UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||
For the quarterly period ended | |||
[ ] | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________________________ to ________________________ | ||
Commission file number: 1-7945
DELUXE CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota (State or other jurisdiction of incorporation or organization) | 41-0216800 (I.R.S. Employer Identification No.) |
3680 Victoria St. N., Shoreview, Minnesota (Address of principal executive offices) | 55126-2966 (Zip Code) |
(651) 483-7111
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).
[X] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [X] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [ ] |
Emerging growth company [ ] | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
The number of shares outstanding of registrant’s common stock, par value $1.00 per share, at July 19, 2017 was 48,354,273 .
1
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.
DELUXE CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share par value)
(Unaudited)
June 30, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Trade accounts receivable (net of allowances for uncollectible accounts of $3,117 and $2,828, respectively) | ||||||||
Inventories and supplies | ||||||||
Funds held for customers | ||||||||
Other current assets | ||||||||
Total current assets | ||||||||
Deferred income taxes | ||||||||
Long-term investments (including $1,694 and $1,877 of investments at fair value, respectively) | ||||||||
Property, plant and equipment (net of accumulated depreciation of $353,035 and $349,249, respectively) | ||||||||
Assets held for sale | ||||||||
Intangibles (net of accumulated amortization of $481,703 and $435,756, respectively) | ||||||||
Goodwill | ||||||||
Other non-current assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued liabilities | ||||||||
Long-term debt due within one year | ||||||||
Total current liabilities | ||||||||
Long-term debt | ||||||||
Deferred income taxes | ||||||||
Other non-current liabilities | ||||||||
Commitments and contingencies (Notes 10 and 11) | ||||||||
Shareholders' equity: | ||||||||
Common shares $1 par value (authorized: 500,000 shares; outstanding: June 30, 2017 – 48,351; December 31, 2016 – 48,546) | ||||||||
Retained earnings | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Total shareholders’ equity | ||||||||
Total liabilities and shareholders’ equity | $ | $ | ||||||
See Condensed Notes to Unaudited Consolidated Financial Statements
2
DELUXE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share amounts)
(Unaudited)
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Product revenue | $ | $ | $ | $ | ||||||||||||
Service revenue | ||||||||||||||||
Total revenue | ||||||||||||||||
Cost of products | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Cost of services | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total cost of revenue | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Gross profit | ||||||||||||||||
Selling, general and administrative expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net restructuring charges | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Asset impairment charges | ( | ) | ( | ) | ||||||||||||
Operating income | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other income | ||||||||||||||||
Income before income taxes | ||||||||||||||||
Income tax provision | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Comprehensive income | $ | $ | $ | $ | ||||||||||||
Basic earnings per share | ||||||||||||||||
Diluted earnings per share | ||||||||||||||||
Cash dividends per share | ||||||||||||||||
See Condensed Notes to Unaudited Consolidated Financial Statements
3
DELUXE CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
(Unaudited)
Common shares | Common shares par value | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Total | ||||||||||||||||||
Balance, December 31, 2016 | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
Net income | — | ||||||||||||||||||||||
Cash dividends | — | ( | ) | ( | ) | ||||||||||||||||||
Common shares issued | |||||||||||||||||||||||
Common shares repurchased | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||
Other common shares retired | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||
Fair value of share-based compensation | — | ||||||||||||||||||||||
Other comprehensive income | — | ||||||||||||||||||||||
Balance, June 30, 2017 | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
See Condensed Notes to Unaudited Consolidated Financial Statements
4
DELUXE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended June 30, | ||||||||||
2017 | 2016 | |||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | $ | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation | ||||||||||
Amortization of intangibles | ||||||||||
Asset impairment charges | ||||||||||
Amortization of contract acquisition costs | ||||||||||
Deferred income taxes | ( | ) | ( | ) | ||||||
Employee share-based compensation expense | ||||||||||
Other non-cash items, net | ( | ) | ||||||||
Changes in assets and liabilities, net of effect of acquisitions: | ||||||||||
Trade accounts receivable | ||||||||||
Inventories and supplies | ||||||||||
Other current assets | ( | ) | ||||||||
Non-current assets | ( | ) | ( | ) | ||||||
Accounts payable | ( | ) | ( | ) | ||||||
Contract acquisition payments | ( | ) | ( | ) | ||||||
Other accrued and non-current liabilities | ( | ) | ( | ) | ||||||
Net cash provided by operating activities | ||||||||||
Cash flows from investing activities: | ||||||||||
Purchases of capital assets | ( | ) | ( | ) | ||||||
Payments for acquisitions, net of cash acquired | ( | ) | ( | ) | ||||||
Proceeds from sales of marketable securities | ||||||||||
Proceeds from company-owned life insurance policies | ||||||||||
Other | ||||||||||
Net cash used by investing activities | ( | ) | ( | ) | ||||||
Cash flows from financing activities: | ||||||||||
Proceeds from issuing long-term debt | ||||||||||
Payments on long-term debt | ( | ) | ( | ) | ||||||
Proceeds from issuing shares under employee plans | ||||||||||
Employee taxes paid for shares withheld | ( | ) | ( | ) | ||||||
Payments for common shares repurchased | ( | ) | ( | ) | ||||||
Cash dividends paid to shareholders | ( | ) | ( | ) | ||||||
Other | ( | ) | ( | ) | ||||||
Net cash used by financing activities | ( | ) | ( | ) | ||||||
Effect of exchange rate change on cash | ||||||||||
Net change in cash and cash equivalents | ( | ) | ||||||||
Cash and cash equivalents, beginning of year | ||||||||||
Cash and cash equivalents, end of period | $ | $ | ||||||||
See Condensed Notes to Unaudited Consolidated Financial Statements
5
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 1: Consolidated financial statements
The consolidated balance sheet as of June 30, 2017, the consolidated statements of comprehensive income for the quarters and six months ended June 30, 2017 and 2016, the consolidated statement of shareholders’ equity for the six months ended June 30, 2017, and the consolidated statements of cash flows for the six months ended June 30, 2017 and 2016 are unaudited. The consolidated balance sheet as of December 31, 2016 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, 2016 (the “2016 Form 10-K”).
Note 2: New accounting pronouncements
Recently adopted accounting pronouncements – In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-04, Simplifying the Test for Goodwill Impairment. The standard removes Step 2 of the goodwill impairment test, which requires a company to perform procedures to determine the fair value of a reporting unit's assets and liabilities following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, a goodwill impairment charge will now be measured as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We elected to early adopt this standard on January 1, 2017. As we have not been required to complete Step 2 of the goodwill impairment test for several years, we do not anticipate that this standard will have an 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. 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. The new guidance is effective for us on January 1, 2018. We are currently in the process of analyzing each of our revenue streams in accordance with the new guidance. We have completed the evaluation of our Direct Checks revenue streams and we do not expect the application of these standards to those revenue streams to have a material impact on our results of operations or financial position. We continue to make progress in our evaluation of the impact of the new standards on our Small Business Services and Financial Services revenue streams. We currently anticipate that we will adopt the standards using the modified retrospective method. This method requires the standard to be applied to existing and future contracts as of the effective date, with an adjustment to opening retained earnings in the year of adoption for the cumulative effect of the change. In addition, we will disclose the amount by which each financial statement line item is affected in the current reporting period by the application of the new guidance as compared with the guidance that was in effect before the change.
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.
6
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
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.
In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory. The standard requires recognition of the tax effects resulting from the intercompany sale of an asset when the transfer occurs. Previously, the tax effects were deferred until the transferred asset was sold to a third party. The guidance is effective for us on January 1, 2018 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.
In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business. The standard revises the
definition of a business, which affects many areas of accounting such as business combinations and disposals and goodwill impairment. The revised definition of a business will likely result in more acquisitions being accounted for as asset acquisitions, as opposed to business combinations. The guidance is effective for us on January 1, 2018 and is required to be applied prospectively to transactions occurring on or after the effective date.
In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The standard requires that the service cost component of net periodic benefit expense be recognized in the same statement of comprehensive income caption(s) as other compensation costs, and requires that the other components of net periodic benefit expense be recognized in the non-operating section of the statement of comprehensive income. In addition, only the service cost component of net periodic benefit expense is eligible for capitalization when applicable. The guidance is effective for us on January 1, 2018. The reclassification of the other components of net periodic benefit expense will be applied on a retrospective basis. As we will use the practical expedient for adoption outlined in the standard, annual net periodic benefit income of $2,016 for 2017, $1,841 for 2016 and $2,697 for 2015 will be reclassified from total cost of revenue and selling, general and administrative (SG&A) expense to other income in our consolidated statements of comprehensive income. This represents the entire amount of our net periodic benefit income as there is no service cost associated with our plans. The guidance allowing only the service cost component of net periodic benefit expense to be capitalized will be adopted on a prospective basis, and we do not expect this change to have a significant impact on our results of operations or financial position.
In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting. The standard provides guidance about which changes to the terms or conditions of a share-based payment award require modification accounting, which may result in a different fair value for the award. The guidance is effective for us on January 1, 2018 and is required to be applied prospectively to awards modified on or after the effective date. Historically, modifications to our share-based payment awards have been rare. As such, we do not expect the application of this standard to have a significant impact on our results of operations or financial position.
7
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 3: Supplemental balance sheet information
(in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Raw materials | $ | $ | ||||||
Semi-finished goods | ||||||||
Finished goods | ||||||||
Supplies | ||||||||
Inventories and supplies | $ | $ | ||||||
June 30, 2017 | ||||||||||||||||
(in thousands) | Cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||
Funds held for customers:(1) | ||||||||||||||||
Domestic money market fund | $ | $ | $ | $ | ||||||||||||
Canadian and provincial government securities | ( | ) | ||||||||||||||
Canadian guaranteed investment certificates | ||||||||||||||||
Available-for-sale securities | $ | $ | $ | ( | ) | $ | ||||||||||
(1) Funds held for customers, as reported on the consolidated balance sheet as of June 30, 2017, also included cash of $63,699 .
December 31, 2016 | ||||||||||||||||
(in thousands) | Cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||
Funds held for customers:(1) | ||||||||||||||||
Domestic money market fund | $ | $ | $ | $ | ||||||||||||
Canadian and provincial government securities | ( | ) | ||||||||||||||
Canadian guaranteed investment certificates | ||||||||||||||||
Available-for-sale securities | $ | $ | $ | ( | ) | $ | ||||||||||
(in thousands) | Fair value | |||
Due in one year or less | $ | |||
Due in two to five years | ||||
Due in six to ten years | ||||
Available-for-sale securities | $ | |||
Further information regarding the fair value of available-for-sale securities can be found in Note 7.
Assets held for sale – Assets held for sale as of June 30, 2017 included the operations of a small business distributor, as well as assets associated with certain custom printing activities. Assets held for sale as of December 31, 2016 included the operations of a small business distributor that was sold during the second quarter of 2017 and a provider of printed and
8
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
promotional products that was sold during the first quarter of 2017. Also during the first quarter of 2017, we sold the operations of an additional small business distributor that previously did not meet the requirements to be reported as assets held for sale in the consolidated balance sheets. We determined that these businesses would be better positioned for long-term growth if they were managed independently. Subsequent to the sales, these businesses are owned by independent distributors that are part of our Safeguard® distributor network. As such, our revenue is not impacted by these sales and the impact to our costs is not significant. We entered into aggregate notes receivable of $20,435 in conjunction with these sales (non-cash investing activity) and we recognized an aggregate net gain of $6,779 , which is included in SG&A expense in the consolidated statement of comprehensive income for the six months ended June 30, 2017.
The businesses sold during the first half of 2017, as well as those held for sale as of June 30, 2017, were included in our Small Business Services segment and their net assets consisted primarily of intangible assets. During the first quarter of 2017, we recorded a pre-tax asset impairment charge of $5,296 related to one of the sold small business distributors. This impairment charge reduced the carrying value of the business to its estimated fair value less costs to sell, based on on-going negotiations for the sale of the business, including multiple offers. During the second quarter of 2017, we recorded an additional pre-tax asset impairment charge of $2,954 as we finalized the sale of this business.
We are actively marketing the remaining assets held for sale and we expect the selling prices will equal or exceed their current carrying values. Net assets held for sale consisted of the following:
(in thousands) | June 30, 2017 | December 31, 2016 | Balance sheet caption | |||||||
Current assets | $ | $ | Other current assets | |||||||
Intangibles | Assets held for sale | |||||||||
Goodwill | Assets held for sale | |||||||||
Other non-current assets | Assets held for sale | |||||||||
Accrued liabilities | ( | ) | Accrued liabilities | |||||||
Deferred income tax liabilities | ( | ) | Other non-current liabilities | |||||||
Net assets held for sale | $ | $ | ||||||||
June 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
(in thousands) | Gross carrying amount | Accumulated amortization | Net carrying amount | Gross carrying amount | Accumulated amortization | Net carrying amount | ||||||||||||||||||
Indefinite-lived intangibles: | ||||||||||||||||||||||||
Trade name | $ | $ | — | $ | $ | $ | — | $ | ||||||||||||||||
Amortizable intangibles: | ||||||||||||||||||||||||
Internal-use software | ( | ) | ( | ) | ||||||||||||||||||||
Customer lists/relationships | ( | ) | ( | ) | ||||||||||||||||||||
Trade names | ( | ) | ( | ) | ||||||||||||||||||||
Software to be sold | ( | ) | ( | ) | ||||||||||||||||||||
Technology-based intangibles | ( | ) | ||||||||||||||||||||||
Other | ( | ) | ( | ) | ||||||||||||||||||||
Amortizable intangibles | ( | ) | ( | ) | ||||||||||||||||||||
Intangibles | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
9
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Amortization of intangibles was $26,273 for the quarter ended June 30, 2017, $18,943 for the quarter ended June 30, 2016, $51,828 for the six months ended June 30, 2017 and $37,091 for the six months ended June 30, 2016. Based on the intangibles in service as of June 30, 2017, estimated future amortization expense is as follows:
(in thousands) | Estimated amortization expense | |||
Remainder of 2017 | $ | |||
2018 | ||||
2019 | ||||
2020 | ||||
2021 | ||||
During the six months ended June 30, 2017, 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 six months ended June 30, 2017:
(in thousands) | Amount | Weighted-average amortization period (in years) | ||||
Internal-use software | $ | |||||
Customer lists/relationships | ||||||
Software to be sold | ||||||
Technology-based intangibles | ||||||
Acquired intangibles | $ | |||||
Information regarding acquired intangibles does not include adjustments recorded during the six months ended June 30, 2017 for changes in the estimated fair values of intangibles acquired during 2016 through acquisitions. Information regarding these adjustments can be found in Note 6.
(in thousands) | Small Business Services | Financial Services | Direct Checks | Total | ||||||||||||
Balance, December 31, 2016: | ||||||||||||||||
Goodwill, gross | $ | $ | $ | $ | ||||||||||||
Accumulated impairment charges | ( | ) | ( | ) | ||||||||||||
Goodwill, net of accumulated impairment charges | ||||||||||||||||
Goodwill resulting from acquisitions | — | |||||||||||||||
Measurement-period adjustments for previous acquisitions (Note 6) | ( | ) | — | ( | ) | |||||||||||
Sale of small business distributor | ( | ) | — | — | ( | ) | ||||||||||
Reclassification to assets held for sale | ( | ) | — | — | ( | ) | ||||||||||
Currency translation adjustment | — | — | ||||||||||||||
Balance, June 30, 2017: | ||||||||||||||||
Goodwill, gross | ||||||||||||||||
Accumulated impairment charges | ( | ) | ( | ) | ||||||||||||
Goodwill, net of accumulated impairment charges | $ | $ | $ | $ | ||||||||||||
10
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Contract acquisition costs | $ | $ | ||||||
Loans and notes receivable from Safeguard distributors | ||||||||
Postretirement benefit plan asset | ||||||||
Deferred advertising costs | ||||||||
Other | ||||||||
Other non-current assets | $ | $ | ||||||
Six Months Ended June 30, | ||||||||
(in thousands) | 2017 | 2016 | ||||||
Balance, beginning of year | $ | $ | ||||||
Additions(1) | ||||||||
Amortization | ( | ) | ( | ) | ||||
Other | ( | ) | ( | ) | ||||
Balance, end of period | $ | $ | ||||||
(1) Contract acquisition costs are accrued upon contract execution. Cash payments made for contract acquisition costs were $10,937 for the six months ended June 30, 2017 and $14,341 for the six months ended June 30, 2016 .
(in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Funds held for customers | $ | $ | ||||||
Deferred revenue | ||||||||
Acquisition-related liabilities(1) | ||||||||
Income tax | ||||||||
Employee profit sharing/cash bonus | ||||||||
Wages, including vacation | ||||||||
Customer rebates | ||||||||
Contract acquisition costs due within one year | ||||||||
Restructuring due within one year (Note 8) | ||||||||
Other | ||||||||
Accrued liabilities | $ | $ | ||||||
(1) Consists of holdback payments due at future dates and liabilities for contingent consideration. Further information regarding liabilities for contingent consideration can be found in Note 7.
11
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Contract acquisition costs | $ | $ | ||||||
Acquisition-related liabilities(1) | ||||||||
Other | ||||||||
Other non-current liabilities | $ | $ | ||||||
Note 4: Earnings per share
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands, except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Earnings per share – basic: | ||||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Income allocated to participating securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income available to common shareholders | $ | $ | $ | $ | ||||||||||||
Weighted-average shares outstanding | ||||||||||||||||
Earnings per share – basic | $ | $ | $ | $ | ||||||||||||
Earnings per share – diluted: | ||||||||||||||||
Net income | $ | $ | $ | $ | ||||||||||||
Income allocated to participating securities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Re-measurement of share-based awards classified as liabilities | ( | ) | ( | ) | ||||||||||||
Income available to common shareholders | $ | $ | $ | $ | ||||||||||||
Weighted-average shares outstanding | ||||||||||||||||
Dilutive impact of potential common shares | ||||||||||||||||
Weighted-average shares and potential common shares outstanding | ||||||||||||||||
Earnings per share – diluted | $ | $ | $ | $ | ||||||||||||
Antidilutive options excluded from calculation | ||||||||||||||||
12
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 5: Other comprehensive income
Accumulated other comprehensive loss components | Amounts reclassified from accumulated other comprehensive loss | Affected line item in consolidated statements of comprehensive income | ||||||||||||||||
Quarter Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||
Amortization of postretirement benefit plan items: | ||||||||||||||||||
Prior service credit | $ | $ | (1) | |||||||||||||||
Net actuarial loss | ( | ) | ( | ) | ( | ) | ( | ) | (1) | |||||||||
Total amortization | ( | ) | ( | ) | ( | ) | ( | ) | (1) | |||||||||
Tax benefit | (1) | |||||||||||||||||
Total reclassifications, net of tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
(1) Amortization of postretirement benefit plan items is included in the computation of net periodic benefit income as presented in Note 9. Net periodic benefit income is included in cost of revenue and SG&A expense in the consolidated statements of comprehensive income, based on the composition of our workforce. A portion of net periodic benefit income is capitalized as a component of labor costs and is included in inventories and intangibles in our consolidated balance sheets.
(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, 2016 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Other comprehensive (loss) income before reclassifications | ( | ) | ||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | ||||||||||||||||
Net current-period other comprehensive income (loss) | ( | ) | ||||||||||||||
Balance, June 30, 2017 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
13
DELUXE CORPORATION
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
Note 6: Acquisitions
We periodically complete business combinations that align with our business strategy. The assets and liabiliti