Exhibit 99.1
Harland News Release
PO Box 105250, Atlanta, GA 30348
(770) 981-9460
www.harland.net
For More Information, Contact:
Investors
Henry R. Bond
Vice President, Investor Relations & Treasurer
770-593-5697
hbond@harland.net
Media
John Pensec
Director of Corporate Communications
770-593-5443
jpensec@harland.net
HARLAND REPORTS THIRD QUARTER RESULTS
ATLANTA (October 29, 2003) - John H. Harland Company (NYSE: JH) today reported
results for the third quarter of 2003.
Consolidated sales for the third quarter were $192.5 million, a 1.5% increase
from the $189.6 million reported for the same period a year earlier.
Consolidated net income for the quarter was $14.7 million, down 8.1% from the
$16.0 million reported for the same period in 2002. The decrease in net income
was primarily attributable to declines in both volumes and pricing in the
company's Printed Products segment. Diluted earnings per share for the third
quarter of 2003 were $0.52 per share, compared to $0.53 for the third quarter of
2002. Earnings per share were favorably impacted in 2003 by a reduction in
weighted shares outstanding, which resulted from the company's repurchase of
shares over the past 12 months.
For the nine months ended September 26, 2003, consolidated sales were $578.3
million, 3.3% greater than the $559.7 million reported for the first nine months
of 2002. Consolidated net income for the nine-month period was $39.1 million, or
$1.38 per share, compared to $37.7 million, or $1.23 per share, for the same
period in 2002. Results for the 2002 period included charges equivalent to $0.15
per share related to accelerated vesting of certain restricted stock grants and
the write-down of an investment.
Segment Reporting
Harland reports results for three business segments: Printed Products, Software
and Services, and Scantron.
Sales for the third quarter from the company's Printed Products segment were
$118.4 million, down 8.2% from the $129.0 million reported for the same period a
year earlier. Segment income from Printed Products for the third quarter was
$17.0 million, a 21.0% decrease from 2002's third quarter segment income of
$21.6 million.
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Harland Reports Third Quarter Results
October 29, 2003
Page Two
"We recently announced a reorganization of our Printed Products business that
includes the consolidation of five of our production facilities and a reduction
in SG&A expenses," said Timothy C. Tuff, chairman and chief executive officer of
Harland. "The reorganization, which has been enabled by our new digital
technology and systems, will be completed in 2004. The reorganization had
minimal impact on third quarter results. We expect that, once fully implemented,
the reorganization will result in an annualized savings of approximately $20
million and the elimination of approximately 500 positions. These actions will
bring our production and support structures in line with our business levels."
Software and Services reported sales of $44.5 million for the third quarter, up
44.0% from the $30.9 million reported for the same period in 2002. The increase
in sales was primarily attributable to the company's acquisitions of INTERLINQ
Software Corporation; SPARAK Financial Systems, LLC; and Premier Systems, Inc.
Segment income for the third quarter decreased 27.1% to $2.9 million from the
$3.9 million reported for the same period in 2002.
"Our software bookings were strong in the quarter but much of the benefit of
these bookings will be reflected in future quarters," said Tuff. "Our backlog
grew 27.7% in the quarter to $91.1 million as a substantial portion of revenue
from these bookings is deferred into future periods. Segment income was
negatively impacted by the decision to delay the launch of our new mortgage
product to incorporate functionality requested by our beta customers."
Scantron reported sales of $30.1 million for the third quarter, down 0.4% from
2002 third quarter sales of $30.2 million. Segment income for the third quarter
decreased 18.7% to $7.6 million, compared with $9.4 million in the third quarter
of 2002.
"While we are seeing signs the economy is improving, this improvement is not
being felt in the education market, particularly in spending on new products,
and we have implemented appropriate cost reductions," said Tuff. "The lack of
spending impacted Scantron's results for the quarter. However, our traditional
testing forms business continues to perform well."
The company expects to report 2003 diluted earnings per share in the range of
$1.83 to $1.88. This range includes an estimate of $0.15 per share for exit
costs and severance related to the previously announced cost reduction actions
in the Printed Products segment.
"We believe the improved economy should help our financial software business in
particular as we move into 2004," said Tuff. "While we don't expect the checks
business or educational testing markets to change fundamentally, improved sales
execution and cost reduction actions taken should have a positive impact in 2004
and even more so in 2005."
Harland's board of directors declared a dividend of $0.10 per share, payable
November 28, 2003 to shareholders of record as of November 19, 2003.
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Harland Reports Third Quarter Results
October 29, 2003
Page Three
Harland will hold a conference call Thursday, October 30, 2003 at 10:00 a.m. EST
to discuss the results of the quarter and future outlook. Interested parties may
listen in by accessing a live webcast in the investor relations section of
Harland's website at http://www.harland.net. Additionally, the live conference
call may be accessed by calling 719-457-2665 and using the access code #338510.
A replay of the conference call will be available in the investor relations
section of Harland's website (http://www.harland.net) beginning approximately
two hours after the call and will remain available through November 13. The
rebroadcast will also be available until November 6, via telephone, by calling
719-457-0820 and using the access code #338510.
The company has posted quarterly segment information dating back to 2000. The
segment information can be found in the investor relations section of the
company's web site at http://www.harland.net.
###
About Harland
Atlanta-based John H. Harland Company (NYSE: JH) (http://www.harland.net) is a
leading provider of software and printed products to the financial and
educational markets. Harland Financial Solutions, Inc., a wholly owned
subsidiary (http://www.harlandfinancialsolutions.com), supplies software and
services, including customer relationship management, deposit and loan
origination, core systems and mortgage services to thousands of financial
institutions of all sizes. Harland's printed products offerings include checks,
direct marketing and financial forms. Scantron Corporation
(http://www.scantron.com), a wholly owned subsidiary, is a leading provider of
both paper and electronic-based services and systems for the collection,
management and interpretation of data to the financial, commercial and
educational markets.
RISK FACTORS AND CAUTIONARY STATEMENTS
This press release contains statements, which may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Those statements include statements regarding the intent, belief or
current expectations of John H. Harland Company and members of its management,
as well as the assumptions on which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties and that
the actual results may differ materially from those contemplated by such
forward-looking statements. Such differences could be material and adverse.
Many variables will impact the ability to achieve sales levels, improve service
quality, achieve production efficiencies and reduce expenses in Printed
Products. These include, but are not limited to, the continuing upgrade of our
customer care infrastructure and systems used in the Company's manufacturing,
sales, marketing, customer service and call center operations.
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Harland Reports Third Quarter Results
October 29, 2003
Page Four
Several factors outside the Company's control could negatively impact check
revenues. These include the continuing expansion of alternative payment systems
such as credit cards, debit cards and other forms of electronic commerce or
online payment systems. Check revenues may continue to be adversely affected by
continued consolidation of financial institutions, competitive check pricing
including up-front contract incentive payments, and the impact of governmental
laws and regulations. There can be no assurances that the Company will not lose
additional customers or that any such loss could be offset by the addition of
new customers.
While the Company believes substantial growth opportunities exist in the
Software and Services segment, there can be no assurances that the Company will
achieve its revenue or earnings growth targets. The Company believes there are
many risk factors inherent in its software business, including but not limited
to the retention of employee talent and customers. Also, variables exist in the
development of new software products, including the timing and costs of the
development effort, product performance, functionality, product acceptance,
competition, the Company's ability to integrate acquired companies, and general
changes in economic conditions or U.S. financial markets.
Several factors outside of the Company's control could affect results in the
Scantron segment. These include the rate of adoption of new electronic data
collection, testing and assessment methods, which could negatively impact
current forms, scanner sales and related service revenue. The Company continues
to develop products and services that it believes offer state-of-the-art
electronic data collection, testing and assessment solutions. However, variables
exist in the development of new testing methods and technologies, including the
timing and costs of the development effort, product performance, functionality,
market acceptance, adoption rates, competition, the Company's ability to
integrate acquired companies, and the funding of education at the federal, state
and local level, all of which could have an impact on the Company's business.
Reference should be made to the Risk Factors and Cautionary Statements section
of Harland's Form 10-K and Form 10-Q for additional information. Harland
undertakes no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
to future operating results.
John H. Harland Company
Financial Highlights
Condensed Statements of Income (Unaudited)
(in 000's)
Three Months ended
Sep 26, 2003 Sep 27, 2002 %
- ----------------------------------------------------------------------------
Sales $ 192,494 $ 189,636 1.5%
Cost of sales 98,177 98,452 -0.3%
Pct of Sales 51.0% 51.9%
---------- ----------
Gross profit 94,317 91,184 3.4%
Pct of Sales 49.0% 48.1%
Selling, general and administrative
expenses 69,753 62,646 11.3%
Pct of Sales 36.2% 33.0%
Amortization of intangibles 939 898 4.6%
Pct of Sales 0.5% 0.5%
---------- ----------
Operating Income 23,625 27,640 -14.5%
Pct of Sales 12.3% 14.6%
Other Income (Expense):
Interest expense (1,424) (1,504) -5.3%
Pct of Sales -0.7% -0.8%
Other - net 127 8
Pct of Sales 0.1% 0.0%
---------- ----------
Income before Income Taxes 22,328 26,144 -14.6%
Pct of Sales 11.6% 13.8%
Income taxes 7,633 10,152 -24.8%
Pct of Sales 4.0% 5.4%
---------- ----------
Net Income $ 14,695 $ 15,992 -8.1%
========== ==========
Pct of Sales 7.6% 8.4%
Earnings per Share
Basic $ 0.53 $ 0.55 -3.6%
Diluted $ 0.52 $ 0.53 -1.9%
Weighted Average Shares (000)
Basic 27,760 29,142 -4.7%
Diluted 28,488 29,960 -4.9%
Shares O/S at end of period (000) 28,048 29,381 -4.5%
Return on Equity 23.4% 27.1% -3.7 pct pts
Depreciation and Amortization (000) $ 15,711 $ 14,472 8.6%
Capital Expenditures (000) $ 6,820 $ 7,577 -10.0%
Number of Employees
(includes temporary employees) 5,070 5,145 -1.5%
Segment Information(1)
Printed Products
Sales $ 118,384 $ 129,019 -8.2%
Depreciation & Amortization $ 11,355 $ 10,439 8.8%
Segment Income(2) $ 17,042 $ 21,582 -21.0%
Software and Services
Sales $ 44,512 $ 30,903 44.0%
Depreciation & Amortization $ 3,168 $ 2,393 32.4%
Segment Income(2) $ 2,869 $ 3,937 -27.1%
Scantron
Sales $ 30,051 $ 30,158 -0.4%
Depreciation & Amortization $ 1,023 $ 792 29.2%
Segment Income(2) $ 7,628 $ 9,377 -18.7%
<FN>
Note: During the third quarter of 2003, the Company reclassified certain items
in its consolidated income statements. The reclassifications affected the
categories of Selling, General and Administrative expenses and Other Income
(Expense). The change primarily reflects the reclassification of gains and
losses on the sale of assets as well as certain other expenses from Other Income
(Expense) to Selling, General and Administrative expenses. During the second
quarter of 2003, the Company reclassified a business from Software and Services
to Printed Products and reclassified certain support activities from corporate
to Printed Products. Financial data for all periods presented have been restated
to reflect the impact of the reclassification. The reclassifications had no
impact on net income or shareholders' equity as previously reported.
(1) Segment information does not include eliminations related to intercompany
activity and does not include corporate expenses.
(2) Segment income (loss) is defined as income before income taxes.
</FN>
John H. Harland Company
Financial Highlights
Condensed Statements of Income (Unaudited)
(in 000's)
Nine Months ended
Sep 26, 2003 Sep 27, 2002 %
- -----------------------------------------------------------------------------
Sales $ 578,347 $ 559,694 3.3%
Cost of sales 296,697 297,528 -0.3%
Pct of Sales 51.3% 53.2%
---------- ----------
Gross profit 281,650 262,166 7.4%
Pct of Sales 48.7% 46.8%
Selling, general and administrative
expenses 213,640 193,314 10.5%
Pct of Sales 36.9% 34.5%
Amortization of intangibles 2,371 2,170 9.3%
Pct of Sales 0.4% 0.4%
---------- ----------
Operating Income 65,639 66,682 -1.6%
Pct of Sales 11.3% 11.9%
Other Income (Expense):
Interest expense (4,487) (4,780) -6.1%
Pct of Sales -0.8% -0.9%
Other - net 272 (114)
Pct of Sales 0.0% 0.0%
---------- ----------
Income before Income Taxes 61,424 61,788 -0.6%
Pct of Sales 10.6% 11.0%
Income taxes 22,300 24,086 -7.4%
Pct of Sales 3.9% 4.3%
---------- ----------
Net Income $ 39,124 $ 37,702 3.8%
========== ==========
Pct of Sales 6.8% 6.7%
Earnings per Share
Basic $ 1.41 $ 1.29 9.3%
Diluted $ 1.38 $ 1.23 12.2%
Weighted Average Shares (000)
Basic 27,747 29,274 -5.2%
Diluted 28,383 30,594 -7.2%
Shares O/S at end of period (000) 28,048 29,381 -4.5%
Return on Equity 21.2% 22.7% -1.5 pct pts
Depreciation and Amortization (000) $ 44,515 $ 42,151 5.6%
Capital Expenditures (000) $ 21,134 $ 26,304 -19.7%
Number of Employees
(includes temporary employees) 5,070 5,145 -1.5%
Segment Information(1)
Printed Products
Sales $ 369,366 $ 389,453 -5.2%
Depreciation & Amortization $ 31,853 $ 31,075 2.5%
Segment Income(2) $ 54,809 $ 62,637 -12.5%
Software and Services
Sales $ 126,743 $ 91,969 37.8%
Depreciation & Amortization $ 8,734 $ 6,959 25.5%
Segment Income(2) $ 10,745 $ 10,477 2.6%
Scantron
Sales $ 83,483 $ 79,649 4.8%
Depreciation & Amortization $ 3,014 $ 1,979 52.3%
Segment Income(2) $ 16,692 $ 22,750 -26.6%
<FN>
Note: During the third quarter of 2003, the Company reclassified certain items
in its consolidated income statements. The reclassifications affected the
categories of Selling, General and Administrative expenses and Other Income
(Expense). The change primarily reflects the reclassification of gains and
losses on the sale of assets as well as certain other expenses from Other Income
(Expense) to Selling, General and Administrative expenses. During the second
quarter of 2003, the Company reclassified a business from Software and Services
to Printed Products and reclassified certain support activities from corporate
to Printed Products. Financial data for all periods presented have been restated
to reflect the impact of the reclassification. The reclassifications had no
impact on net income or shareholders' equity as previously reported.
(1) Segment information does not include eliminations related to intercompany
activity and does not include corporate expenses.
(2) Segment income (loss) is defined as income before income taxes.
</FN>
John H. Harland Company
Financial Highlights
Condensed Balance Sheets (Unaudited)
(in 000's)
September 26, December 31,
2003 2002
- --------------------------------------------------------------------
Cash & Cash Equivalents $ 6,686 $ 19,218
Accounts Receivable - Net 64,461 58,871
Inventory 15,510 18,191
Deferred Income Taxes 27,800 26,977
Prepaid & Other 17,200 15,568
---------- ----------
Total Current Assets 131,657 138,825
Investments 5,145 3,917
Goodwill - Net 217,467 210,462
Intangibles - Net 17,756 14,127
Refundable Contract Payments 53,381 23,281
Other 22,239 25,860
Property, Plant and Equipment - Net 129,532 134,215
---------- ----------
Total Assets $ 577,177 $ 550,687
========== ==========
Accounts Payable $ 22,784 $ 22,599
Current Portion of Long-term Debt 140,075 83
Deferred Revenues 61,508 53,311
Accrued Liabilities:
Salaries, Wages and Employee Benefits 28,397 31,039
Taxes 18,857 18,817
Other 22,129 21,237
---------- ----------
Total Current Liabilities 293,750 147,086
Long-Term Debt 11 144,106
Other Liabilities 25,142 25,501
Shareholders' Equity 258,274 233,994
---------- ----------
Total Liabilities and Equity $ 577,177 $ 550,687
========== ==========
John H. Harland Company
Financial Highlights
Condensed Statements of Cash Flows (Unaudited)
(in 000's)
Nine Months ended
Sep 26, 2003 Sep 27, 2002
- -----------------------------------------------------------------------------
Operating Activities:
Net income $ 39,124 $ 37,702
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 44,515 42,151
Stock-based compensation 1,775 8,173
Gain on sale of assets (1,199) (96)
Tax benefits from stock-based compensation 1,306 2,758
Other (1,195) (44)
Changes in assets and liabilities (5,714) 13,112
Refundable contract payments (40,081) (5,956)
--------- ---------
Net cash provided by operating activities 38,531 97,800
--------- ---------
Investing Activities:
Purchases of property, plant and equipment (21,134) (26,304)
Payment of acquisition of businesses -
net of cash acquired (11,303) (71,475)
Other 4,308 1,438
--------- ---------
Net cash used in investing activities (28,129) (96,341)
--------- ---------
Financing Activities:
Purchases of treasury stock (19,138) (5,404)
Issuance of treasury stock 7,067 10,474
Long-term debt - net (4,103) 13,934
Other (6,760) (8,049)
--------- ---------
Net cash provided by (used in) financing
activities (22,934) 10,955
--------- ---------
Increase (decrease) in cash and cash equivalents (12,532) 12,414
Cash and cash equivalents at beginning of period 19,218 10,096
--------- ---------
Cash and cash equivalents at end of period $ 6,686 $ 22,510
========= =========