Harland Reports Third Quarter Results ATLANTA, Oct. 29
/PRNewswire-FirstCall/ -- John H. Harland Company 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. "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. 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. 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(A) Printed Products Sales $ 118,384 $ 129,019 -8.2%
Depreciation & Amortization $ 11,355 $ 10,439 8.8% Segment
Income(B) $ 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(B) $ 2,869 $ 3,937 -27.1% Scantron Sales
$ 30,051 $ 30,158 -0.4% Depreciation & Amortization $ 1,023 $
792 29.2% Segment Income(B) $ 7,628 $ 9,377 -18.7% 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. (A) Segment
information does not include eliminations related to intercompany
activity and does not include corporate expenses. (B) Segment
income (loss) is defined as income before income taxes. 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(A) Printed Products Sales $ 369,366 $ 389,453 -5.2%
Depreciation & Amortization $ 31,853 $ 31,075 2.5% Segment
Income(B) $ 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(B) $ 10,745 $ 10,477 2.6% Scantron Sales
$ 83,483 $ 79,649 4.8% Depreciation & Amortization $ 3,014 $
1,979 52.3% Segment Income(B) $ 16,692 $ 22,750 -26.6% 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. (A) Segment
information does not include eliminations related to intercompany
activity and does not include corporate expenses. (B) Segment
income (loss) is defined as income before income taxes. 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 ========= =========
DATASOURCE: John H. Harland Company CONTACT: Investors, Henry R.
Bond, Vice President, Investor Relations & Treasurer,
+1-770-593-5697, or , or Media, John Pensec, Director of Corporate
Communications, +1-770-593-5443, or , both of John H. Harland
Company Web site: http://www.harland.net/
http://www.harlandfinancialsolutions.com/ http://www.scantron.com/
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