ATLANTA, July 28, 2004 (PRIMEZONE) -- John H. Harland Company (NYSE:JH) today reported results for the second quarter of 2004 and announced an increase in its quarterly dividend.
Consolidated net income for the quarter was $8.9 million, compared to $11.3 million for the second quarter of 2003. Diluted earnings per share for the quarter were $0.31, compared with $0.40 for the same period in 2003. Consolidated sales for the quarter were $193.0 million, up 0.3% from 2003 second quarter consolidated sales of $192.4 million.
The second quarter of 2004 included $6.0 million of pre-tax exit costs and severance charges related to the reorganization of the company's Printed Products segment, equivalent to $0.14 per share, and $1.3 million of pre-tax severance charges related to cost reduction initiatives in the company's Software and Services segment, equivalent to $0.03 per share.
"Results for the quarter were in line with our expectations," said Timothy C. Tuff, chairman and chief executive officer of Harland. "We continued to make progress in each of our segments. We were awarded a major check contract in Printed Products, we continued to grow Software and Services through internal development and acquisition, and announced five alliances in our testing and assessment business in Scantron."
For the six months ended June 25, 2004, consolidated sales were $383.6 million, down 0.6% from the $385.9 million reported for the same period a year earlier. Consolidated net income for the first six months of 2004 was $21.9 million, or $0.78 per diluted share, compared to $24.4 million, or $0.86 per diluted share for the same period in 2003. Results for the first six months of 2004 included pre-tax exit costs, severance charges and a gain on the sale of a facility in Printed Products that totaled to a net expense of $5.5 million, equivalent to $0.12 per share, as well as $1.3 million of pre-tax severance charges related to cost reduction initiatives in the company's Software and Services segment, equivalent to $0.03 per share.
Segment Reporting
Harland reports results for three business segments: Printed Products, Software and Services and Scantron.
Sales for the quarter from Harland's Printed Products segment were $118.2 million, a 4.0% decrease from the $123.1 million reported for the same period in 2003. Segment income from Printed Products was $10.7 million, a 36.9% decrease from $17.0 million in 2003. Exit costs and severance charges related to the reorganization of the segment totaled $6.0 million during the second quarter of 2004.
"Printed Products' plant consolidation program remains on track. In addition, we were awarded a significant new check contract in the second quarter," said Tuff. "While we won't see the revenue from this business until late in the fourth quarter, we believe it marks a major milestone in getting Printed Products back on a growth track. We now expect to see check volumes increasing on a year-over-year basis by year end."
Software and Services sales for the quarter were $47.7 million, a 12.8% increase from the $42.3 million reported for the same period in 2003. Segment income for the quarter was $3.6 million, a 1.3% increase from 2003.
"We continue to grow our software business through a combination of organic growth and acquisition," said Tuff. "Organic growth was 3.9% in the quarter, with the balance of the sales increase attributable primarily to an acquisition last year in our Core Systems business."
Scantron sales for the quarter were $27.8 million, up 1.4% from $27.4 million reported for the second quarter of 2003. Segment income was $7.5 million, a 43.7% increase from $5.2 million reported for the second quarter of 2003.
"The improvement in Scantron's segment income was due to cost reduction actions taken last year," said Tuff. "We announced a number of key alliances for our testing and assessment business in the quarter, which should further expand the market penetration for our newer technology products. We also saw a significant increase in survey services and won business from a number of new customers in our field services business."
Harland repurchased 577,800 shares of stock in the second quarter at an aggregate cost of $17.6 million, or $30.40 per share. There are approximately 1.9 million shares remaining available for purchase under the current Board authorization.
The company expects third quarter 2004 diluted earnings per share to be in the range of $0.47 to $0.52 per share, which includes an estimated $0.08 per share of exit costs and severance charges for its Printed Products and Software and Services segments. For the full year, the company reiterated that it expects earnings to be in the range of $1.94 to $1.99 per share, which includes an estimated $0.25 per share of exit costs and severance charges for its Printed Products and Software and Services segments.
Harland's board of directors declared a quarterly dividend of $0.125 per share, an increase of $0.025 per share from the prior quarter, payable August 31, 2004 to shareholders of record as of August 20, 2004.
Harland will hold a conference call Thursday, July 29, 2004 at 10:00 a.m. EDT to discuss the results of the quarter and future outlook. Interested parties may listen 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 719-457-2604 and using the access code #263665.
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 August 12. The rebroadcast will also be available until August 5, via telephone, by calling 719-457-0820 and using the access code #263665.
The company has posted quarterly segment information dating back to 2001. The segment information can be found in the investor relations section of the company's Web site at www.harland.net under News and Publications.
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, and the ongoing plant consolidation and relocation program.
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 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 - 2nd Quarter 2004
Condensed Statements of Income (Unaudited)
(in 000's)
Three Months ended
June 25, 2004 June 26, 2003 %
--------------------------------------------------------------
Sales $192,979 $192,428 0.3%
Cost of sales 100,770 98,927 1.9%
Pct of Sales 52.2% 51.4%
--------- ---------
Gross profit 92,209 93,501 -1.4%
Pct of Sales 47.8% 48.6%
Selling, general and
administrative
expenses 76,672 73,669 4.1%
Pct of Sales 39.7% 38.3%
Amortization of
intangibles 927 762 21.7%
Pct of Sales 0.5% 0.4%
--------- ---------
Operating Income 14,610 19,070 -23.4%
Pct of Sales 7.6% 9.9%
Other Income (Expense):
Interest expense (1,007) (1,505) -33.1%
Pct of Sales -0.5% -0.8%
Other - net 37 102 -63.7%
Pct of Sales 0.0% 0.1%
--------- ---------
Income before Income
Taxes 13,640 17,667 -22.8%
Pct of Sales 7.1% 9.2%
Income taxes 4,777 6,417 -25.6%
Pct of Sales 2.5% 3.3%
--------- ---------
Net Income $ 8,863 $ 11,250 -21.2%
========= =========
Pct of Sales 4.6% 5.8%
Effective Tax Rate 35.0% 36.3%
Earnings per Share
Basic $ 0.32 $ 0.41 -22.0%
Diluted $ 0.31 $ 0.40 -22.5%
Weighted Average Shares
(000)
Basic 27,397 27,607 -0.8%
Diluted 28,191 28,258 -0.2%
Shares O/S at end of
period (000) 27,716 27,949 -0.8%
Return on Equity 13.3% 19.1% -5.8 pct pts
Depreciation and
Amortization (000) $ 18,413 $ 14,537 26.7%
Capital Expenditures
(000) $ 7,356 $ 7,646 -3.8%
Number of Employees
(includes temporary
employees) 4,714 5,133 -8.2%
Segment Information
Printed Products
Sales $118,170 $123,088 -4.0%
Depreciation &
Amortization $ 14,067 $ 10,368 35.7%
Segment Income $ 10,719 $ 16,986 -36.9%
Software and Services
Sales $ 47,716 $ 42,291 12.8%
Depreciation &
Amortization $ 3,066 $ 2,816 8.9%
Segment Income $ 3,622 $ 3,577 1.3%
Scantron
Sales $ 27,797 $ 27,418 1.4%
Depreciation &
Amortization $ 1,109 $ 1,026 8.1%
Segment Income $ 7,499 $ 5,217 43.7%
Corporate and
Eliminations
Sales $ (704) $ (369) 90.8%
Depreciation &
Amortization $ 171 $ 327 -47.7%
Segment Income (Loss) $ (8,200) $ (8,113) -1.2%
Segment income (loss) is defined as income before income taxes.
John H. Harland Company
Financial Highlights - 2nd Quarter 2004
Condensed Statements of Income (Unaudited)
(in 000's)
Six Months ended
June 25, 2004 June 26, 2003 %
--------------------------------------------------------------
Sales $383,555 $385,853 -0.6%
Cost of sales 202,896 198,520 2.2%
Pct of Sales 52.9% 51.4%
--------- ---------
Gross profit 180,659 187,333 -3.6%
Pct of Sales 47.1% 48.6%
Selling, general and
administrative
expenses 142,359 143,887 -1.1%
Pct of Sales 37.1% 37.3%
Amortization of intangibles 1,834 1,432 28.1%
Pct of Sales 0.5% 0.4%
--------- ---------
Operating Income 36,466 42,014 -13.2%
Pct of Sales 9.5% 10.9%
Other Income (Expense):
Interest expense (2,131) (3,063) -30.4%
Pct of Sales -0.6% -0.8%
Other - net 190 145 31.0%
Pct of Sales 0.0% 0.0%
--------- ---------
Income before Income Taxes 34,525 39,096 -11.7%
Pct of Sales 9.0% 10.1%
Income taxes 12,609 14,667 -14.0%
Pct of Sales 3.3% 3.8%
--------- ---------
Net Income $ 21,916 $ 24,429 -10.3%
========= =========
Pct of Sales 5.7% 6.3%
Effective Tax Rate 36.5% 37.5%
Earnings per Share
Basic $ 0.80 $ 0.88 -9.1%
Diluted $ 0.78 $ 0.86 -9.3%
Weighted Average Shares (000)
Basic 27,417 27,740 -1.2%
Diluted 28,215 28,331 -0.4%
Shares O/S at end of
period (000) 27,716 27,949 -0.8%
Return on Equity 16.9% 20.5% -3.6 pct pts
Depreciation and
Amortization (000) $ 35,784 $ 28,804 24.2%
Capital Expenditures (000) $ 12,906 $ 14,314 -9.8%
Number of Employees
(includes temporary
employees) 4,714 5,133 -8.2%
Segment Information
Printed Products
Sales $238,589 $250,982 -4.9%
Depreciation & Amortization $ 27,155 $ 20,498 32.5%
Segment Income $ 28,511 $ 37,767 -24.5%
Software and Services
Sales $ 92,479 $ 82,231 12.5%
Depreciation & Amortization $ 6,124 $ 5,566 10.0%
Segment Income $ 7,633 $ 7,876 -3.1%
Scantron
Sales $ 53,710 $ 53,432 0.5%
Depreciation & Amortization $ 2,159 $ 1,991 8.4%
Segment Income $ 13,799 $ 9,064 52.2%
Corporate and Eliminations
Sales $ (1,223) $ (792) 54.4%
Depreciation & Amortization $ 346 $ 749 -53.8%
Segment Income (Loss) $(15,418) $(15,611) -1.2%
Segment income (loss) is defined as income before income taxes.
John H. Harland Company
Financial Highlights - 2nd Quarter 2004
Condensed Balance Sheets (Unaudited)
(in 000's)
June 25, December 31,
2004 2003
---------------------------------------------------------------------
Cash & Cash Equivalents $ 6,797 $ 8,525
Accounts Receivable - Net 61,384 60,338
Inventory 15,634 15,517
Deferred Income Taxes 19,627 32,517
Income Taxes Receivable 11,477 37
Prepaid & Other 21,617 18,412
---------- ----------
Total Current Assets 136,536 135,346
Goodwill - Net 223,328 217,749
Intangibles - Net 15,873 16,835
Refundable Contract Payments 58,169 52,933
Other 17,874 19,681
Property, Plant and Equipment - Net 110,335 124,433
---------- ----------
Total Assets $ 562,115 $ 566,977
========== ==========
Accounts Payable $ 28,087 $ 26,030
Deferred Revenues 60,705 57,745
Accrued Liabilities:
Salaries, Wages and Employee Benefits 24,974 30,376
Taxes 18,189 17,669
Other 27,486 29,602
---------- ----------
Total Current Liabilities 159,441 161,422
Long-Term Debt 110,092 122,059
Other Liabilities 28,627 28,053
Shareholders' Equity 263,955 255,443
---------- ----------
Total Liabilities and Equity $ 562,115 $ 566,977
========== ==========
John H. Harland Company
Financial Highlights - 2nd Quarter 2004
Condensed Statements of Cash Flows (Unaudited)
(in 000's)
Six Months ended
June 25, 2004 June 27, 2003
---------------------------------------------------------------------
Operating Activities:
Net income $ 21,916 $ 24,429
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 35,784 28,804
Stock-based compensation 1,629 1,203
Gain on sale of assets (3,549) (69)
Asset impairment charge 2,282 -
Tax benefits from stock-based
compensation 2,199 1,019
Deferred income taxes 12,495 (1,378)
Other 3,089 584
Changes in assets and liabilities (15,998) 852
Refundable contract payments (16,990) (20,922)
--------- ---------
Net cash provided by operating
activities 42,857 34,522
--------- ---------
Investing Activities:
Purchases of property, plant and
equipment (12,906) (14,314)
Proceeds from sale of property, plant
and equipment 5,493 198
Payments for acquisition of businesses,
net of cash acquired (5,867) (11,293)
Other (175) 1,190
--------- ---------
Net cash (used in) investing activities (13,455) (24,219)
--------- ---------
Financing Activities:
Purchases of treasury stock (20,738) (19,138)
Issuance of treasury stock 9,063 5,038
Long-term debt - net (12,034) (4,788)
Dividends paid (5,586) (4,211)
Other (1,835) 528
--------- ---------
Net cash (used in) financing activities (31,130) (22,571)
--------- ---------
Increase (decrease) in cash and cash
equivalents (1,728) (12,268)
Cash and cash equivalents at beginning
of period 8,525 19,218
--------- ---------
Cash and cash equivalents at end
of period $ 6,797 $ 6,950
========= =========