount | 294,778 | 294,778 | 266,211 | ||
Gross carrying amount, total | 765,092 | 765,092 | 693,058 | ||
Net carrying amount, total | 313,878 | 313,878 | 285,311 | ||
Amortization of intangibles | 19,273 | $ 14,686 | 56,364 | $ 42,425 | |
Amount acquired | $ 84,552 | ||||
Amount acquired, weighted-average amortization period (in years) | 6 years | ||||
Estimated future amortization expense | |||||
Remainder of 2016 | 18,260 | $ 18,260 | |||
2,017 | 65,293 | 65,293 | |||
2,018 | 51,235 | 51,235 | |||
2,019 | 37,788 | 37,788 | |||
2,020 | 31,737 | 31,737 | |||
Trade names [Member] | |||||
Intangibles [Line Items] | |||||
Indefinite-lived intangibles, carrying amount | 19,100 | 19,100 | 19,100 | ||
Internal-use software [Member] | |||||
Intangibles [Line Items] | |||||
Amortizable intangibles, gross carrying amount | 410,231 | 410,231 | 375,037 | ||
Accumulated amortization | (336,356) | (336,356) | (310,665) | ||
Amortizable intangibles, net carrying amount | 73,875 | 73,875 | 64,372 | ||
Amount acquired | $ 34,970 | ||||
Amount acquired, weighted-average amortization period (in years) | 4 years | ||||
Customer lists/relationships [Member] | |||||
Intangibles [Line Items] | |||||
Amortizable intangibles, gross carrying amount | 239,972 | $ 239,972 | 202,682 | ||
Accumulated amortization | (67,366) | (67,366) | (54,990) | ||
Amortizable intangibles, net carrying amount | 172,606 | 172,606 | 147,692 | ||
Amount acquired | $ 48,982 | ||||
Amount acquired, weighted-average amortization period (in years) | 7 years | ||||
Trade names [Member] | |||||
Intangibles [Line Items] | |||||
Amortizable intangibles, gross carrying amount | 65,481 | $ 65,481 | 64,881 | ||
Accumulated amortization | (40,029) | (40,029) | (36,325) | ||
Amortizable intangibles, net carrying amount | 25,452 | 25,452 | 28,556 | ||
Amount acquired | $ 600 | ||||
Amount acquired, weighted-average amortization period (in years) | 5 years | ||||
Software to be sold [Member] | |||||
Intangibles [Line Items] | |||||
Amortizable intangibles, gross carrying amount | 28,500 | $ 28,500 | 28,500 | ||
Accumulated amortization | (6,141) | (6,141) | (3,765) | ||
Amortizable intangibles, net carrying amount | 22,359 | 22,359 | 24,735 | ||
Other [Member] | |||||
Intangibles [Line Items] | |||||
Amortizable intangibles, gross carrying amount | 1,808 | 1,808 | 2,858 | ||
Accumulated amortization | (1,322) | (1,322) | (2,002) | ||
Amortizable intangibles, net carrying amount | $ 486 | $ 486 | $ 856 |
Supplemental balance sheet in43
Supplemental balance sheet information (goodwill) (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Goodwill [Roll Forward] | |
Goodwill, gross, beginning of year | $ 996,415 |
Accumulated impairment charges, beginning of year | (20,000) |
Goodwill, net of accumulated impairment charges, beginning of year | 976,415 |
Currency translation adjustment | 79 |
Goodwill, gross, end of period | 1,009,641 |
Accumulated impairment charges, end of period | (20,000) |
Goodwill, net of accumulated impairment charges, end of period | 989,641 |
180 Fusion LLC [Member] | |
Goodwill [Roll Forward] | |
Goodwill acquired during period | 575 |
Inkhead, Inc. [Member] | |
Goodwill [Roll Forward] | |
Goodwill acquired during period | 4,421 |
Payce, Inc. [Member] | |
Goodwill [Roll Forward] | |
Goodwill acquired during period | 7,979 |
Datamyx LLC [Member] | |
Goodwill [Roll Forward] | |
Adjustment to goodwill | 172 |
Small Business Services [Member] | |
Goodwill [Roll Forward] | |
Goodwill, gross, beginning of year | 671,295 |
Accumulated impairment charges, beginning of year | (20,000) |
Goodwill, net of accumulated impairment charges, beginning of year | 651,295 |
Currency translation adjustment | 79 |
Goodwill, gross, end of period | 684,349 |
Accumulated impairment charges, end of period | (20,000) |
Goodwill, net of accumulated impairment charges, end of period | 664,349 |
Small Business Services [Member] | 180 Fusion LLC [Member] | |
Goodwill [Roll Forward] | |
Goodwill acquired during period | 575 |
Small Business Services [Member] | Inkhead, Inc. [Member] | |
Goodwill [Roll Forward] | |
Goodwill acquired during period | 4,421 |
Small Business Services [Member] | Payce, Inc. [Member] | |
Goodwill [Roll Forward] | |
Goodwill acquired during period | 7,979 |
Financial Services [Member] | |
Goodwill [Roll Forward] | |
Goodwill, gross, beginning of year | 176,614 |
Accumulated impairment charges, beginning of year | 0 |
Goodwill, net of accumulated impairment charges, beginning of year | 176,614 |
Currency translation adjustment | 0 |
Goodwill, gross, end of period | 176,786 |
Accumulated impairment charges, end of period | 0 |
Goodwill, net of accumulated impairment charges, end of period | 176,786 |
Direct Checks [Member] | |
Goodwill [Roll Forward] | |
Goodwill, gross, beginning of year | 148,506 |
Accumulated impairment charges, beginning of year | 0 |
Goodwill, net of accumulated impairment charges, beginning of year | 148,506 |
Currency translation adjustment | 0 |
Goodwill, gross, end of period | 148,506 |
Accumulated impairment charges, end of period | 0 |
Goodwill, net of accumulated impairment charges, end of period | $ 148,506 |
Supplemental balance sheet in44
Supplemental balance sheet information (other) (Details) - USD ($) $ in Thousands | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Dec. 31, 2015 | ||
Other non-current assets | |||||
Contract acquisition costs | $ 58,792 | $ 74,101 | $ 67,488 | $ 58,792 | |
Loans and notes receivable from distributors | 21,531 | 23,957 | |||
Postretirement benefit plan asset | 20,260 | 16,250 | |||
Deferred advertising costs | 6,660 | 7,500 | |||
Other | 7,907 | 7,313 | |||
Other non-current assets | 123,846 | 113,812 | |||
Contract acquisition costs [Roll Forward] | |||||
Balance, beginning of year | 58,792 | 74,101 | |||
Additions | [1] | 23,471 | 4,828 | ||
Amortization | (14,700) | (14,059) | |||
Other | (75) | (3,458) | |||
Balance, end of period | 67,488 | 61,412 | |||
Contract acquisition payments | $ 17,190 | $ 9,843 | |||
Accrued liabilities | |||||
Funds held for customers | 90,960 | 52,366 | |||
Deferred revenue | 32,418 | 48,119 | |||
Employee profit sharing/cash bonus | 24,771 | 40,683 | |||
Customer rebates | 17,077 | 18,900 | |||
Contract acquisition costs due within one year | 11,980 | 9,045 | |||
Wages, including vacation | 11,260 | 5,731 | |||
Restructuring due within one year (Note 9) | 2,648 | 3,864 | |||
Other | 49,523 | 49,715 | |||
Accrued liabilities | $ 240,637 | $ 228,423 | |||
[1] | Contract acquisition costs are accrued upon contract execution. Cash payments made for contract acquisition costs were $17,190 for the nine months ended September 30, 2016 and $9,843 for the nine months ended September 30, 2015. |
Earnings per share (Details)
Earnings per share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Earnings per share - basic: | ||||
Net income | $ 58,663 | $ 56,917 | $ 175,154 | $ 158,920 |
Income allocated to participating securities | (491) | (386) | (1,445) | (1,054) |
Income available to common shareholders | $ 58,172 | $ 56,531 | $ 173,709 | $ 157,866 |
Weighted-average shares outstanding | 48,493 | 49,396 | 48,634 | 49,592 |
Earnings per share - basic | $ 1.20 | $ 1.14 | $ 3.57 | $ 3.18 |
Earnings per share - diluted: | ||||
Net income | $ 58,663 | $ 56,917 | $ 175,154 | $ 158,920 |
Income allocated to participating securities | (487) | (384) | (1,436) | (1,049) |
Re-measurement of share-based awards classified as liabilities | (64) | (114) | 230 | (67) |
Income available to common shareholders | $ 58,112 | $ 56,419 | $ 173,948 | $ 157,804 |
Weighted-average shares outstanding | 48,493 | 49,396 | 48,634 | 49,592 |
Dilutive impact of potential common shares | 455 | 366 | 427 | 391 |
Weighted-average shares and potential common shares outstanding | 48,948 | 49,762 | 49,061 | 49,983 |
Earnings per share - diluted | $ 1.19 | $ 1.13 | $ 3.55 | $ 3.16 |
Antidilutive options excluded from calculation | 223 | 255 | 223 | 255 |
Other comprehensive income (rec
Other comprehensive income (reclassification adjustments) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | ||
Reclassification adjustments [Line Items] | |||||
Total reclassifications, net of tax | $ 1,238 | ||||
Amortization of postretirement benefit plan items [Member] | |||||
Reclassification adjustments [Line Items] | |||||
Total reclassifications, net of tax | 1,238 | ||||
Amounts reclassified from accumulated other comprehensive loss [Member] | Amortization of postretirement benefit plan items [Member] | |||||
Reclassification adjustments [Line Items] | |||||
Prior service credit | [1] | $ 355 | $ 355 | 1,066 | $ 1,066 |
Net actuarial loss | [1] | (949) | (780) | (2,848) | (2,340) |
Total amortization | [1] | (594) | (425) | (1,782) | (1,274) |
Tax benefit | [1] | 181 | 113 | 544 | 339 |
Total reclassifications, net of tax | $ (413) | $ (312) | $ (1,238) | $ (935) | |
[1] | Amortization of postretirement benefit plan items is included in the computation of net periodic benefit income. Additional details can be found in Note 10. |
Other comprehensive income (acc
Other comprehensive income (accumulated other comprehensive loss) (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016USD ($) | ||
Accumulated other comprehensive loss [Line Items] | ||
Accumulated other comprehensive loss, beginning of year | $ (55,203) | |
Other comprehensive income before reclassifications | 3,906 | |
Amounts reclassified from accumulated other comprehensive loss | 1,238 | |
Net current-period other comprehensive income | 5,144 | |
Accumulated other comprehensive loss, end of period | (50,059) | |
Postretirement benefit plans, net of tax [Member] | ||
Accumulated other comprehensive loss [Line Items] | ||
Accumulated other comprehensive loss, beginning of year | (38,822) | |
Other comprehensive income before reclassifications | 0 | |
Amounts reclassified from accumulated other comprehensive loss | 1,238 | |
Net current-period other comprehensive income | 1,238 | |
Accumulated other comprehensive loss, end of period | (37,584) | |
Net unrealized loss on marketable securities, net of tax [Member] | ||
Accumulated other comprehensive loss [Line Items] | ||
Accumulated other comprehensive loss, beginning of year | (114) | [1] |
Other comprehensive income before reclassifications | 40 | [1] |
Amounts reclassified from accumulated other comprehensive loss | 0 | [1] |
Net current-period other comprehensive income | 40 | [1] |
Accumulated other comprehensive loss, end of period | (74) | [1] |
Unrealized holding gains on securities arising during the period, tax | 14 | |
Currency translation adjustment [Member] | ||
Accumulated other comprehensive loss [Line Items] | ||
Accumulated other comprehensive loss, beginning of year | (16,267) | |
Other comprehensive income before reclassifications | 3,866 | |
Amounts reclassified from accumulated other comprehensive loss | 0 | |
Net current-period other comprehensive income | 3,866 | |
Accumulated other comprehensive loss, end of period | $ (12,401) | |
[1] | Other comprehensive income before reclassifications is net of income tax expense of $14. |
Acquisitions (Details)
Acquisitions (Details) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($)business | ||
Acquisitions [Line Items] | |||
Intangibles acquired | $ 84,552 | ||
Payments for acquisitions, net of cash acquired | 64,637 | $ 50,933 | |
Holdback payments for prior year acquisitions | 1,534 | $ 4,137 | |
Customer lists/relationships [Member] | |||
Acquisitions [Line Items] | |||
Intangibles acquired | 48,982 | ||
Internal-use software [Member] | |||
Acquisitions [Line Items] | |||
Intangibles acquired | 34,970 | ||
Trade names [Member] | |||
Acquisitions [Line Items] | |||
Intangibles acquired | 600 | ||
180 Fusion LLC [Member] | |||
Acquisitions [Line Items] | |||
Goodwill acquired during period | 575 | ||
Inkhead, Inc. [Member] | |||
Acquisitions [Line Items] | |||
Goodwill acquired during period | 4,421 | ||
Payce, Inc. [Member] | |||
Acquisitions [Line Items] | |||
Goodwill acquired during period | 7,979 | ||
2016 acquisitions [Member] | |||
Acquisitions [Line Items] | |||
Net tangible assets acquired and liabilities assumed | (784) | ||
Intangibles acquired | 59,832 | ||
Goodwill acquired during period | 12,975 | ||
Total aggregate purchase price | 72,023 | ||
Liabilities for holdback payments | (6,900) | ||
Non-cash consideration | [1] | (2,020) | |
Payments for acquisitions, net of cash acquired | 63,103 | ||
2016 acquisitions [Member] | Customer lists/relationships [Member] | |||
Acquisitions [Line Items] | |||
Intangibles acquired | 48,982 | ||
2016 acquisitions [Member] | Internal-use software [Member] | |||
Acquisitions [Line Items] | |||
Intangibles acquired | 10,250 | ||
2016 acquisitions [Member] | Trade names [Member] | |||
Acquisitions [Line Items] | |||
Intangibles acquired | 600 | ||
Small business distributors [Member] | |||
Acquisitions [Line Items] | |||
Number of businesses acquired | business | 8 | ||
Small business distributors previously in Safeguard network [Member] | |||
Acquisitions [Line Items] | |||
Number of businesses acquired | business | 5 | ||
Datamyx LLC [Member] | |||
Acquisitions [Line Items] | |||
Adjustment to goodwill | $ 172 | ||
2015 acquisitions [Member] | |||
Acquisitions [Line Items] | |||
Payments for acquisitions, net of cash acquired | $ 46,796 | ||
[1] | Consists of pre-acquisition amounts owed to us by certain of the acquired businesses. |
Derivative financial instrume49
Derivative financial instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Senior notes due 2020 [Member] | ||
Derivative financial instruments [Line Items] | ||
Decrease in debt due to fair value adjustments | $ (109) | $ (4,842) |
Fair value hedge related to long-term debt due in 2020 [Member] | ||
Derivative financial instruments [Line Items] | ||
Notional amount | 200,000 | 200,000 |
Fair value of interest rate swaps, liability | $ (109) | $ (4,842) |
Fair value measurements (annual
Fair value measurements (annual asset impairment analyses) (Details) - USD ($) $ in Thousands | 9 Months Ended | |||
Sep. 30, 2016 | Jul. 31, 2016 | Dec. 31, 2015 | Jul. 31, 2015 | |
Schedule of goodwill and indefinite-lived intangibles [Line Items] | ||||
Goodwill | $ 989,641 | $ 976,415 | ||
Carrying value of indefinite-lived trade name | $ 19,100 | |||
Indefinite-lived trade name, fair value in excess of carrying value | $ 32,000 | |||
Goodwill [Member] | ||||
Schedule of goodwill and indefinite-lived intangibles [Line Items] | ||||
Asset impairment charge | 0 | |||
Indefinite-lived intangibles [Member] | ||||
Schedule of goodwill and indefinite-lived intangibles [Line Items] | ||||
Asset impairment charge | 0 | |||
Financial Services Commercial [Member] | ||||
Schedule of goodwill and indefinite-lived intangibles [Line Items] | ||||
Excess of fair value over carrying value of reporting unit | 49.00% | 13.00% | ||
Goodwill | $ 45,000 |
Fair value measurements (acquis
Fair value measurements (acquisitions) (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Acquisitions [Line Items] | |
Intangibles acquired | $ 84,552 |
2016 acquisitions [Member] | |
Acquisitions [Line Items] | |
Intangibles acquired | 59,832 |
Customer lists/relationships [Member] | |
Acquisitions [Line Items] | |
Intangibles acquired | 48,982 |
Customer lists/relationships [Member] | 2016 acquisitions [Member] | |
Acquisitions [Line Items] | |
Intangibles acquired | 48,982 |
Internal-use software [Member] | |
Acquisitions [Line Items] | |
Intangibles acquired | 34,970 |
Internal-use software [Member] | 2016 acquisitions [Member] | |
Acquisitions [Line Items] | |
Intangibles acquired | $ 10,250 |
Fair value measurements (recurr
Fair value measurements (recurring fair value measurements) (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |||
Recurring fair value measurements [Line Items] | |||||
Net unrealized loss on investment in mutual funds | $ 160 | $ 333 | |||
Available-for-sale marketable securities | 16,066 | $ 16,683 | |||
Long-term investment in mutual funds | 1,868 | $ 2,091 | |||
Verify Valid [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Contingent consideration, period | 8 years | ||||
Liability for contingent consideration, maximum unlimited | There is no maximum amount of contingent payments specified in the agreement | ||||
Small business distributors [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Contingent consideration, period | 3 years | ||||
Liability for contingent consideration, maximum amount | $ 925 | ||||
Funds held for customers [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Available-for-sale marketable securities | $ 16,066 | [1] | 15,067 | [2] | |
Funds held for customers [Member] | Guaranteed investment certificates [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Maximum maturity period, debt securities | 1 year | ||||
Available-for-sale marketable securities | $ 7,618 | [1] | 7,226 | ||
Other current assets [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Realized gain (loss) on available-for-sale securities | 0 | $ 0 | |||
Recurring fair value measurements [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Long-term investment in mutual funds | 1,868 | 2,091 | |||
Derivative liabilities | (109) | (4,842) | |||
Accrued contingent consideration | (4,276) | (5,861) | |||
Transfers between fair value levels | 0 | ||||
Recurring fair value measurements [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Long-term investment in mutual funds | 1,868 | 2,091 | |||
Derivative liabilities | 0 | 0 | |||
Accrued contingent consideration | 0 | 0 | |||
Recurring fair value measurements [Member] | Significant other observable inputs (Level 2) [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Long-term investment in mutual funds | 0 | 0 | |||
Derivative liabilities | (109) | (4,842) | |||
Accrued contingent consideration | 0 | 0 | |||
Recurring fair value measurements [Member] | Significant unobservable inputs (Level 3) [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Long-term investment in mutual funds | 0 | 0 | |||
Derivative liabilities | 0 | 0 | |||
Accrued contingent consideration | (4,276) | (5,861) | |||
Recurring fair value measurements [Member] | Funds held for customers [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Available-for-sale marketable securities | 16,066 | 15,067 | |||
Recurring fair value measurements [Member] | Funds held for customers [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Available-for-sale marketable securities | 0 | 0 | |||
Recurring fair value measurements [Member] | Funds held for customers [Member] | Significant other observable inputs (Level 2) [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Available-for-sale marketable securities | 16,066 | 15,067 | |||
Recurring fair value measurements [Member] | Funds held for customers [Member] | Significant unobservable inputs (Level 3) [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Available-for-sale marketable securities | $ 0 | 0 | |||
Recurring fair value measurements [Member] | Other current assets [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Available-for-sale marketable securities | 1,616 | ||||
Recurring fair value measurements [Member] | Other current assets [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Available-for-sale marketable securities | 0 | ||||
Recurring fair value measurements [Member] | Other current assets [Member] | Significant other observable inputs (Level 2) [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Available-for-sale marketable securities | 1,616 | ||||
Recurring fair value measurements [Member] | Other current assets [Member] | Significant unobservable inputs (Level 3) [Member] | |||||
Recurring fair value measurements [Line Items] | |||||
Available-for-sale marketable securities | $ 0 | ||||
[1] | Funds held for customers, as reported on the consolidated balance sheet as of September 30, 2016, also included cash of $76,104. This cash included amounts related to FISC Solutions, which was acquired in December 2015. This business provides cash receipt processing services. A portion of the cash receipts are remitted to our clients the business day following receipt. As such, the amounts on-hand are reported as funds held for customers in the consolidated balance sheets, with a corresponding liability included in accrued liabilities. The asset and liability of $18,743 were recorded as acquisition measurement-period balance sheet adjustments during 2016. In addition, this cash included $12,532 related to the September 2016 acquisition of Payce, Inc., a payroll services provider (see Note 6). | ||||
[2] | Funds held for customers, as reported on the consolidated balance sheet as of December 31, 2015, also included cash of $38,276. |
Fair value measurements (change
Fair value measurements (changes in Level 3 recurring fair value measurement) (Details) - Accrued contingent consideration [Member] $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Change in accrued contingent consideration | |
Balance, beginning of year | $ 5,861 |
Change in fair value | (448) |
Payments | (1,137) |
Balance, end of period | $ 4,276 |
Fair value measurements (other
Fair value measurements (other financial instruments) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 | |
Carrying value [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Loans and notes receivable from distributors | $ 23,329 | $ 25,745 | |
Long-term debt | [1] | 615,985 | 626,909 |
Carrying value [Member] | Cash [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Cash | 80,065 | 62,427 | |
Carrying value [Member] | Funds held for customers [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Cash | 76,104 | 38,276 | |
Fair value [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Loans and notes receivable from distributors | 21,290 | 23,383 | |
Long-term debt | [1] | 624,758 | 641,000 |
Fair value [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Loans and notes receivable from distributors | 0 | 0 | |
Long-term debt | [1] | 0 | 0 |
Fair value [Member] | Significant other observable inputs (Level 2) [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Loans and notes receivable from distributors | 0 | 0 | |
Long-term debt | [1] | 624,758 | 641,000 |
Fair value [Member] | Significant unobservable inputs (Level 3) [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Loans and notes receivable from distributors | 21,290 | 23,383 | |
Long-term debt | [1] | 0 | 0 |
Fair value [Member] | Cash [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Cash | 80,065 | 62,427 | |
Fair value [Member] | Cash [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Cash | 80,065 | 62,427 | |
Fair value [Member] | Cash [Member] | Significant other observable inputs (Level 2) [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Cash | 0 | 0 | |
Fair value [Member] | Cash [Member] | Significant unobservable inputs (Level 3) [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Cash | 0 | 0 | |
Fair value [Member] | Funds held for customers [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Cash | 76,104 | 38,276 | |
Fair value [Member] | Funds held for customers [Member] | Quoted prices in active markets for identical assets (Level 1) [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Cash | 76,104 | 38,276 | |
Fair value [Member] | Funds held for customers [Member] | Significant other observable inputs (Level 2) [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Cash | 0 | 0 | |
Fair value [Member] | Funds held for customers [Member] | Significant unobservable inputs (Level 3) [Member] | |||
Fair value measurements, other financial instruments [Line Items] | |||
Cash | $ 0 | $ 0 | |
[1] | Amounts exclude capital lease obligations. |
Restructuring charges (Details)
Restructuring charges (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 33 Months Ended | ||||
Sep. 30, 2016USD ($)Employees | Sep. 30, 2015USD ($)Employees | Sep. 30, 2016USD ($)Employees | Sep. 30, 2015USD ($)Employees | Sep. 30, 2016USD ($)Employees | Dec. 31, 2015USD ($) | ||
Restructuring charges [Line Items] | |||||||
Restructuring charges | $ 2,058 | $ 1,738 | $ 4,143 | $ 3,156 | |||
Restructuring reversals | (666) | $ (2,457) | [1] | ||||
Net restructuring accruals | $ 1,626 | $ 1,249 | $ 3,204 | $ 2,605 | |||
Number of employees in severance accruals | Employees | 55 | 50 | 120 | 200 | |||
Other restructuring charges disclosures | |||||||
Restructuring accruals, total | $ 2,648 | $ 2,648 | $ 2,648 | $ 3,864 | |||
Number of employees that have not started to receive severance benefits | Employees | 25 | 25 | 25 | ||||
Total cost of revenue [Member] | |||||||
Restructuring charges [Line Items] | |||||||
Restructuring charges | $ 65 | $ 233 | $ 136 | $ 418 | |||
Operating expenses [Member] | |||||||
Restructuring charges [Line Items] | |||||||
Restructuring charges | 1,993 | 1,505 | 4,007 | 2,738 | |||
Severance [Member] | |||||||
Restructuring charges [Line Items] | |||||||
Restructuring charges | 1,824 | 1,443 | 3,870 | 3,493 | |||
Restructuring reversals | (198) | (282) | (666) | (976) | |||
Operating lease obligations [Member] | |||||||
Restructuring charges [Line Items] | |||||||
Restructuring charges | 0 | 88 | 0 | 88 | |||
Other costs [Member] | |||||||
Restructuring charges [Line Items] | |||||||
Restructuring charges | $ 432 | $ 489 | $ 939 | $ 551 | |||
[1] | Includes accruals related to our cost reduction initiatives for 2014 through 2016. |
Restructuring charges (restruct
Restructuring charges (restructuring accruals by year and by segment) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 21 Months Ended | 33 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2016 | |||
Restructuring accruals [Line Items] | ||||||||
Balance, beginning of year | $ 3,864 | |||||||
Restructuring charges | 3,870 | $ 18,239 | [1] | |||||
Restructuring reversals | (666) | (2,457) | [1] | |||||
Inter-segment transfer | [1] | 0 | ||||||
Payments | (4,420) | (13,134) | [1] | |||||
Balance, end of period | $ 2,648 | 2,648 | $ 2,648 | 2,648 | ||||
2014 initiatives [Member] | ||||||||
Restructuring accruals [Line Items] | ||||||||
Balance, beginning of year | 176 | |||||||
Restructuring charges | 0 | 8,242 | ||||||
Restructuring reversals | (111) | (1,444) | ||||||
Payments | (65) | (6,798) | ||||||
Balance, end of period | 0 | 0 | 0 | 0 | ||||
2015 initiatives [Member] | ||||||||
Restructuring accruals [Line Items] | ||||||||
Balance, beginning of year | 3,688 | |||||||
Restructuring charges | 78 | 6,205 | ||||||
Restructuring reversals | (465) | (923) | ||||||
Payments | (2,989) | (4,970) | ||||||
Balance, end of period | 312 | 312 | 312 | 312 | ||||
2016 initiatives [Member] | ||||||||
Restructuring accruals [Line Items] | ||||||||
Balance, beginning of year | 0 | |||||||
Restructuring charges | 3,792 | |||||||
Restructuring reversals | (90) | |||||||
Payments | (1,366) | |||||||
Balance, end of period | 2,336 | 2,336 | 2,336 | 2,336 | ||||
Employee severance benefits [Member] | ||||||||
Restructuring accruals [Line Items] | ||||||||
Restructuring reversals | (198) | $ (282) | (666) | $ (976) | ||||
Employee severance benefits [Member] | Small Business Services [Member] | ||||||||
Restructuring accruals [Line Items] | ||||||||
Balance, beginning of year | 1,023 | |||||||
Restructuring charges | 1,979 | 7,704 | [1] | |||||
Restructuring reversals | (255) | (1,455) | [1] | |||||
Inter-segment transfer | [1] | 41 | ||||||
Payments | (1,457) | (5,000) | [1] | |||||
Balance, end of period | 1,290 | 1,290 | 1,290 | 1,290 | ||||
Employee severance benefits [Member] | Financial Services [Member] | ||||||||
Restructuring accruals [Line Items] | ||||||||
Balance, beginning of year | 884 | |||||||
Restructuring charges | 768 | 5,027 | [1] | |||||
Restructuring reversals | (50) | (361) | [1] | |||||
Inter-segment transfer | [1] | (14) | ||||||
Payments | (922) | (3,972) | [1] | |||||
Balance, end of period | 680 | 680 | 680 | 680 | ||||
Employee severance benefits [Member] | Direct Checks [Member] | ||||||||
Restructuring accruals [Line Items] | ||||||||
Balance, beginning of year | 0 | |||||||
Restructuring charges | 135 | 171 | [1] | |||||
Restructuring reversals | (2) | (4) | [1] | |||||
Inter-segment transfer | [1] | 0 | ||||||
Payments | (85) | (119) | [1] | |||||
Balance, end of period | 48 | 48 | 48 | 48 | ||||
Employee severance benefits [Member] | Corporate [Member] | ||||||||
Restructuring accruals [Line Items] | ||||||||
Balance, beginning of year | 1,859 | |||||||
Restructuring charges | 929 | 4,940 | [1] | |||||
Restructuring reversals | (359) | (637) | [1] | |||||
Inter-segment transfer | [1] | (27) | ||||||
Payments | (1,811) | (3,658) | [1] | |||||
Balance, end of period | 618 | 618 | 618 | 618 | ||||
Operating lease obligations [Member] | Small Business Services [Member] | ||||||||
Restructuring accruals [Line Items] | ||||||||
Balance, beginning of year | 56 | |||||||
Restructuring charges | 59 | 344 | [1] | |||||
Restructuring reversals | 0 | 0 | [1] | |||||
Inter-segment transfer | [1] | 0 | ||||||
Payments | (103) | (332) | [1] | |||||
Balance, end of period | 12 | 12 | 12 | 12 | ||||
Operating lease obligations [Member] | Direct Checks [Member] | ||||||||
Restructuring accruals [Line Items] | ||||||||
Balance, beginning of year | 42 | |||||||
Restructuring charges | 0 | 53 | [1] | |||||
Restructuring reversals | 0 | 0 | [1] | |||||
Inter-segment transfer | [1] | 0 | ||||||
Payments | (42) | (53) | [1] | |||||
Balance, end of period | $ 0 | $ 0 | $ 0 | $ 0 | ||||
[1] | Includes accruals related to our cost reduction initiatives for 2014 through 2016. |
Postretirement benefits (Detail
Postretirement benefits (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Net periodic benefit income | ||||
Interest cost | $ 780 | $ 859 | $ 2,339 | $ 2,578 |
Expected return on plan assets | (1,834) | (1,958) | (5,501) | (5,875) |
Amortization of prior service credit | (355) | (355) | (1,066) | (1,066) |
Amortization of net actuarial losses | 949 | 780 | 2,848 | 2,340 |
Net periodic benefit income | $ (460) | $ (674) | $ (1,380) | $ (2,023) |
Debt (Details)
Debt (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
Nov. 30, 2016USD ($) | Mar. 31, 2015USD ($) | Nov. 30, 2012USD ($) | Mar. 31, 2011USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Dec. 31, 2015USD ($) | ||
Debt instruments [Line Items] | ||||||||||
Long-term portion of debt | $ 616,790 | $ 616,790 | $ 627,973 | |||||||
Capital lease obligations due within one year | 951 | 951 | 1,045 | |||||||
Total debt | $ 617,741 | $ 617,741 | 629,018 | |||||||
Ratio of EBITDA to interest expense | 2 | 2 | ||||||||
Ratio of total debt less unrestricted cash to EBITDA | 2.75 | 2.75 | ||||||||
Loss on early debt extinguishment | $ 0 | $ 0 | $ 0 | $ (8,917) | ||||||
Capital lease obligations | 1,756 | $ 1,756 | 2,109 | |||||||
Capital lease obligations, expiration date | Aug. 31, 2020 | |||||||||
Credit facility, date of expiration | Feb. 21, 2019 | |||||||||
Senior notes due 2020 [Member] | ||||||||||
Debt instruments [Line Items] | ||||||||||
Principal amount issued | 200,000 | $ 200,000 | 200,000 | |||||||
Less unamortized debt issuance costs | (1,906) | (1,906) | (2,249) | |||||||
Cumulative change in fair value of hedged debt (Note 7) | (109) | (109) | (4,842) | |||||||
Long-term portion of debt | 197,985 | 197,985 | 192,909 | |||||||
Debt issuance date | Nov. 27, 2012 | |||||||||
Stated interest rate | 6.00% | |||||||||
Debt maturity date | Nov. 15, 2020 | |||||||||
Proceeds from offering, net of offering costs | $ 196,340 | |||||||||
Fair value of notes outstanding | 206,758 | 206,758 | ||||||||
Senior notes due 2020 [Member] | Subsequent event [Member] | ||||||||||
Debt instruments [Line Items] | ||||||||||
Redemption price, percentage | 103.00% | |||||||||
Principal amount retired | $ 200,000 | |||||||||
Senior notes due 2019 [Member] | ||||||||||
Debt instruments [Line Items] | ||||||||||
Principal amount issued | $ 200,000 | |||||||||
Debt issuance date | Mar. 15, 2011 | |||||||||
Stated interest rate | 7.00% | |||||||||
Debt maturity date | Mar. 15, 2019 | |||||||||
Proceeds from offering, net of offering costs | $ 196,195 | |||||||||
Principal amount retired | $ 200,000 | |||||||||
Loss on early debt extinguishment | $ 8,917 | |||||||||
Capital lease obligations [Member] | ||||||||||
Debt instruments [Line Items] | ||||||||||
Long-term portion of debt | 805 | 805 | 1,064 | |||||||
Revolving credit facility [Member] | ||||||||||
Debt instruments [Line Items] | ||||||||||
Long-term portion of debt | 418,000 | 418,000 | $ 434,000 | |||||||
Credit facility commitment | $ 525,000 | $ 525,000 | ||||||||
Credit facility, interest rate, amount outstanding | 1.95% | 1.95% | 1.89% | |||||||
Credit facility, daily average amount outstanding | $ 416,814 | $ 270,063 | ||||||||
Credit facility, weighted-average interest rate | 1.91% | 1.66% | ||||||||
Outstanding letters of credit | [1] | $ (12,795) | $ (12,795) | |||||||
Credit facility, net available for borrowing at end of period | 94,205 | $ 94,205 | ||||||||
Revolving credit facility [Member] | Minimum [Member] | ||||||||||
Debt instruments [Line Items] | ||||||||||
Credit facility, commitment fee | 0.20% | |||||||||
Revolving credit facility [Member] | Maximum [Member] | ||||||||||
Debt instruments [Line Items] | ||||||||||
Credit facility, commitment fee | 0.40% | |||||||||
Term loan facility [Member] | ||||||||||
Debt instruments [Line Items] | ||||||||||
Credit facility commitment | 200,000 | $ 200,000 | ||||||||
Principal payments due in 2017 | 21,250 | 21,250 | ||||||||
Principal payments due in 2018 | $ 26,250 | 26,250 | ||||||||
Short-term bank loan [Member] | ||||||||||
Debt instruments [Line Items] | ||||||||||
Principal amount issued | $ 75,000 | |||||||||
Debt issuance date | Mar. 5, 2015 | |||||||||
Proceeds from offering, net of offering costs | $ 74,880 | |||||||||
Short-term borrowings, daily average amount outstanding | $ 0 | $ 47,178 | ||||||||
Short-term borrowings, weighted-average interest rate | 0.00% | 1.59% | ||||||||
[1] | We use standby letters of credit to collateralize certain obligations related primarily to our self-insured workers’ compensation claims, as well as claims for environmental matters, as required by certain states. These letters of credit reduce the amount available for borrowing under our revolving credit facility. |
Other commitments and conting59
Other commitments and contingencies (Details) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Environmental matters [Line Items] | ||||
Accruals for environmental matters | $ 3,329 | $ 5,952 | ||
Expense for environmental matters | (1,759) | $ 915 | ||
Self-insurance | ||||
Self-insurance liabilities | 6,766 | $ 6,457 | ||
Litigation | ||||
Damages sought | $ 43,000 | |||
Environmental insurance policy purchased during 2002 [Member] | ||||
Environmental matters [Line Items] | ||||
Environmental insurance coverage | 10,000 | |||
Environmental insurance policy purchased during 2009 [Member] | ||||
Environmental matters [Line Items] | ||||
Environmental insurance coverage | 15,000 | |||
Environmental insurance policies in effect [Member] | ||||
Environmental matters [Line Items] | ||||
Accruals for environmental matters | $ 0 |
Shareholders' equity (Details)
Shareholders' equity (Details) - USD ($) shares in Thousands, $ in Thousands | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | May 04, 2016 | Aug. 01, 2003 | |
Stockholders' Equity Note [Abstract] | ||||
Common shares authorized for repurchase | 10,000 | |||
Common shares that remain available for repurchase | 233 | |||
Common shares repurchased (in shares) | 733 | |||
Payments for common shares repurchased | $ 44,944 | $ 46,996 | ||
Share repurchase program, authorized amount | $ 300,000 |
Business segment information (D
Business segment information (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) | Dec. 31, 2015USD ($) | |
Business segment information [Line Items] | |||||
Number of reportable business segments | 3 | ||||
Total revenue from external customers: | $ 458,920 | $ 439,816 | $ 1,368,860 | $ 1,309,308 | |
Operating income | 92,292 | 89,368 | 275,883 | 263,538 | |
Depreciation and amortization expense: | 23,059 | 18,753 | 67,711 | 54,431 | |
Total assets | 1,941,148 | 1,690,057 | 1,941,148 | 1,690,057 | $ 1,842,153 |
Capital asset purchases: | 10,031 | 10,242 | 32,215 | 29,549 | |
Reportable Business Segments [Member] | Small Business Services [Member] | |||||
Business segment information [Line Items] | |||||
Total revenue from external customers: | 298,931 | 288,966 | 877,384 | 848,216 | |
Operating income | 50,670 | 51,873 | 150,776 | 149,545 | |
Depreciation and amortization expense: | 13,315 | 11,825 | 38,195 | 33,265 | |
Total assets | 1,075,661 | 990,282 | 1,075,661 | 990,282 | |
Capital asset purchases: | 0 | 0 | 0 | 0 | |
Reportable Business Segments [Member] | Small Business Services [Member] | Checks [Member] | Product concentration risk [Member] | |||||
Business segment information [Line Items] | |||||
Percentage of revenue | 40.10% | ||||
Reportable Business Segments [Member] | Financial Services [Member] | |||||
Business segment information [Line Items] | |||||
Total revenue from external customers: | 123,033 | 110,894 | 374,511 | 335,134 | |
Operating income | 28,708 | 23,364 | 84,467 | 69,280 | |
Depreciation and amortization expense: | 8,876 | 5,979 | 26,888 | 17,760 | |
Total assets | 434,374 | 270,421 | 434,374 | 270,421 | |
Capital asset purchases: | 0 | 0 | 0 | 0 | |
Reportable Business Segments [Member] | Financial Services [Member] | Checks [Member] | Product concentration risk [Member] | |||||
Business segment information [Line Items] | |||||
Percentage of revenue | 59.70% | ||||
Reportable Business Segments [Member] | Direct Checks [Member] | |||||
Business segment information [Line Items] | |||||
Total revenue from external customers: | 36,956 | 39,956 | 116,965 | 125,958 | |
Operating income | 12,914 | 14,131 | 40,640 | 44,713 | |
Depreciation and amortization expense: | 868 | 949 | 2,628 | 3,406 | |
Total assets | 160,624 | 161,636 | 160,624 | 161,636 | |
Capital asset purchases: | 0 | 0 | 0 | 0 | |
Reportable Business Segments [Member] | Direct Checks [Member] | Checks [Member] | Product concentration risk [Member] | |||||
Business segment information [Line Items] | |||||
Percentage of revenue | 84.60% | ||||
Corporate [Member] | |||||
Business segment information [Line Items] | |||||
Total revenue from external customers: | 0 | 0 | 0 | 0 | |
Operating income | 0 | 0 | 0 | 0 | |
Depreciation and amortization expense: | 0 | 0 | 0 | 0 | |
Total assets | 270,489 | 267,718 | 270,489 | 267,718 | |
Capital asset purchases: | $ 10,031 | $ 10,242 | $ 32,215 | $ 29,549 |
Supplemental guarantor financ62
Supplemental guarantor financial information (Condensed Consolidating Balance Sheets) (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Dec. 31, 2014 |
Current assets: | ||||
Cash and cash equivalents | $ 80,065 | $ 62,427 | $ 62,895 | $ 61,541 |
Trade accounts receivable, net | 117,761 | 123,654 | ||
Inventories and supplies | 41,474 | 41,956 | ||
Funds held for customers | 92,170 | 53,343 | ||
Other current assets | 41,038 | 42,605 | ||
Total current assets | 372,508 | 323,985 | ||
Deferred income taxes | 1,749 | 1,238 | ||
Long-term investments | 41,893 | 41,691 | ||
Property, plant and equipment, net | 83,667 | 85,732 | ||
Assets held for sale | 13,966 | 13,969 | ||
Intangibles, net | 313,878 | 285,311 | ||
Goodwill | 989,641 | 976,415 | ||
Investments In consolidated subsidiaries | 0 | 0 | ||
Intercompany receivable | 0 | 0 | ||
Other non-current assets | 123,846 | 113,812 | ||
Total assets | 1,941,148 | 1,842,153 | 1,690,057 | |
Current liabilities: | ||||
Accounts payable | 86,835 | 87,575 | ||
Accrued liabilities | 240,637 | 228,423 | ||
Long-term debt due within one year | 951 | 1,045 | ||
Total current liabilities | 328,423 | 317,043 | ||
Long-term debt | 616,790 | 627,973 | ||
Deferred income taxes | 80,754 | 81,076 | ||
Intercompany payable | 0 | 0 | ||
Other non-current liabilities | 65,234 | 70,992 | ||
Total shareholders' equity | 849,947 | 745,069 | ||
Total liabilities and shareholders' equity | 1,941,148 | 1,842,153 | ||
Eliminations [Member] | ||||
Current assets: | ||||
Cash and cash equivalents | (1,759) | (122) | (200) | (3,329) |
Trade accounts receivable, net | 0 | 0 | ||
Inventories and supplies | 0 | 0 | ||
Funds held for customers | 0 | 0 | ||
Other current assets | 0 | 0 | ||
Total current assets | (1,759) | (122) | ||
Deferred income taxes | (14,754) | (13,498) | ||
Long-term investments | 0 | 0 | ||
Property, plant and equipment, net | 0 | 0 | ||
Assets held for sale | 0 | 0 | ||
Intangibles, net | 0 | 0 | ||
Goodwill | 0 | 0 | ||
Investments In consolidated subsidiaries | (1,504,758) | (1,329,648) | ||
Intercompany receivable | (23,164) | (99,506) | ||
Other non-current assets | 0 | 0 | ||
Total assets | (1,544,435) | (1,442,774) | ||
Current liabilities: | ||||
Accounts payable | (1,759) | (122) | ||
Accrued liabilities | 0 | 0 | ||
Long-term debt due within one year | 0 | 0 | ||
Total current liabilities | (1,759) | (122) | ||
Long-term debt | 0 | 0 | ||
Deferred income taxes | (14,754) | (13,498) | ||
Intercompany payable | (23,164) | (99,506) | ||
Other non-current liabilities | 0 | 0 | ||
Total shareholders' equity | (1,504,758) | (1,329,648) | ||
Total liabilities and shareholders' equity | (1,544,435) | (1,442,774) | ||
Deluxe Corporation [Member] | ||||
Current assets: | ||||
Cash and cash equivalents | 14,019 | 5,187 | 7,832 | 8,335 |
Trade accounts receivable, net | 0 | 0 | ||
Inventories and supplies | 0 | 0 | ||
Funds held for customers | 0 | 0 | ||
Other current assets | 6,718 | 7,230 | ||
Total current assets | 20,737 | 12,417 | ||
Deferred income taxes | 14,754 | 13,498 | ||
Long-term investments | 34,156 | 34,304 | ||
Property, plant and equipment, net | 11,914 | 10,111 | ||
Assets held for sale | 0 | 0 | ||
Intangibles, net | 19,119 | 9,066 | ||
Goodwill | 0 | 0 | ||
Investments In consolidated subsidiaries | 1,395,804 | 1,248,549 | ||
Intercompany receivable | 23,164 | 99,506 | ||
Other non-current assets | 6,549 | 5,861 | ||
Total assets | 1,526,197 | 1,433,312 | ||
Current liabilities: | ||||
Accounts payable | 25,328 | 15,625 | ||
Accrued liabilities | 20,577 | 23,567 | ||
Long-term debt due within one year | 906 | 1,026 | ||
Total current liabilities | 46,811 | 40,218 | ||
Long-term debt | 616,697 | 627,942 | ||
Deferred income taxes | 0 | 0 | ||
Intercompany payable | 0 | 0 | ||
Other non-current liabilities | 12,742 | 20,083 | ||
Total shareholders' equity | 849,947 | 745,069 | ||
Total liabilities and shareholders' equity | 1,526,197 | 1,433,312 | ||
Guarantor subsidiaries [Member] | ||||
Current assets: | ||||
Cash and cash equivalents | 902 | 940 | 1,341 | 4,342 |
Trade accounts receivable, net | 109,326 | 115,951 | ||
Inventories and supplies | 39,175 | 39,758 | ||
Funds held for customers | 24,031 | 0 | ||
Other current assets | 32,934 | 32,765 | ||
Total current assets | 206,368 | 189,414 | ||
Deferred income taxes | 0 | 0 | ||
Long-term investments | 7,737 | 7,387 | ||
Property, plant and equipment, net | 66,833 | 71,017 | ||
Assets held for sale | 0 | 0 | ||
Intangibles, net | 283,237 | 273,051 | ||
Goodwill | 980,142 | 974,973 | ||
Investments In consolidated subsidiaries | 108,954 | 81,099 | ||
Intercompany receivable | 0 | 0 | ||
Other non-current assets | 117,215 | 107,767 | ||
Total assets | 1,770,486 | 1,704,708 | ||
Current liabilities: | ||||
Accounts payable | 60,456 | 69,809 | ||
Accrued liabilities | 149,507 | 148,279 | ||
Long-term debt due within one year | 0 | 0 | ||
Total current liabilities | 209,963 | 218,088 | ||
Long-term debt | 0 | 0 | ||
Deferred income taxes | 95,508 | 94,574 | ||
Intercompany payable | 22,494 | 98,365 | ||
Other non-current liabilities | 46,717 | 45,132 | ||
Total shareholders' equity | 1,395,804 | 1,248,549 | ||
Total liabilities and shareholders' equity | 1,770,486 | 1,704,708 | ||
Non-guarantor subsidiaries [Member] | ||||
Current assets: | ||||
Cash and cash equivalents | 66,903 | 56,422 | $ 53,922 | $ 52,193 |
Trade accounts receivable, net | 8,435 | 7,703 | ||
Inventories and supplies | 2,299 | 2,198 | ||
Funds held for customers | 68,139 | 53,343 | ||
Other current assets | 1,386 | 2,610 | ||
Total current assets | 147,162 | 122,276 | ||
Deferred income taxes | 1,749 | 1,238 | ||
Long-term investments | 0 | 0 | ||
Property, plant and equipment, net | 4,920 | 4,604 | ||
Assets held for sale | 13,966 | 13,969 | ||
Intangibles, net | 11,522 | 3,194 | ||
Goodwill | 9,499 | 1,442 | ||
Investments In consolidated subsidiaries | 0 | 0 | ||
Intercompany receivable | 0 | 0 | ||
Other non-current assets | 82 | 184 | ||
Total assets | 188,900 | 146,907 | ||
Current liabilities: | ||||
Accounts payable | 2,810 | 2,263 | ||
Accrued liabilities | 70,553 | 56,577 | ||
Long-term debt due within one year | 45 | 19 | ||
Total current liabilities | 73,408 | 58,859 | ||
Long-term debt | 93 | 31 | ||
Deferred income taxes | 0 | 0 | ||
Intercompany payable | 670 | 1,141 | ||
Other non-current liabilities | 5,775 | 5,777 | ||
Total shareholders' equity | 108,954 | 81,099 | ||
Total liabilities and shareholders' equity | $ 188,900 | $ 146,907 |
Supplemental guarantor financ63
Supplemental guarantor financial information (Condensed Consolidating Statements of Comprehensive Income) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Condensed Consolidating Statements of Comprehensive Income [Abstract] | ||||
Product revenue | $ 364,680 | $ 361,781 | $ 1,090,686 | $ 1,075,692 |
Service revenue | 94,240 | 78,035 | 278,174 | 233,616 |
Total revenue | 458,920 | 439,816 | 1,368,860 | 1,309,308 |
Cost of products | (133,628) | (132,594) | (391,161) | (384,590) |
Cost of services | (32,642) | (26,708) | (99,246) | (83,332) |
Total cost of revenue | (166,270) | (159,302) | (490,407) | (467,922) |
Gross profit | 292,650 | 280,514 | 878,453 | 841,386 |
Operating expenses | (200,358) | (191,146) | (602,570) | (577,848) |
Operating income | 92,292 | 89,368 | 275,883 | 263,538 |
Loss on early debt extinguishment | 0 | 0 | 0 | (8,917) |
Interest expense | (4,855) | (4,387) | (15,281) | (15,322) |
Other income | 742 | 919 | 1,335 | 2,174 |
Income before income taxes | 88,179 | 85,900 | 261,937 | 241,473 |
Income tax benefit (provision) | (29,516) | (28,983) | (86,783) | (82,553) |
(Loss) income before equity in earnings of consolidated subsidiaries | 58,663 | 56,917 | 175,154 | 158,920 |
Equity in earnings of consolidated subsidiaries | 0 | 0 | 0 | 0 |
Net income | 58,663 | 56,917 | 175,154 | 158,920 |
Comprehensive income | 57,824 | 52,680 | 180,298 | 150,190 |
Eliminations [Member] | ||||
Condensed Consolidating Statements of Comprehensive Income [Abstract] | ||||
Product revenue | 0 | 0 | 0 | 0 |
Service revenue | (37,199) | (29,098) | (106,532) | (86,550) |
Total revenue | (37,199) | (29,098) | (106,532) | (86,550) |
Cost of products | 0 | 0 | 0 | 0 |
Cost of services | 40,142 | 28,798 | 117,289 | 90,978 |
Total cost of revenue | 40,142 | 28,798 | 117,289 | 90,978 |
Gross profit | 2,943 | (300) | 10,757 | 4,428 |
Operating expenses | (2,943) | 300 | (10,757) | (4,428) |
Operating income | 0 | 0 | 0 | 0 |
Loss on early debt extinguishment | 0 | |||
Interest expense | 4,371 | 3,865 | 10,812 | 9,527 |
Other income | (4,371) | (3,865) | (10,812) | (9,527) |
Income before income taxes | 0 | 0 | 0 | 0 |
Income tax benefit (provision) | 0 | 0 | 0 | 0 |
(Loss) income before equity in earnings of consolidated subsidiaries | 0 | 0 | 0 | 0 |
Equity in earnings of consolidated subsidiaries | (61,967) | (58,505) | (189,056) | (178,379) |
Net income | (61,967) | (58,505) | (189,056) | (178,379) |
Comprehensive income | (59,826) | (49,676) | (197,955) | (159,856) |
Deluxe Corporation [Member] | ||||
Condensed Consolidating Statements of Comprehensive Income [Abstract] | ||||
Product revenue | 0 | 0 | 0 | 0 |
Service revenue | 36,078 | 28,005 | 103,173 | 83,116 |
Total revenue | 36,078 | 28,005 | 103,173 | 83,116 |
Cost of products | 0 | 0 | 0 | 0 |
Cost of services | (40,487) | (29,218) | (115,810) | (89,348) |
Total cost of revenue | (40,487) | (29,218) | (115,810) | (89,348) |
Gross profit | (4,409) | (1,213) | (12,637) | (6,232) |
Operating expenses | 0 | 0 | 0 | 0 |
Operating income | (4,409) | (1,213) | (12,637) | (6,232) |
Loss on early debt extinguishment | (8,917) | |||
Interest expense | (5,019) | (4,126) | (14,920) | (14,727) |
Other income | 3,994 | 3,737 | 10,302 | 9,680 |
Income before income taxes | (5,434) | (1,602) | (17,255) | (20,196) |
Income tax benefit (provision) | 4,592 | 3,382 | 11,431 | 10,671 |
(Loss) income before equity in earnings of consolidated subsidiaries | (842) | 1,780 | (5,824) | (9,525) |
Equity in earnings of consolidated subsidiaries | 59,505 | 55,137 | 180,978 | 168,445 |
Net income | 58,663 | 56,917 | 175,154 | 158,920 |
Comprehensive income | 57,824 | 52,680 | 180,298 | 150,190 |
Guarantor subsidiaries [Member] | ||||
Condensed Consolidating Statements of Comprehensive Income [Abstract] | ||||
Product revenue | 350,454 | 345,820 | 1,048,288 | 1,018,518 |
Service revenue | 89,355 | 72,419 | 263,292 | 217,412 |
Total revenue | 439,809 | 418,239 | 1,311,580 | 1,235,930 |
Cost of products | (127,210) | (124,910) | (372,165) | (355,690) |
Cost of services | (30,363) | (24,016) | (95,125) | (78,770) |
Total cost of revenue | (157,573) | (148,926) | (467,290) | (434,460) |
Gross profit | 282,236 | 269,313 | 844,290 | 801,470 |
Operating expenses | (188,768) | (182,823) | (566,081) | (544,450) |
Operating income | 93,468 | 86,490 | 278,209 | 257,020 |
Loss on early debt extinguishment | 0 | |||
Interest expense | (4,206) | (4,126) | (11,171) | (10,121) |
Other income | 919 | 746 | 1,786 | 1,355 |
Income before income taxes | 90,181 | 83,110 | 268,824 | 248,254 |
Income tax benefit (provision) | (33,138) | (31,341) | (95,924) | (89,743) |
(Loss) income before equity in earnings of consolidated subsidiaries | 57,043 | 51,769 | 172,900 | 158,511 |
Equity in earnings of consolidated subsidiaries | 2,462 | 3,368 | 8,078 | 9,934 |
Net income | 59,505 | 55,137 | 180,978 | 168,445 |
Comprehensive income | 58,614 | 50,857 | 185,966 | 159,587 |
Non-guarantor subsidiaries [Member] | ||||
Condensed Consolidating Statements of Comprehensive Income [Abstract] | ||||
Product revenue | 14,226 | 15,961 | 42,398 | 57,174 |
Service revenue | 6,006 | 6,709 | 18,241 | 19,638 |
Total revenue | 20,232 | 22,670 | 60,639 | 76,812 |
Cost of products | (6,418) | (7,684) | (18,996) | (28,900) |
Cost of services | (1,934) | (2,272) | (5,600) | (6,192) |
Total cost of revenue | (8,352) | (9,956) | (24,596) | (35,092) |
Gross profit | 11,880 | 12,714 | 36,043 | 41,720 |
Operating expenses | (8,647) | (8,623) | (25,732) | (28,970) |
Operating income | 3,233 | 4,091 | 10,311 | 12,750 |
Loss on early debt extinguishment | 0 | |||
Interest expense | (1) | 0 | (2) | (1) |
Other income | 200 | 301 | 59 | 666 |
Income before income taxes | 3,432 | 4,392 | 10,368 | 13,415 |
Income tax benefit (provision) | (970) | (1,024) | (2,290) | (3,481) |
(Loss) income before equity in earnings of consolidated subsidiaries | 2,462 | 3,368 | 8,078 | 9,934 |
Equity in earnings of consolidated subsidiaries | 0 | 0 | 0 | 0 |
Net income | 2,462 | 3,368 | 8,078 | 9,934 |
Comprehensive income | $ 1,212 | $ (1,181) | $ 11,989 | $ 269 |
Supplemental guarantor financ64
Supplemental guarantor financial information (Condensed Consolidating Statements of Cash Flows) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Condensed Consolidating Statements of Cash Flows [Abstract} | ||||
Net cash provided by operating activities | $ 208,121 | $ 219,148 | ||
Cash flows from investing activities: | ||||
Purchases of capital assets | $ (10,031) | $ (10,242) | (32,215) | (29,549) |
Payments for acquisitions, net of cash acquired | (64,637) | (50,933) | ||
Proceeds from company-owned life insurance policies | 4,123 | 3,973 | ||
Other | 2,330 | 805 | ||
Net cash used by investing activities | (90,399) | (75,704) | ||
Cash flows from financing activities: | ||||
Proceeds from short-term borrowings | 0 | 50,000 | ||
Proceeds from issuing long-term debt | 169,000 | 276,500 | ||
Payments on long-term debt, including costs of debt reacquisition | (185,873) | (375,291) | ||
Proceeds from issuing shares under employee plans | 6,861 | 5,492 | ||
Excess tax benefit from share-based employee awards | 0 | 1,816 | ||
Employee taxes paid for shares withheld | (2,333) | (1,236) | ||
Payments for common shares repurchased | (44,944) | (46,996) | ||
Cash dividends paid to shareholders | (44,127) | (44,965) | ||
Advances from (to) consolidated subsidiaries | 0 | 0 | ||
Other | (1,634) | (378) | ||
Net cash used by financing activities | (103,050) | (135,058) | ||
Effect of exchange rate change on cash | 2,966 | (7,032) | ||
Net change in cash and cash equivalents | 17,638 | 1,354 | ||
Cash and cash equivalents, beginning of year | 62,427 | 61,541 | ||
Cash and cash equivalents, end of period | 80,065 | 62,895 | 80,065 | 62,895 |
Eliminations [Member] | ||||
Condensed Consolidating Statements of Cash Flows [Abstract} | ||||
Net cash provided by operating activities | (1,637) | 3,129 | ||
Cash flows from investing activities: | ||||
Purchases of capital assets | 0 | 0 | ||
Payments for acquisitions, net of cash acquired | 0 | 0 | ||
Proceeds from company-owned life insurance policies | 0 | 0 | ||
Other | 0 | 0 | ||
Net cash used by investing activities | 0 | 0 | ||
Cash flows from financing activities: | ||||
Proceeds from short-term borrowings | 0 | |||
Proceeds from issuing long-term debt | 0 | 0 | ||
Payments on long-term debt, including costs of debt reacquisition | 0 | 0 | ||
Proceeds from issuing shares under employee plans | 0 | 0 | ||
Excess tax benefit from share-based employee awards | 0 | |||
Employee taxes paid for shares withheld | 0 | 0 | ||
Payments for common shares repurchased | 0 | 0 | ||
Cash dividends paid to shareholders | 0 | 0 | ||
Advances from (to) consolidated subsidiaries | 0 | 0 | ||
Other | 0 | 0 | ||
Net cash used by financing activities | 0 | 0 | ||
Effect of exchange rate change on cash | 0 | 0 | ||
Net change in cash and cash equivalents | (1,637) | 3,129 | ||
Cash and cash equivalents, beginning of year | (122) | (3,329) | ||
Cash and cash equivalents, end of period | (1,759) | (200) | (1,759) | (200) |
Deluxe Corporation [Member] | ||||
Condensed Consolidating Statements of Cash Flows [Abstract} | ||||
Net cash provided by operating activities | 3,734 | (820) | ||
Cash flows from investing activities: | ||||
Purchases of capital assets | (18,463) | (1,317) | ||
Payments for acquisitions, net of cash acquired | 0 | (26) | ||
Proceeds from company-owned life insurance policies | 4,123 | 3,973 | ||
Other | (290) | (387) | ||
Net cash used by investing activities | (14,630) | 2,243 | ||
Cash flows from financing activities: | ||||
Proceeds from short-term borrowings | 50,000 | |||
Proceeds from issuing long-term debt | 169,000 | 276,500 | ||
Payments on long-term debt, including costs of debt reacquisition | (185,849) | (375,279) | ||
Proceeds from issuing shares under employee plans | 6,861 | 5,492 | ||
Excess tax benefit from share-based employee awards | 1,816 | |||
Employee taxes paid for shares withheld | (2,333) | (1,236) | ||
Payments for common shares repurchased | (44,944) | (46,996) | ||
Cash dividends paid to shareholders | (44,127) | (44,965) | ||
Advances from (to) consolidated subsidiaries | 121,653 | 132,878 | ||
Other | (533) | (136) | ||
Net cash used by financing activities | 19,728 | (1,926) | ||
Effect of exchange rate change on cash | 0 | 0 | ||
Net change in cash and cash equivalents | 8,832 | (503) | ||
Cash and cash equivalents, beginning of year | 5,187 | 8,335 | ||
Cash and cash equivalents, end of period | 14,019 | 7,832 | 14,019 | 7,832 |
Guarantor subsidiaries [Member] | ||||
Condensed Consolidating Statements of Cash Flows [Abstract} | ||||
Net cash provided by operating activities | 196,493 | 205,987 | ||
Cash flows from investing activities: | ||||
Purchases of capital assets | (11,777) | (26,094) | ||
Payments for acquisitions, net of cash acquired | (64,637) | (50,907) | ||
Proceeds from company-owned life insurance policies | 0 | 0 | ||
Other | 965 | 1,182 | ||
Net cash used by investing activities | (75,449) | (75,819) | ||
Cash flows from financing activities: | ||||
Proceeds from short-term borrowings | 0 | |||
Proceeds from issuing long-term debt | 0 | 0 | ||
Payments on long-term debt, including costs of debt reacquisition | 0 | 0 | ||
Proceeds from issuing shares under employee plans | 0 | 0 | ||
Excess tax benefit from share-based employee awards | 0 | |||
Employee taxes paid for shares withheld | 0 | 0 | ||
Payments for common shares repurchased | 0 | 0 | ||
Cash dividends paid to shareholders | 0 | 0 | ||
Advances from (to) consolidated subsidiaries | (119,981) | (133,077) | ||
Other | (1,101) | (92) | ||
Net cash used by financing activities | (121,082) | (133,169) | ||
Effect of exchange rate change on cash | 0 | 0 | ||
Net change in cash and cash equivalents | (38) | (3,001) | ||
Cash and cash equivalents, beginning of year | 940 | 4,342 | ||
Cash and cash equivalents, end of period | 902 | 1,341 | 902 | 1,341 |
Non-guarantor subsidiaries [Member] | ||||
Condensed Consolidating Statements of Cash Flows [Abstract} | ||||
Net cash provided by operating activities | 9,531 | 10,852 | ||
Cash flows from investing activities: | ||||
Purchases of capital assets | (1,975) | (2,138) | ||
Payments for acquisitions, net of cash acquired | 0 | 0 | ||
Proceeds from company-owned life insurance policies | 0 | 0 | ||
Other | 1,655 | 10 | ||
Net cash used by investing activities | (320) | (2,128) | ||
Cash flows from financing activities: | ||||
Proceeds from short-term borrowings | 0 | |||
Proceeds from issuing long-term debt | 0 | 0 | ||
Payments on long-term debt, including costs of debt reacquisition | (24) | (12) | ||
Proceeds from issuing shares under employee plans | 0 | 0 | ||
Excess tax benefit from share-based employee awards | 0 | |||
Employee taxes paid for shares withheld | 0 | 0 | ||
Payments for common shares repurchased | 0 | 0 | ||
Cash dividends paid to shareholders | 0 | 0 | ||
Advances from (to) consolidated subsidiaries | (1,672) | 199 | ||
Other | 0 | (150) | ||
Net cash used by financing activities | (1,696) | 37 | ||
Effect of exchange rate change on cash | 2,966 | (7,032) | ||
Net change in cash and cash equivalents | 10,481 | 1,729 | ||
Cash and cash equivalents, beginning of year | 56,422 | 52,193 | ||
Cash and cash equivalents, end of period | $ 66,903 | $ 53,922 | $ 66,903 | $ 53,922 |
Subsequent events (Details)
Subsequent events (Details) - USD ($) $ in Thousands | 1 Months Ended | 9 Months Ended | ||||
Nov. 30, 2016 | Oct. 31, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Nov. 15, 2016 | Dec. 31, 2015 | |
Subsequent events [Line Items] | ||||||
Payments for acquisitions, net of cash acquired | $ 64,637 | $ 50,933 | ||||
Fair value hedge related to long-term debt due in 2020 [Member] | ||||||
Subsequent events [Line Items] | ||||||
Derivative notional amount | $ 200,000 | $ 200,000 | ||||
Subsequent event [Member] | Data Support Systems, Inc. [Member] | ||||||
Subsequent events [Line Items] | ||||||
Payments for acquisitions, net of cash acquired | $ 21,000 | |||||
Subsequent event [Member] | Fair value hedge related to long-term debt due in 2020 [Member] | ||||||
Subsequent events [Line Items] | ||||||
Derivative notional amount | $ 200,000 | |||||
Subsequent event [Member] | Senior notes due 2020 [Member] | ||||||
Subsequent events [Line Items] | ||||||
Principal amount retired | $ 200,000 | |||||
Redemption price, percentage | 103.00% |