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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
(Mark One)
|x| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993 or
| | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________________________ to _______________
Commission file number 1-6352
John H. Harland Company
(Exact name of registrant as specified in its charter)
Georgia 58-0278260
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2939 Miller Road, Decatur, Georgia 30035
(Address of principal executive offices) (Zip Code)
(404) 981-9460
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------------- -----------------------------------------
Common Stock $1 par value New York Stock Exchange
Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports re-
quired 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. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. (X)
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of the close of business on March 15, 1994 was $684,127,134.
The number of shares of the Registrant's Common Stock outstanding on March
15, 1994 was 30,485,953.
A portion of the Registrant's Definitive Proxy Statement dated March 17, 1994
is incorporated by reference in Part III hereof.
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John H. Harland Company and Subsidiaries
Index to Annual Report on Form 10-K
Page
Part I
Item 1: Business 3
Item 2: Properties 6
Item 3: Legal Proceedings 7
Item 4: Submission of Matters to a Vote of Security Holders 7
Item X: Executive Officers of the Registrant 7
Part II
Item 5: Market for the Registrant's Common Equity and
Related Stockholder Matters 8
Item 6: Selected Financial Data 8
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 8: Financial Statements and Supplementary Data 8
Item 9: Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 9
PART III
Item 10: Directors and Executive Officers of the Registrant 9
Item 11: Executive Compensation 9
Item 12: Security Ownership of Certain Beneficial Owners
and Management 9
Item 13: Certain Relationships and Related Transactions 9
PART IV
Item 14: Exhibits, Financial Statement Schedules and
Reports on Form 8-K 9
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PART I
ITEM 1. BUSINESS
GENERAL
John H. Harland Company (the "Company" or the "Registrant") was founded in
1923 as a general printer and lithographer. Today, the Company is a leading
printer and supplier of checks, business documents and forms to the financial
industry. The Company also designs and produces optical mark reading ("OMR")
and optical character recognition ("OCR") forms and equipment for use in
educational and commercial markets. The Company, a Georgia corporation, is
headquartered in Atlanta, Georgia and operates primarily in the printing
industry. In addition, the Company operates one major subsidiary, Scantron
Corporation ("Scantron").
Scantron produces and provides OMR equipment and scannable forms to the
educational and commercial markets. Scantron is a Delaware corporation based
in Tustin, California. In November 1991, Scantron acquired the remaining 50%
of Datascan, its European partner in OMR/OCR machine development and
distribution, for $3 million. In September 1993, Scantron acquired Economics
Research, Inc. ("ERI"), a software company based in Costa Mesa, California.
ERI provides test development, scoring, analysis and grade management
products for educational markets.
In February 1992, the Company acquired the net assets of Interchecks Inc.
("Interchecks"), a Seattle, Washington-based check printer for $50 million in
cash. Interchecks was purchased from the United Kingdom company Bowater plc
through its United States subsidiary Rexham Inc. On January 1, 1993, the
Company acquired substantially all the net assets of Rocky Mountain Bank Note
Company ("RMBN"), a Lakewood, Colorado-based check printer, for $37.9 million
in cash. A portion of the consideration was financed through borrowings under
the Company's unsecured line of credit and the balance was paid in cash. RMBN
assets were purchased from ROMO Corp., the sole shareholder of RMBN.
In October 1993, the Company announced the formation of a new subsidiary,
The Check Store, Inc. ("The Check Store"), which will market checks and
related products directly to consumers. The Check Store will become
operational during the first half of 1994.
On January 7, 1994, the Company acquired Marketing Profiles, Inc. ("MPI").
MPI is based in Maitland, Florida and is a database marketing and consulting
company which provides software products and related marketing services to
the financial industry. On March 24, 1994, the Company announced that it had
signed a definitive agreement to purchase the net assets of FormAtion
Technologies, Inc.("FTI"). FTI develops, markets and supports lending and
platform automation software for the financial services industry. The FTI
acquisition is expected to be completed by March 31, 1994. Both the MPI and
FTI transactions were for cash amounts which are not considered material.
During 1993, the Company developed three strategic alliances with
independent companies to provide its financial industry customers with
additional services and products. Through its alliance with TeleCheck
Services, Inc., the nation's leading provider of check authorization and
related guarantee services, the Company addresses security and fraud concerns
of financial institutions. Through Cardpro Services, Inc., a nationwide
provider of magnetic stripe cards, the Company provides full-service plastic
card programs for financial institutions. Through its alliance with
Bottomline Technologies, Inc. , a leader in desktop printing of magnetic ink
character recognition ("MICR") readable documents, the Company offers point
of service production capabilities of MICR readable documents.
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DESCRIPTION OF BUSINESS UNITS
Overview
In 1993, the Company operated under two business units, the Financial
Services Group ("FSG") and the Data Services Group ("DSG"). Both units oper-
ate primarily within the printing industry segment. FSG provides financial
documents to support America's payment systems. DSG's principal operation is
the production of data collection forms which are used in conjunction with
form reading equipment.
Approximately 95% of the Company's consolidated revenues during the three
years ended December 31, 1993, 1992 and 1991, respectively, were from sales
of checks and related items, business documents, and scannable forms.
Approximately 5% of the Company's consolidated revenues during the periods
were from sales of scanning equipment and revenues from other areas.
Financial Services Group
FSG includes the Company's check printing operations and specialty
printing operations. FSG's principal products consist of MICR encoded checks,
deposit tickets and related forms for financial institutions and their
customers. The product line consists of a number of different styles of
checks including scenic checks, which incorporate multi-colored backgrounds,
personal and business three-to-the-page checks and carbonized payroll,
voucher, window, and computer generated checks (includes continuous form
checks and checks produced with laser printers). In 1993, FSG's overall
prices of its checks and related products remained essentially unchanged from
1992 due to competitive conditions in the check printing industry.
FSG, through its specialty print operations, also produces a number of
printed or lithographed custom printed packages, forms, business products and
computer-related documents for sale to financial institutions and other
commercial establishments. Such custom printed items include specially
designed checks and deposit tickets printed with a customer's individual
design, magnetically encoded internal control documents and carbon-
interleaved forms.
FSG's documents are printed on stock lithographed in its 7 base stock
plants and at its specialty printing plant. FSG imprints checks and related
product documents at its 50 check printing facilities located in 33 states
and 1 plant in Puerto Rico. All of these plants are devoted exclusively to
printing checks, deposit tickets and related forms.
FSG's products are marketed across the United States and in Puerto Rico
through a sales force of approximately 360 personnel. FSG's sales
organization is organized by customer type through three distinct sales
support units, Primary, National and Business Services. The Primary sales
unit, consisting of approximately 280 sales representatives, serves community
based financial institutions. The National Accounts sales unit of 70 sales
representatives serves the top 400 financial institutions in the country. The
Business Services unit, consisting of approximately 10 representatives,
serves selected retail markets such as superstores, software companies and
catalog merchandisers. The primary responsibility of the sales force is to
consult with customers regarding their needs and provide solutions to meet
those needs. FSG also uses catalogs, brochures and similar sales aides to
present solutions to customers.
Data Services Group
The DSG provides creative data collection and management solutions for its
customers. Data collection represents diverse technologies with similar
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objectives -- converting information into a computer-compatible format, then
providing information that can be used for a specific function. DSG
concentrates on the production and distribution of OMR, OCR and imaging forms
and systems within the data collection market. DSG's principal products are
scanning equipment and the scannable forms used in conjunction with the
equipment. DSG also offers maintenance services for the scanning machines and
software products related to data collection and analysis activities.
DSG forms and equipment are used as a solution for capturing, tabulating
and analyzing data. DSG's primary market is the educational field for test
scoring and grade reporting. Within the commercial sector, DSG equipment and
forms are used to collect and analyze survey responses, inventory informa-
tion, employee evaluations, order information and other forms of data collec-
tion and analysis.
The products are marketed primarily through 193 sales and service
representatives located in 49 locations throughout the United States and 2
locations in Canada. Representatives sell and place new equipment and provide
ongoing assistance, such as machine servicing and development of new forms.
DSG's products are also marketed in certain foreign countries through
distributorships.
Other Information Relating to Business of the Company
Seasonal Business
There is a seasonal nature to DSG's business in the educational market,
but it does not significantly affect the Company's consolidated results.
Patent, Trademarks, Licenses, Franchises and Concessions
On February 4, 1992, the Company received a patent on a Scannable Form and
System developed by Scantron. This patent expires February 4, 2009. Also,
the Company has trademarks on names of several of its products and services.
The Company believes these patents and trademarks impact business, however,
it does not consider any of them to be critical to its operation.
Competition
Financial Services Group -- At the present time, there are a number of
domestic companies specializing in the production of MICR encoded checks and
related items similar to those produced by the Company. The Company believes
that the primary competitive factors considered by customers are printing
accuracy, service capabilities, price and the availability of a complete
product line. The Company compares favorably with its competitors with regard
to these above mentioned factors. Although complete statistics on check
production are not available, the Company believes it is among the largest
printers of MICR encoded personalized checks in the United States. One other
printer has substantially greater sales and financial resources than the
Company.
Technological advancements in electronics have created possible
alternatives to the check as a medium of transferring funds. While electronic
funds transfer has gained acceptance for some applications, it has had
minimal acceptance by consumers as a mode of personal payment. At this time,
the Company cannot determine or predict what effect this technology may
eventually have on the check printing business.
Data Services Group -- The data collection market is a highly fragmented
industry, with many large and small competitors, and is growing at
approximately 15% annually. DSG products are sold mainly in the United States
with minor sales activity in Puerto Rico, Canada, Europe, the Middle East and
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the Far East. Scannable forms are produced by commercial and specialized
forms printers throughout the United States. DSG has attempted to identify
and develop specialized products for niche markets. DSG believes it is the
leading provider of OMR stand-alone equipment to the educational market in
the United States. In Canada, one competitor has substantially larger sales.
The loss of any one customer in the FSG or DSG would not have a material
adverse effect on the Company.
Raw Materials
The Company purchases its principal raw materials (safety paper, form
paper and MICR bond) from several large domestic manufacturers. Past
conditions in the paper market have resulted in temporary increases in paper
prices and required advanced scheduling of paper deliveries. However, raw
materials have traditionally been readily available, and the Company has
never experienced a paper shortage.
The Company purchases other raw materials, such as vinyl (used in the
production of check book covers), inks, checkboards, packaging materials and
miscellaneous paper from a number of suppliers.
The components used in the assembly and manufacturing of the OMR equipment
are purchased from equipment manufacturers, supply firms and others. The
Company has no reason to believe that it cannot continue to obtain such
materials or suitable substitutes for its operation. The Company has no long-
term contracts with any of its raw material suppliers.
Number of Employees
As of December 31, 1993, the Company and its subsidiaries employed ap-
proximately 7,300 people (includes 649 temporary employees).
ITEM 2. PROPERTIES
As of December 31, 1993, the Company and its subsidiaries owned 49
facilities located in 30 states of which all but 2 facilities were production
and service facilities. Approximate square footage of owned facilities to-
taled 2,000,000 square feet. The Company leases approximately 591,000 square
feet in 22 facilities for printing and/or warehouse activities. The leased
facilities are located in 14 states and Puerto Rico.
Printing production locations:
Alburqueque, NM Miami (Sunrise), FL
Atlanta (Decatur), GA (2) Milwaukee (Waukesha), WI
Baltimore (Columbia), MD Minneapolis (Plymouth), MN
Birmingham, AL Nashville (Antioch), TN
Boise, ID New Orleans, LA
Boston (Rockland), MA Newark (West Caldwell), NJ
Centralia, WA (2) Oklahoma City, OK
Chicago (Burr Ridge), IL Orlando, FL
Cincinnati, OH Phoenix, AZ
Cleveland (East Lake), OH Pittsburgh (Mars), PA
Concord, CA Portland (Tualatin), OR
Covington, GA Richmond, VA
Dallas (Irving), TX Rochester, NY
Denver (Aurora), CO Salt Lake City, UT (2)
Denver (Lakewood), CO San Antonio, TX
Des Moines (Urbandale), IA San Diego, CA
Detroit (Plymouth), MI San Francisco (Livermore), CA
-6-
El Paso, TX San Juan (Carolinas), PR
Essex, MD San Juan (Gurabo), PR
Fresno, CA Shreveport (Bossier City), LA
Greensboro, NC St. Louis (St. Peters), MO
Hartford (Enfield), CT St. Petersburg, FL
Houston, TX Tucson, AZ
Indianapolis, IN Tustin, CA
Jackson, MS West Columbia, SC
Jacksonville, FL Wilkes-Barre, PA
Kansas City, MO Yorba Linda, CA
Memphis (Bartlett), TN
Idle production locations:
Birmingham, AL (leased) Memphis, TN (sold 2/94)
Cincinnati, OH (leased) Philadelphia (West Chester), PA
Denver (Wheat Ridge), CO (sold 2/94)
(lease terminated 3/94) Portland (Beaverton), OR (leased)
Gulfport, MS (sold 1/94) Richmond, VA (leased)
Warehouse locations:
Chicago (Arlington Heights), IL West Columbia, SC
Fresno, CA
The foregoing information excludes Company held properties leased to
others. The Company leases office space for sales and services activities in
areas where there are no production facilities. These leases are not
considered to be significant.
The Company also has a facility in Villeret, Switzerland (9,000 square
feet).
The Company's executive offices are located in Atlanta, Georgia.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages of all executive
officers of the Company and all positions and offices with the Company
presently held by such executive officers.
Name Age Office Held
Robert R. Woodson 61 Chairman, President and Chief Executive Officer
William M. Dollar 45 Vice President, Treasurer, and Chief Financial
Officer
Earl W. Rogers Jr. 45 Senior Vice President
Michael S. Rupe 43 Senior Vice President
Victoria P. Weyand 43 Vice President and Secretary
Of the foregoing officers, Mr. Woodson is also a Director of the
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Registrant. Officers are elected annually by the Board of Directors.
Mr. Woodson was elected Chairman of the Board in April 1992 and has been
Chief Executive Officer since April 1990 and President since April 1984.
Mr. Dollar was elected Vice President in April 1992 and has been Treasurer
and Chief Financial Officer of the Registrant since February 1990. Prior to
his employment with the Company, Mr. Dollar served as Assistant Vice
President and Regional Controller of units of Sonat Inc., a Birmingham,
Alabama-based energy company, from 1981 through 1989.
Mr. Rogers was elected Vice President in April 1989 and Senior Vice
President in April 1993 and was named manager of the Company's Financial
Services Group in July 1993. Mr. Rogers joined the Company in 1976 and has
served in the positions of plant manager, district operations manager and
FSG operations manager.
Mr. Rupe was elected Senior Vice President in 1991. In 1987, Mr. Rupe was
Treasurer and Chief Financial Officer of the Company, prior to that time,
Mr. Rupe had served in the positions of Assistant-Treasurer and Controller.
In 1989, Mr. Rupe left the Company to assume the position of Executive Vice
President with Profit Freight Systems. Mr. Rupe returned to the Company in
March 1991.
Ms. Weyand was elected Secretary of the Registrant in January 1994 and is
Vice President-Investor Relations. Ms. Weyand's responsibilities also
include investor relations, shareholder relations and strategic
planning/acquisition support. Ms. Weyand was elected Vice President of the
Registrant in 1980 and has served the Company in a variety of positions
including Vice President-Human Resources.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
See the information with respect to the market for an number of holders of
the Company's common stock, quarterly market information and dividend
information which is set forth on page F16 of this Annual Report on Form 10-
K. The number of holders of record of the Company's common stock was
computed by a count of record holders on December 31, 1993.
ITEM 6. SELECTED FINANCIAL DATA
See the information with respect to selected financial data on page F16 of
this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
See the information under the caption Management's Discussion and Analysis
of Results of Operations and Financial Condition on pages F17 through F19 of
this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the information with respect to Financial Statements and Supplementary
Data on pages F2 through F15 and page F16, respectively of this Annual
Report on Form 10-K.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding Directors required herein is incorporated by
reference to the information under the caption "Management of the Company"
in the Registrant's Definitive Proxy Statement for the Annual Shareholders'
Meeting dated March 17, 1994 (the "Proxy Statement").
The information regarding Executive Officers required herein is included
in Part I, Item X of this report and incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information regarding executive compensation is incorporated by
reference to the information under the caption "Executive Compensation and
Other Information" in the Registrant's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required herein is incorporated by reference to the
information under the caption "Management of the Company -- Beneficial
Ownership" in the Registrant's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required herein is incorporated by reference to the
information under the caption "Certain Transactions" in the Registrant's
Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
Page in this
Annual Report
on Form 10-k
-------------
(a)1. Financial Statements:
Management Responsibility for Financial Statements F2
Independent Auditors' Report F3
Consolidated Balance Sheets F4
Consolidated Statements of Income F6
Consolidated Statements of Cash Flows F7
Consolidated Statements of Shareholders' Equity F8
Notes to Consolidated Financial Statements. F9
Quarterly Financial Information (unaudited) F16
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Page in this
Annual Report
on Form 10-k
-------------
(a)2. Financial Statement Schedules:
Schedule V. Property, plant and equipment S1
Schedule VI. Accumulated depreciation and amortization
of property, plant and equipment S2
Schedule VIII. Valuation and qualifying accounts S3
Schedule IX. Short-term borrowings S4
Schedule X. Supplementary income statement information S5
(a)3. Exhibits
(Asterisk indicates exhibit previously filed with the Securities and
Exchange Commission and incorporated herein by reference.)
3.1 Amended and Restated Articles of Incorporation.
3.2 * By-Laws, as amended. Adopted by the Board of Directors on July 27, 1990
filed as Exhibit 3(D) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990.
4.1 Indenture, as supplemented and amended, relating to 6.75% Convertible
Subordinated Debentures due 2011 of Scantron Corporation (omitted
pursuant to Item 601(b)(4)(iii) of Regulation S-K; will be filed upon
request).
4.2 * Form of Rights Agreement dated as of June 9, 1989, between the
Registrant and Citizens and Southern Trust Company. Filed as Exhibit 1
to Form 8-K dated June 9, 1989.
4.3 * First Amendment dated June 12, 1992 to Rights Agreement dated June 9,
1989 between the Company and NationsBank of Georgia Inc., N.A., succes-
sor to Citizens and Southern Trust Company. Filed as exhibit 4.1 on
Form 10-Q for the quarter ended September 30, 1992.
4.4 * Second Amendment dated July 24, 1992 to Rights Agreement dated June 9,
1989 between the Company and Trust Company Bank, successor to
NationsBank of Georgia Inc., N.A., and to Citizens and Southern Trust
Company. Filed as exhibit 4.2 on Form 10-Q for the quarter ended
September 30, 1992.
4.5 Note Agreement dated as of December 1, 1993 between the Company and the
purchasers listed on Schedule I of the agreement, for the issuance and
sale of $85,000,000 aggregate principle amount of 6.60% Series A Senior
Notes Due December 30, 2008.
10.1 Form of Deferred Compensation Agreement between the Registrant and the
following Executive Officer and Director: Mr. Woodson and the follow-
ing Retired Executive Officer and Current Director: Mr. Lang.
10.2 * Form of Monthly Benefit Amendment to Deferred Compensation Agreement
between the Registrant and the following Executive Officer and
Director: Mr. Woodson and the following Retired Executive Officer and
Current Director: Mr. Lang. Filed as Exhibit 10(H) to the Registrant's
Annual Report on Form 10-K for the year ended December 3l, 1990.
10.3 Form of Deferred Compensation Agreement between the Registrant and the
following Executive Officers: Messrs. Dollar, Rogers and Rupe.
10.4 Form of Deferred Compensation Agreement between the Registrant and the
following Executive Officer: Ms. Weyand.
10.5 Form of Frozen Benefit Amendment to Deferred Compensation Agreement
between the Registrant and the following Executive Officer: Ms.
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Weyand.
10.6 Form of Amendment to Deferred Compensation Agreement between the Regis-
trant and the following Executive Officer and Director: Mr. Woodson
and the following Retired Executive Officer and Current Director: Mr.
Lang and the following Executive Officers: Messrs. Dollar, Rogers and
Rupe and Ms. Weyand.
10.7 Form of Non-Compete and Termination Agreement between the Registrant
and the following Executive Officer and Director: Mr. Woodson, the
following Retired Executive Officer and Current Director: Mr. Lang and
the following Executive Officers: Messrs. Dollar, Rogers and Rupe.
10.8 Form of Executive Life Insurance Plan between the Registrant and the
following Executive Officer and Director: Mr. Woodson, the following
Retired Executive Officer and Current Director: Mr. Lang and the fol-
lowing Executive Officers: Messrs. Dollar, Rogers and Rupe and Ms.
Weyand.
10.9 * The John H. Harland Company Incentive Stock Option Plan filed as Exhib-
it (28)(a) to the Registrant's Registration Statement on Form S-8 (no.
33-1402).
10.10 Amendment to the John H. Harland Company Incentive Stock Option Plan.
10.11 * John H. Harland Company 1981 Incentive Stock Option Plan, As Extended.
Filed as Exhibit 10.1 to the Registrant's Report on Form 10-Q for the
quarterly period ended June 30, 1993.
10.12 * Asset Purchase Agreement, dated as of February 7, 1992, by and among
the Registrant , Rexham, Inc. ("Rexham") and Interchecks; as partially
assigned to Centralia Holding Corp. ("Centralia") on February 19, 1992;
and as amended on February 19, 1992 by and among the Registrant, Cen-
tralia, Rexham and Interchecks. Filed as exhibit 2.1 on Form 8-K dated
March 4, 1992 by Form SE dated March 4, 1992.
10.13 * Asset Purchase Agreement, dated as of November 13, 1992, by and among
the Registrant, The Rocky Mountain Bank Note Company and Romo Corp.;
and as amended on November 25, 1992, by and among the Registrant, The
Rocky Mountain Bank Note Company and Romo Corp. Filed as exhibit 2.1
and 2.2 on Form 8-K dated January 11, 1993.
10.14 Term Loan Agreement dated as of October 25, 1993 between the Company
and Trust Company Bank for a $15,000,000 Term Loan due 2003.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Auditors
b. Report on Form 8-K
No reports on Form 8-K were filed by the Registrant during the last quarter
of the period covered by this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
JOHN H. HARLAND COMPANY
William M. Dollar
____________________
William M. Dollar
Vice President, Treasurer and
Chief Financial Officer
March 30, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Robert R. Woodson 3/30/94 John J. McMahon, Jr. 3/30/94
______________________ ________ ______________________ ________
Robert R. Woodson Date John J. McMahon, Jr. Date
Chairman, President and Director Director
(Principal Executive Officer)
William M. Dollar 3/30/94
______________________ ________ ______________________ ________
William M. Dollar Date G. Harold Northrop Date
Vice President, Treasurer and Director
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Juanita Powell Baranco 3/30/94 H.G. Pattillo 3/30/94
______________________ ________ ______________________ ________
Juanita Powell Baranco Date H.G. Pattillo Date
Director Director
______________________ ________ ______________________ ________
I. Ward Lang Date Larry L. Prince Date
Director Director
Lawrence L.
Gellerstedt Jr. 3/30/94 John H. Weitnauer, Jr. 3/30/94
______________________ ________ ______________________ ________
Lawrence L. Date John H. Weitnauer, Jr. Date
Gellerstedt Jr. Director
Director
Edward J. Hawie 3/30/94 L. C. Whitney 3/30/94
______________________ ________ ______________________ ________
Edward J. Hawie Date L. C. Whitney Date
Director Director
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JOHN H. HARLAND COMPANY
_______________________
Management Responsibility For Financial Statements
Independent Auditors' Report
Consolidated Financial Statements and
Notes to Consolidated Financial Statements
Supplemental Financial Information
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Supplemental Financial Statement Schedules
For Inclusion in the Annual Report on Form 10-K
to the Securities and Exchange Commission
for the year ended December 31, 1993.
-F1-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS
The financial statements and related financial information included in
this report were prepared by the Company in conformity with generally
accepted accounting principles consistently applied. Management's best
estimates and judgments were used, where appropriate. Management is
responsible for the integrity of the financial statements and for other
financial information included in this report. The consolidated financial
statements and supplementary financial schedules have been audited by the
Company's independent auditors, Deloitte & Touche. As set forth in their
report, their audits were conducted in accordance with generally accepted
auditing standards and formed the basis for their opinion on the
accompanying financial statements. They consider the Company's control
structure and perform such tests and other procedures as they deem necessary
to express an opinion on the fairness of the financial statements.
The Company maintains a control structure which is designed to provide
reasonable assurance that assets are safeguarded and that the financial
records reflect the authorized transactions of the Company. As a part of this
process, the Company has an internal audit function which evaluates the
adequacy and effectiveness of the control structure.
The Audit Committee of the Board of Directors includes directors who are
neither officers nor employees of the Company. The Committee meets
periodically with management, internal auditors and the independent auditors
to discuss auditing, the Company's control structure and financial reporting
matters. The Director of Internal Audit and the independent auditors have
full and free access to meet with the Audit Committee.
William M. Dollar
Vice President, Treasurer and
Chief Financial Officer
-F2-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
John H. Harland Company:
We have audited the accompanying consolidated balance sheets of John H.
Harland Company and its subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, cash flows and shareholders'
equity for each of the three years in the period ended December 31, 1993.
Our audits also included the financial statement schedules listed in Item
14(a)2. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of John H. Harland Company and
its subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken
as a whole, present fairly in all material respects the information set
forth therein.
As discussed in Note 8 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income
taxes to conform with the provisions of Statement of Financial Accounting
Standards No. 109.
DELOITTE & TOUCHE
Atlanta, Georgia
January 28, 1994
-F3-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share amounts)
December 31
1993 1992
- ----------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 26,224 $ 19,133
Short-term investments 1,900 150
Accounts receivable from customers, less
allowance for doubtful accounts of $1,753
and $1,343 63,660 56,700
Inventories:
Raw materials and semi-finished goods 22,389 20,692
Hardware component parts 1,478 2,547
Finished goods 2,133 3,882
Deferred income taxes 6,694
Other 10,417 7,555
----------------------
Total current assets 134,895 110,659
----------------------
INVESTMENTS AND OTHER ASSETS:
Investments 8,103 7,705
Goodwill and other intangibles - net 54,053 37,528
Acquisition deposit and other 7,014 36,259
----------------------
Total investments and other assets 69,170 81,492
----------------------
PROPERTY, PLANT AND EQUIPMENT:
Land 9,201 8,746
Buildings and improvements 72,212 66,394
Machinery and equipment 204,405 186,400
Furniture and fixtures 15,082 13,259
Leasehold improvements 2,134 2,050
Additions in progress 2,008 1,434
----------------------
Total 305,042 278,283
Less accumulated depreciation and amortization 152,656 130,554
----------------------
Property, plant and equipment - net 152,386 147,729
----------------------
Total $ 356,451 $ 339,880
======================
See Notes to Consolidated Financial Statements.
-F4-
CONSOLIDATED BALANCE SHEETS (continued)
December 31
1993 1992
- -----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 4,000 $ 22,000
Accounts payable - trade 8,690 9,639
Accrued liabilities:
Salaries, wages and employee benefits 15,458 11,966
Taxes 649 4,090
Other 15,182 11,771
----------------------
Total current liabilities 43,979 59,466
----------------------
LONG-TERM LIABILITIES:
Long-term debt 111,542 12,622
Deferred income taxes 6,393 1,987
Other 10,863 9,583
----------------------
Total long-term liabilities 128,798 24,192
----------------------
Total liabilities 172,777 83,658
----------------------
SHAREHOLDERS' EQUITY
Series preferred stock, authorized 500,000
shares of $1.00 par value, none issued
Common stock, authorized 144,000,000 shares of
$1.00 par value, 37,907,497 shares issued 37,907 37,907
Additional paid-in capital 4,225 4,326
Foreign currency translation adjustment 72 187
Retained earnings 325,323 303,249
----------------------
Total shareholders' equity 367,527 345,669
Less 7,421,903 and 3,858,049 shares in
treasury, at cost 183,853 89,447
----------------------
Shareholders' equity - net 183,674 256,222
----------------------
TOTAL $ 356,451 $ 339,880
======================
See Notes to Consolidated Financial Statements.
-F5-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
Year ended December 31
1993 1992 1991
- --------------------------------------------------------------------------
NET SALES $ 519,486 $ 444,980 $ 378,659
--------------------------------
COST AND EXPENSES:
Cost of sales 288,786 236,559 189,835
Selling, general and administrative
expenses 125,077 111,100 94,060
Employees' profit sharing 9,614 9,118 8,105
Amortization of intangibles 8,702 4,673
Restructuring charge 12,191
--------------------------------
Total 432,179 361,450 304,191
--------------------------------
INCOME FROM OPERATIONS 87,307 83,530 74,468
INTEREST AND OTHER INCOME (EXPENSE)-NET (1,633) 4,737 5,234
--------------------------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 85,674 88,267 79,702
INCOME TAXES 33,152 31,629 29,882
--------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 52,522 56,638 49,820
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 2,385
--------------------------------
NET INCOME $ 52,522 $ 56,638 $ 47,435
================================
PER COMMON SHARE:
Income before cumulative effect of
change in accounting principle $ 1.62 $ 1.59 $ 1.33
--------------------------------
Net Income $ 1.62 $ 1.59 $ 1.27
================================
See Notes to Consolidated Financial Statements.
-F6-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended December 31
1993 1992 1991
- -------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net Income $ 52,522 $ 56,638 $ 47,435
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 35,102 29,662 22,684
Deferred income taxes (2,288) (2,135) (5,767)
Loss (gain) on sale of assets 599 (3,410)
Provision for restructuring charge 12,191
Provision for postretirement benefits 768 640 4,156
Other 965 1,070 1,915
Change in assets and liabilities net of
effects of businesses acquired:
Accounts receivable 3,059 (3,706) 6,740
Inventories and other current assets 3,347 1,540 (1,398)
Accounts payable and accrued expenses (2,969) (2,142) 5,502
Other - net (434) 229 (238)
-------------------------------
Net cash provided by operating activities 90,671 78,386 93,220
-------------------------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (27,121) (18,721) (16,899)
Proceeds from sale of property, plant and
equipment 1,474 1,979 1,059
Change in short-term investments - net (1,750) 52,350 (32,465)
Payment for acquisition of businesses -
net of cash acquired (9,564) (54,826)
Acquisition deposit (31,900)
Proceeds from sale of Puerto Rico bonds 49,982
Other - net (2,469) (2,169) 1,989
-------------------------------
Net cash used in investing activities (39,430) (3,305) (46,316)
-------------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 100,000
Short-term borrowings (18,000) 18,000
Purchases of treasury stock (99,435) (65,565) (22,806)
Issuance of treasury stock 4,779 4,818 4,061
Dividends paid (30,448) (32,088) (32,196)
Other - net (1,046) (36) 806
-------------------------------
Net cash used in financing activities (44,150) (74,871) (50,135)
-------------------------------
Increase (decrease) in cash and cash
equivalents 7,091 210 (3,231)
Cash and cash equivalents at beginning of
year 19,133 18,923 22,154
-------------------------------
Cash and cash equivalents at end of year $ 26,224 $ 19,133 $ 18,923
===============================
Cash paid during the year for:
Interest $ 2,144 $ 998 $ 1,115
===============================
Income Taxes $ 38,785 $ 36,613 $ 31,972
===============================
See Notes to Consolidated Financial Statements.
-F7-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands except share and per share amounts)
Foreign
Additional Currency
Common Paid-In Retained Treasury Translation
Stock Capital Earnings Stock Adjustments
- -------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1990 $ 37,907 $ 5,661 $ 263,460 $ (11,845) $ 503
Net Income 47,435
Cash dividends, $.86 per share (32,196)
Purchase of 1,024,213 shares of treasury
stock (22,806)
Issuance of 238,235 shares of treasury
stock under employee stock plans (1,253) 5,272
Foreign currency translation adjustment (197)
Other 285 37
---------------------------------------------------------
BALANCE, DECEMBER 31, 1991 37,907 4,693 278,699 (29,342) 306
Net Income 56,638
Cash dividends, $.90 per share (32,088)
Purchase of 2,781,813 shares of treasury
stock (65,565)
Issuance of 261,308 shares of treasury
stock under employee stock plans (642) 5,460
Foreign currency translation adjustment (119)
Other 275
---------------------------------------------------------
BALANCE, DECEMBER 31, 1992 37,907 4,326 303,249 (89,447) 187
Net Income 52,522
Cash dividends, $.94 per share (30,448)
Purchase of 3,792,377 shares of treasury
stock (99,435)
Issuance of 228,523 shares of treasury
stock under employee stock plans (250) 5,029
Foreign currency translation adjustment (115)
Other 149
---------------------------------------------------------
BALANCE, DECEMBER 31, 1993 $ 37,907 $ 4,225 $ 325,323 $ (183,853) $ 72
=========================================================
See Notes to Consolidated Financial Statements.
-F8-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES:
Consolidation - The consolidated financial statements include the
financial statements of John H. Harland Company and its wholly owned
subsidiaries (the "Company"). Intercompany balances and transactions have
been eliminated.
Cash Equivalents - The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
Inventories - Inventories are stated at the lower of cost or market. Cost
of inventory for checks and related forms is determined by average costing.
Cost of scannable forms and hardware component parts inventories is
determined by the first-in, first-out method. Cost of data entry terminals is
determined by the specific identification method.
Investments - Short-term investments are carried at cost plus accrued
interest, which approximates market, and consist primarily of certificates of
deposit and demand notes with original maturities in excess of three months.
Marketable equity securities included in long-term investments are carried at
the lower of cost or market. Other long-term investments are carried
principally at cost.
Property, Plant and Equipment - Property, plant and equipment are carried
at cost. Depreciation of buildings is computed primarily by the declining
balance method. Depreciation of equipment, furniture and fixtures is
calculated by the straight-line or sum-of-the-years digits methods. Leasehold
improvements are amortized by the straight-line method over the life of the
lease or the life of the property, whichever is shorter. Accelerated methods
are used for income tax purposes for all property where it is allowed.
Goodwill and Other Intangibles - Amortization of goodwill is calculated by
the straight-line method over a 40-year period. The Company periodically
assesses the recoverability of goodwill based on its judgment as to the
future profitability of its operations. Other intangible assets consist
primarily of purchased customer lists and non-compete covenants. Amortization
of other intangible assets is calculated by the straight-line method over the
estimated useful life which is primarily a 5-year period.
Net Income Per Share - Net income per common share is based on the
weighted average number of shares of common stock and common share
equivalents outstanding during each year which was 32,460,128 for 1993,
35,688,645 for 1992 and 37,468,637 for 1991. Common share equivalents include
the number of shares issuable upon the exercise of the Company's stock
options and the conversion of convertible securities. The difference between
primary and fully diluted common share equivalents is not significant.
Income Taxes - Effective Jan. 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109") in which deferred tax liabilities and assets are determined based on
the difference between financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
2. BUSINESS SEGMENTS: The Company operates principally within the printing
industry.
-F9-
3. ACQUISITIONS: On January 1, 1993, the Company completed the acquisition
of substantially all the net assets of the Denver-based Rocky Mountain Bank
Note Company ("RMBN") for cash of $37.9 million and acquisition related costs
of approximately $8.9 million. The purchase was funded through short-term
borrowings of $18.0 million and by internally generated funds. The acquisi-
tion has been accounted for as a purchase and, accordingly, the acquired net
assets and operations have been included in the consolidated financial state-
ments from the date of acquisition. Assets acquired totaled $46.8 million,
net of liabilities assumed of $2.0 million. Of the total acquisition cost,
$25.7 million was allocated to intangible assets, of which $10.7 million
represented goodwill.
On February 19, 1992, the Company completed the acquisition of
substantially all the net assets of Interchecks Inc. ("Interchecks"), a
Seattle, Washington-based check printer for a cash purchase price of $50
million and acquisition related costs of $9.4 million. The acquisition has
been accounted for as a purchase and, accordingly, the acquired net assets
and operations have been included in the consolidated financial statements
from the date of acquisition. Assets acquired totaled $59.4 million, net of
liabilities assumed of $4.7 million. Of the total acquisition cost, $38.4
million was allocated to intangible assets, of which $13.4 million
represented goodwill.
The following represents the unaudited pro forma results of operations
which assumes the acquisitions occurred at the beginning of the respective
year in which the assets were acquired as well as the beginning of the
immediately preceding year. These results include certain adjustments,
primarily increased amortization of intangible assets, reduced interest
income and reduced depreciation expense (in thousands of dollars, except per
share amounts):
1992 1991
- -----------------------------------------------------------------------
Net sales $ 539,889 $ 453,541
Income before cumulative effect of change
in accounting principle 55,968 45,938
Net income 55,968 43,553
Per common share:
Income before cumulative effect of change
in accounting principle 1.57 1.21
Net income 1.57 1.15
The pro forma financial information presented above does not purport to be
indicative of either the results of operations that would have occurred had
the acquisitions taken place at the beginning of the periods presented or of
future results of operations of the combined businesses.
4. RESTRUCTURING CHARGE: During the fourth quarter of 1991, the Company
recorded a provision of $12,191,000 for the restructuring and revaluation of
certain subsidiaries and investments of $9,191,000 and for taxes of
$3,000,000 for the repatriation of earnings from Puerto Rico. The Company's
policy had been to invest such earnings long term to avoid the payment of
taxes upon repatriation.
5. INVESTMENTS AND OTHER ASSETS: Long-term investments at December 31, 1993
primarily consisted of investments in limited partnerships.
Other assets at December 31, 1992 included a $31,900,000 deposit related
to the acquisition of RMBN.
-F10-
6. SHORT-TERM DEBT: At December 31, 1993, the Company had available unsecured
lines of credit under which it could borrow up to $111,000,000 in the form of
short-term notes for which no compensating balances or commitment fees are
required. At December 31, 1992, the Company had borrowed $18,000,000 under
the lines of credit at an interest rate of 3.8%. No amounts were outstanding
under the lines of credit at December 31, 1993.
In addition, the Company had outstanding at December 31, 1993 and 1992 an
Industrial Revenue Bond, due on demand, in the amount of $4,000,000 which
bears interest at an average rate of 5.26%.
7. LONG-TERM DEBT: The Company's long-term debt consists of (in thousands):
1993 1992
- ------------------------------------------------------------------------
Series A Senior Notes $ 85,000
Term Loan 15,000
Convertible Subordinated Debentures 10,600 $ 10,579
Other 1,477 2,573
-----------------------
112,077 13,152
Less current portion 535 530
-----------------------
Long-term Debt $ 111,542 $ 12,622
=======================
In December 1993, the Company issued $85,000,000 of Series A Senior Notes
("Senior Notes") and arranged a $15,000,000 Term Loan ("Term Loan"). The
Senior Notes and the Term Loan are at fixed interest rates of 6.60% and
6.63%, respectively. The Senior Notes mature from 2004 to 2008 and the Term
Loan is due 2003. Both the Term Loan and the Senior Notes contain certain
covenants, the most restrictive of which limit the amount of funded
indebtedness of the Company and require the Company to maintain a minimum
fixed charge coverage ratio. At December 31, 1993, the Company was in
compliance with the covenants associated with these agreements.
The Company's 6.75% convertible subordinated debentures are convertible
into common stock of the Company at any time prior to maturity, at a
conversion price of $25.17 per share, subject to adjustment in certain
events. At December 31, 1993, there were 328,249 shares of common stock
reserved for conversion of the debentures. The debentures are entitled to an
annual mandatory sinking fund, commencing June 1, 1996, calculated to retire
75% of the debentures prior to maturity in 2011. The debentures are
redeemable, in whole or in part, at any time at the option of the Company at
specific redemption prices plus accrued interest. The debentures are
subordinated to all senior debt.
Other long-term debt relates principally to capitalized lease obligations.
Annual maturities of long-term debt including sinking fund requirements
during the next five years are: 1994-$535,000; 1995-$519,000; 1996-$813,000;
1997-$559,000; and 1998-$550,000.
8. INCOME TAXES: Effective January 1, 1993, the Company adopted SFAS 109.
Previously, the Company had computed its income tax expense in accordance
with the provisions of the Accounting Principles Board Opinion No. 11. The
cumulative effect of adopting SFAS 109 was not significant to the Company's
consolidated financial statements.
-F11-
The provision for income taxes for the years ended December 31, 1993, 1992
and 1991 (including the impact of the accounting change in 1991) includes the
following (in thousands):
1993 1992 1991
- ------------------------------------------------------------------------
Current:
Federal $ 28,350 $ 29,709 $ 29,259
State 7,090 4,055 4,959
--------------------------------------
Total 35,440 33,764 34,218
--------------------------------------
Deferred:
Federal (1,999) (1,879) (5,254)
State (289) (256) (513)
--------------------------------------
Total (2,288) (2,135) (5,767)
--------------------------------------
Total $ 33,152 $ 31,629 $ 28,451
======================================
The tax effects of significant items comprising the Company's net deferred
tax asset and liability as of December 31, 1993 are as follows (in
thousands):
- ------------------------------------------------------------------------
Current deferred tax asset:
Accrued vacation $ 2,634
Other accrued liabilities 4,742
Other (682)
--------
Total 6,694
--------
Noncurrent deferred tax liability:
Difference between book and tax basis of property (13,976)
Other liabilities 5,542
Postretirement benefit obligation 2,085
Other (44)
--------
Total (6,393)
Valuation allowance 0
Net deferred tax asset $ 301
========
A reconciliation between the Federal income tax statutory rate and the
Company's effective income tax rate is as follows:
1993 1992 1991
- ------------------------------------------------------------------------
Statutory rate 35.0% 34.0% 34.0%
State and local income taxes net
of Federal income tax benefit 5.0 4.3 4.0
Income from Puerto Rico (3.7) (3.3) (2.3)
Other, net 2.4 0.8 1.8
----------------------------------
Effective income tax rate 38.7% 35.8% 37.5%
==================================
-F12-
9. SHAREHOLDERS' EQUITY: Each share of common stock includes a stock purchase
right which is not currently exercisable but would become exercisable upon
occurrence of certain events as provided for in the Rights Agreement. The
rights expire on July 5, 1999.
10. EMPLOYEE STOCK PURCHASE PLAN: The Company has an Employee Stock Purchase
Plan under which employees are granted an option to purchase shares of the
Company's common stock during the quarter in which the option is granted. The
option price is 85% of the fair market value of the stock at the beginning or
end of the quarter, whichever is lower. Options for shares were exercised at
prices ranging from $18.70 to $23.06 in 1993, $17.64 to $20.24 in 1992 and
$16.26 to $19.60 in 1991. At December 31, 1993, there were 672,657 shares of
common stock reserved for purchase under the plan.
11. STOCK OPTION PLANS: The Company has granted incentive and non-qualified
stock options to certain key employees to purchase shares of the Company's
common stock at the fair market value of the common stock on the date of the
grant. The options generally become exercisable one year from the date of
grant.
Option transactions during the three years ended December 31, 1993 are as
follows:
Exercise
Shares Price
- ------------------------------------------------------------------------
Balance, December 31, 1990 460,541 $ 9.11 - 25.13
Options
Granted 68,000 22.75
Exercised (76,202) 9.11 - 21.88
Cancelled (47,100) 21.88 - 25.13
---------
Balance, December 31, 1991 405,239 9.11 - 25.13
Options
Granted 92,500 23.88 - 24.75
Exercised (90,414) 9.11 - 23.50
Cancelled (47,176) 11.59 - 25.13
---------
Balance, December 31, 1992 360,149 9.11 - 24.75
Options
Granted 102,157 23.88 - 26.25
Exercised (55,467) 9.11 - 23.50
Cancelled (31,151) 11.34 - 24.75
---------
Balance, December 31, 1993 375,688 9.11 - 26.25
=========
At December 31, 1993, there were options for 273,531 shares exercisable
and 682,978 shares of common stock reserved for options under the plans.
12. PROFIT SHARING AND DEFERRED COMPENSATION: The Company has a non-
contributory profit sharing plan to provide retirement income for most of its
employees. The Company is required to contribute to the profit sharing plan's
trust fund an amount equal to 7.5% of its income before income taxes and
profit sharing contribution plus such additional amount as the Board of
Directors may determine, up to a maximum of 15% of the aggregate compensation
of participating employees (see Consolidated Statements of Income).
-F13-
The Company has deferred compensation agreements with certain officers.
The present value of cash benefits payable under the agreements is being
provided over the periods of active employment. The charge to expense for the
agreements was $345,000 in 1993, $286,000 in 1992 and $463,000 in 1991.
13. POSTRETIREMENT BENEFITS: The Company sponsors two defined postretirement
benefit plans that cover qualifying salaried and non-salaried employees. One
plan provides health care benefits and the other provides life insurance
benefits. The medical plan is contributory and contributions are adjusted
annually based on actual claims experience, while the life insurance plan is
noncontributory. The Company's intent is that the retiree provide
approximately 50% of the actual cost of providing the medical plan. Neither
plan is funded.
In 1991, the Company adopted the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and elected
immediate recognition of the transition amount of $3,816,000 ($2,385,000
after income taxes).
As of December 31, 1993, the accumulated postretirement benefit obligation
("APBO") was $7,614,000. The following table reconciles the plans' status to
the accrued postretirement health care and life insurance liability as
reflected on the balance sheet as of December 31, (in thousands):
1993 1992
- ------------------------------------------------------------------------
APBO:
Retirees $ 1,890 $ 1,834
Fully eligible participants 1,790 1,057
Other participants 3,934 2,907
--------------------
7,614 5,798
Unrecognized net loss (1,195) (457)
---------------------
Accrued postretirement benefit obligation
- included in Other Liabilities $ 6,419 $ 5,341
=====================
Net postretirement costs are summarized as follows (in thousands):
1993 1992 1991
- ------------------------------------------------------------------------
Service costs $ 245 $ 184 $ 131
Interest on APBO 523 456 338
--------------------------------
Net periodic postretirement cost $ 768 $ 640 $ 469
================================
For measurement purposes, the cost of providing medical benefits was
assumed to increase by 12% in 1993, decreasing to an annual rate of 7.5%
after 1998. The medical cost trend rate assumption could have a significant
effect on amounts reported. An increase of 1% in the assumed rate of increase
would have had the effect of increasing the APBO by $851,000 and the net
periodic postretirement cost by $113,000. The weighted average discount rate
used in determining the APBO was 7.5% in 1993, 8.5% in 1992 and 9% in 1991
and employee earnings were estimated to increase 4.5% annually until age 65.
-F14-
14. FINANCIAL INSTRUMENTS: The following methods and assumptions were used to
estimate the fair value of each class of financial instruments for which it
is practicable to estimate that value:
Short-term investments - The carrying amount approximates fair value
because of the short maturity of those instruments.
Long-term investments - The fair values of certain investments are
estimated based on quoted market prices. The fair values of the Company's
investments in limited partnerships are based on estimates by general
partners in the absence of readily ascertainable market values. For the
Company's other investments, which are not actively traded and are
immaterial, fair value is based on an estimate of the net realizable value of
those investments.
Long-term debt - The fair values of the Company's convertible debentures
are based on recent market quotes. The fair value of the other long-term debt
is based on estimated rates currently available to the Company for debt with
similar terms and maturities.
The carrying value and estimated fair values of the Company's financial
instruments at December 31, 1993 and 1992 are as follows (in thousands):
Carrying Value Fair Value
1993 1992 1993 1992
- ------------------------------------------------------------------------
Assets:
Short-term investments $ 1,900 $ 150 $ 1,900 $ 150
Long-term investments 8,103 7,705 9,169 8,601
Liabilities:
Long-term debt 111,542 12,622 112,105 13,931
15. COMMITMENTS AND CONTINGENCIES: Total rental expense was $12,257,000 in
1993, $6,969,000 in 1992, and $3,731,000 in 1991. Minimum annual rentals
under non-cancellable operating leases total $22,471,000 and range from
$7,536,000 in 1994 to $1,847,000 in 1998.
16. SUBSEQUENT EVENT: On January 7, 1994, the Company acquired Marketing
Profiles, Inc. ("MPI") for $18,000,000 in cash and a contingent purchase
payment payable in 1997 to the former MPI shareholders. The contingent
purchase payment is based upon a multiple of MPI's 1996 operating results as
defined in the acquisition agreement. The acquisition price was funded with a
portion of the proceeds received in the December 1993 issuance of long-term
debt (See Note 7). The acquisition will be accounted for using the purchase
method of accounting and, accordingly, the results of operations of MPI will
be included in the Company's consolidated financial statements from the date
of acquisition. MPI is based in Maitland, Florida and is a database marketing
and consulting company which provides software products and related marketing
services to the financial industry.
-F15-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES - Supplemental Financial Information
SELECTED QUARTERLY FINANCIAL DATA,
DIVIDENDS PAID AND STOCK PRICE RANGE
(unaudited)
(In thousands except per share amounts)
--------- Quarter ended ----------
March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------
1993:
Net sales $ 133,504 $ 129,979 $ 129,922 $ 126,081
Gross profit 58,928 59,814 56,892 55,066
Net income 13,119 14,127 13,318 11,958
Per common share:
Net income .39 .42 .42 .39
Dividends paid .235 .235 .235 .235
Market price:
High 27 1/2 28 1/8 27 3/4 25 5/8
Low 24 1/4 25 5/8 25 1/4 20 7/8
1992:
Net sales 103,629 113,766 113,975 113,610
Gross profit 49,917 53,677 52,804 52,023
Net income 14,869 14,530 13,671 13,568
Per common share:
Net income .41 .40 .39 .39
Dividends paid .225 .225 .225 .225
Market price:
High 25 1/4 25 24 1/4 27 1/4
Low 22 1/8 20 1/2 20 5/8 22 1/2
The Company's common stock (symbol:JH) is listed on the New York Stock
Exchange. At December 31, 1993 there were 8,044 shareholders of record.
SELECTED FINANCIAL DATA
(In thousands except per share amounts)
--------- Year ended December 31 ---------
1993 1992 1991 1990 1989
- ----------------------------------------------------------------------
Net sales $ 519,486 $ 444,980 $ 378,659 $ 366,834 $ 344,734
Net income 52,522 56,638 47,435 57,167 58,052
Total assets 356,451 339,880 351,554 347,105 321,081
Long-term debt 111,542 12,622 11,661 11,304 11,276
Per common share:
Net income 1.62 1.59 1.27 1.52 1.54
Dividends paid .94 .90 .86 .78 .68
Average number of
shares outstanding 32,460 35,689 37,469 37,604 37,797
Refer to Note 13 of the Notes to Consolidated Financial Statements
regarding the impact of change in accounting method for postretirement
benefits in 1991 and to Note 4 for impact of a restructuring charge in
1991. Refer to Note 3 regarding the impact of acquisitions in 1992 and
1993.
-F16-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS
RESULTS OF OPERATIONS
1993 versus 1992
1993 consolidated net sales increased $74.5 million or 16.7% over 1992 and
represented the 44th consecutive year of sales increases. The Company's
Financial Services Group ("FSG") had a net sales increase of $72.1 million or
18.4% which consisted of an 18.1% increase in units and a price and product
mix increase of 0.3%. The FSG sales increase is attributable to the
acquisition of Rocky Mountain Bank Note Company ("RMBN") in January 1993
coupled with the impact of the February 1992 acquisition of Interchecks, Inc.
("Interchecks") (see Note 3 of the Notes to Consolidated Financial
Statements). Competitive pricing pressures within the check printing
industry contributed to the mild change in the FSG price and product mix. Net
sales by the Company's Data Services Group ("DSG") increased $2.4 million or
4.6% in 1993 primarily due to increases in hardware sales and service-related
revenues while 1993 form sales were flat compared to 1992. The hardware sales
and service-related revenue increases offset sales decreases by DSG's
European sales subsidiary Datascan and the loss of revenues associated with
American Testronics Company, the assets of which were sold in June 1992.
Consolidated cost of goods sold increased $52.2 million or 22.1% and
increased as a percentage of sales to 55.6% from 53.2% in 1992. FSG's cost of
goods sold increased as a percentage of sales to 56.0% from 53.4% in 1992
primarily due to acquired operations, which had lower margins, and
duplication of costs during integration of acquired operations. FSG achieved
labor productivity improvements of 0.6% in 1993. DSG's cost of goods sold
increased slightly as a percentage of sales to 51.8% in 1993 from 51.1% in
1992. DSG's gross margin improved as a result of the 1992 sale of American
Testronics Company, which had lower margins, but the improvement was offset
by increased machine sales and service-related revenues, which have lower
margins than forms, and by increased product development costs.
Consolidated selling, general and administrative expenses increased $14.0
million or 12.6% in 1993 primarily due to acquired operations, higher
information systems costs and increases in employee health care costs. As a
percentage of sales, consolidated selling, general and administrative
expenses decreased from 25.0% in 1992 to 24.1% in 1993. The consolidation of
selling and certain administrative functions of the acquired operations was a
primary factor contributing to this decrease. Profit sharing costs increased
$0.5 million but decreased as a percentage of sales from 2.0% in 1992 to 1.9%
in 1993.
Due to the February 1992 acquisition of Interchecks and the January 1993
acquisition of RMBN, amortization of intangibles increased $4.0 million over
1992 and was 1.7% as a percentage of sales in 1993 compared to 1.1% in 1992.
Of the total 1993 amortization of intangibles, $8.0 million relates to
intangible assets which are being amortized over 5 years.
Interest and other income (expense) - net decreased $6.4 million from
1992. The primary components of the change were gains of $3.4 million
realized in 1992 on the dispositions of American Testronics Company and the
Puerto Rico bond investment portfolio and increased interest expense, which
totaled $2.6 million in 1993 due to increased levels of debt. Another
component of the interest and other income (expense) - net change was reduced
interest income earned in 1993 due to lower average cash and investment
balances.
Income before income taxes decreased $2.6 million or 2.9% from 1992 and
-F17-
decreased as a percentage of sales from 19.8% in 1992 to 16.5% in 1993. The
effective consolidated income tax rate for 1993 was 38.7% compared to 35.8%
in 1992. The effective tax rate increased primarily as a result of the
Omnibus Tax Reconciliation Act of 1993, which increased the federal corporate
tax rate from 34% to 35%, and certain nonrecurring tax exempt items and
higher tax exempt income in 1992.
1992 versus 1991
Consolidated 1992 sales increased $66.3 million or 17.5% over 1991. Both
FSG and DSG experienced sales increases with FSG contributing $60.7 million
of the increase and DSG contributing $5.6 million. FSG's sales growth was
attributable to a 25.7% increase in check unit production tempered by a 7.4%
reduction from price and product mix. The unit increase came principally from
the new business obtained through the acquisition of Interchecks in February
1992 with a lesser portion due to an increase in FSG's core business. Lower
pricing in 1992 resulted from competitive conditions in the check printing
industry. DSG's sales increased 11.8% partially due to the consolidation of
Datascan's results of operations after acquisition of the remaining 50% of
Datascan's stock in December 1991 and to sales increases in educational
markets.
Consolidated gross profit margin declined in 1992 to 46.8% from 49.9% in
1991. Margins in both FSG and DSG were negatively impacted by acquired
operations (Interchecks and Datascan, respectively); however, FSG realized an
increase in labor efficiency of 3.6% in its core operations as a result of
completion of the conversion to offset printing and computerized production
systems in 1991. DSG's margin declines were moderated by the sales increase
in standard forms in its educational markets which generally provide higher
margins.
Selling, general and administrative expenses increased $17.0 million in
1992 or 18.1% and, as a percentage of sales, increased to 25.0% from 24.8% in
1991. The primary components of this increase were employee health care
costs, the costs of enhanced data processing systems, expenses of acquired
operations and marketing costs associated with customer relations. Profit
sharing costs increased $1.0 million but decreased as a percentage of sales
from 2.1% in 1991 to 2.0% in 1992.
Amortization of intangibles costs associated with the acquired operations
totaled $4.7 million or 1.1% as a percentage of sales.
Interest and other income decreased $0.5 million or 9.5% from 1991, which
is attributable to both lower interest rates and significantly lower
investment balances, a result of the use of funds for the acquisitions of
Interchecks and Datascan and for the stock repurchase program. The reduced
interest and other income was offset by $3.4 million of gains realized in the
sale of the Puerto Rico bond investment portfolio and the sale of the assets
of American Testronics Company.
The Company's effective consolidated income tax rate decreased to 35.8%
from 37.5% primarily due to the higher level of tax exempt income in 1992.
Outlook
The Company will continue its efforts to further diversify its business
during 1994. On January 7, 1994, the Company acquired Marketing Profiles,
Inc. ("MPI"), a database marketing and consulting company which provides
software products and related marketing services to the financial industry.
See Note 16 of the Notes to Consolidated Financial Statements.
In October 1993, the Company announced the formation of a new subsidiary,
The Check Store, Inc. ("The Check Store"), which will market checks and
related products directly to consumers. The direct marketing of checks and
related products to consumers is currently the fastest growing segment of the
-F18-
check printing market and The Check Store, which will become operational
during the first half of 1994, represents the Company's entry into this
distribution channel. It is anticipated that The Check Store will have lower
margins than the Company's traditional check printing operations and, due to
start-up costs and expenditures for marketing and product development, will
negatively impact the Company's results and cash flows during 1994. The
Company is unable to determine if or when The Check Store operations will
contribute positively to cash flow or operating results.
The Company expects that its check printing operations will continue to
experience competitive pricing pressures during 1994, and as a result the
price component of changes in revenue might be flat or negative. However, the
Company anticipates that profit margins should experience a slight
improvement in 1994 as a result of the continued integration of acquired
operations along with other cost control measures.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
Cash flows provided by operations in 1993 were $90.7 million compared to
$78.4 million in 1992, an increase of 15.7%. The primary uses of funds in
1993 were for the purchase of the Company's common stock, the acquisition of
the net assets of RMBN, additions to property, plant and equipment and
dividends paid to the Company's shareholders.
In December 1993, the Company issued $85.0 million of Series A Senior
Notes ("Senior Notes") with a final maturity of December 2008, and also
arranged a $15.0 Million Term Loan ("Term Loan") due December 2003. The
Senior Notes and the Term Loan have a fixed annual interest rate of 6.60% and
6.63%, respectively. Proceeds from these obligations were used to repay
amounts outstanding under short-term lines of credit and to fund the January
1994 purchase of MPI and will be used to fund additional purchases of Company
stock and for general corporate purposes.
The Company has unsecured lines of credit which provide for borrowing up
to $111.0 million. At December 31, 1993, no amounts were outstanding under
these lines, a decrease of $18.0 million from December 31, 1992.
Excluding the borrowings under the unsecured lines of credit, which the
Company replaced with long-term financing, the ratio of current assets to
current liabilities increased from 2.7 at December 31, 1992 to 3.1 at
December 31, 1993, and working capital increased to $90.9 million at December
31, 1993 from $69.2 million at December 31, 1992.
In March 1993, the Company completed a program announced in November 1991
to repurchase 4.0 million shares of its common stock. In June 1993, the
Company initiated a new program to repurchase 3.4 million additional common
shares which was completed in November 1993 at an average cost of $26.24 per
share. In December 1993, the Company announced another program to repurchase
1.5 million common shares but had not purchased any shares under this program
as of December 31, 1993.
Additions to property, plant and equipment for 1993 were $27.1 million
compared to $18.7 million in 1992. The Company anticipates 1994 capital
expenditures will total approximately $37 million.
On December 31, 1993, the Company had $28.1 million in cash and cash
equivalents and short-term investments. The Company believes that its current
cash position, funds from operations and available amounts under its lines of
credit will be sufficient to meet anticipated requirements for working
capital, dividends, capital expenditures, the purchase of MPI, the announced
stock repurchase program and other corporate needs.
-F19-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands of dollars)
________________________________________________________________________________________________________________________________
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
CLASSIFICATION BALANCE AT BEGINNING ADDITIONS AT RETIREMENTS OTHER CHANGES BALANCE AT END
OF PERIOD COST ADD(DEDUCT) OF PERIOD
(1) (2)
________________________________________________________________________________________________________________________________
Year Ended December 31, 1993
Land. . . . . . . . . . . . . . . . $ 8,746 $ 450 $ 182 $ 187 $ 9,201
Buildings and Improvements. . . . . 66,394 5,882 297 233 72,212
Machinery and Equipment . . . . . . 186,400 19,156 5,490 4,339 204,405
Furniture and Fixtures. . . . . . . 13,259 873 130 1,080 15,082
Leasehold Improvements. . . . . . . 2,050 186 102 2,134
Additions in Progress . . . . . . . 1,434 574 2,008
---------- ---------- ---------- ---------- ----------
Total $ 278,283 $ 27,121 $ 6,201 $ 5,839 $ 305,042
========== ========== ========== ========== ==========
Year Ended December 31, 1992
Land. . . . . . . . . . . . . . . . $ 8,098 $ 488 $ 160 $ 8,746
Buildings and Improvements. . . . . 63,892 843 1,659 66,394
Machinery and Equipment . . . . . . 165,953 14,605 $ 6,733 12,575 186,400
Furniture and Fixtures. . . . . . . 11,500 1,534 401 626 13,259
Leasehold Improvements. . . . . . . 1,902 165 17 2,050
Additions in Progress . . . . . . . 348 1,086 1,434
---------- ---------- ---------- ---------- ----------
Total $ 251,693 $ 18,721 $ 7,151 $ 15,020 $ 278,283
========== ========== ========== ========== ==========
Year Ended December 31, 1991
Land. . . . . . . . . . . . . . . . $ 8,263 $ 165 $ 8,098
Buildings and Improvements. . . . . 60,878 $ 3,104 447 $ 357 63,892
Machinery and Equipment . . . . . . 174,468 13,694 22,371 162 165,953
Furniture and Fixtures. . . . . . . 10,180 1,528 300 92 11,500
Leasehold Improvements. . . . . . . 1,863 100 61 1,902
Additions in Progress . . . . . . . 1,875 (1,527) 348
---------- ---------- ---------- ---------- ----------
Total $ 257,527 $ 16,899 $ 23,344 $ 611 $ 251,693
========== ========== ========== ========== ==========
NOTES:
(1) Increase in additions in progress, at cost, less transfers of completed projects to buildings and improvements,
machinery and equipment, and furniture and fixtures.
(2) The 1993 amount consists of $6,065,000 of assets obtained in the acquisition of RMBN and the remaining balance is
foreign currency exchange adjustments. Of the 1992 amount, $14,672,000 relates to assets obtained in the Interchecks
acquisition, $319,000 to revaluation of certain Datascan assets acquired in 1991 and the remaining balance to foreign
currency exchange adjustments. The 1991 amount of $611,000 relates to the acquisition of the remaining interest in
Datascan in November 1991.
-S1-
JOHN H. HARLAND COMPANIES AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(In thousands of dollars)
________________________________________________________________________________________________________________________________
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
DESCRIPTION BALANCE AT BEGINNING ADDITIONS CHARGED TO RETIREMENTS OTHER CHARGES BALANCE AT END
OF PERIOD COSTS AND EXPENSES ADD (DEDUCT) OF PERIOD
(1)
________________________________________________________________________________________________________________________________
Year Ended December 31, 1993
Buildings and Improvements. . . $ 18,504 $ 2,534 $ 79 $ 5 $ 20,964
Machinery and Equipment . . . . 102,151 21,695 3,844 (120) 119,882
Furniture and Fixtures. . . . . 8,270 1,904 102 4 10,075
Leasehold Improvements. . . . . 1,629 206 101 1,735
--------- --------- --------- ---------- ---------
Total $ 130,554 $ 26,339 $ 4,126 $ (111) $ 152,656
========= ========= ========= ========== =========
Year Ended December 31, 1992
Buildings and Improvements. . . $ 15,985 $ 2,477 $ 42 $ 18,504
Machinery and Equipment . . . . 87,189 20,511 $ 5,605 56 102,151
Furniture and Fixtures. . . . . 6,949 1,707 351 (35) 8,270
Leasehold Improvements. . . . . 1,443 202 16 1,629
--------- --------- --------- ---------- ---------
Total $ 111,566 $ 24,897 $ 5,972 $ 63 $ 130,554
========= ========= ========= ========== =========
Year Ended December 31, 1991
Buildings and Improvements. . . $ 13,818 $ 2,341 $ 174 $ 15,985
Machinery and Equipment . . . . 85,528 18,554 16,893 87,189
Furniture and Fixtures. . . . . 5,723 1,469 243 6,949
Leasehold Improvements. . . . . 1,273 230 60 1,443
--------- --------- --------- ---------
Total $ 106,342 $ 22,594 $ 17,370 $ 111,566
========= ========= ========= =========
NOTE:
(1) Classification changes and foreign currency exchange adjustments arising from changes in current rates of exchange.
-S2-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands of dollars)
_____________________________________________________________________________________________________________________________
COLUMN A COLUMN B ----------COLUMN C --------- COLUMN D COLUMN E
ADDITIONS
BALANCE AT BEGINNING CHARGED TO CHARGED TO BALANCE AT END
DESCRIPTION OF PERIOD COSTS AND EXPENSES OTHER ACCOUNTS DEDUCTIONS OF PERIOD
(1) (2)
_____________________________________________________________________________________________________________________________
Year Ended December 31, 1993
Allowance for doubtful accounts $ 1,343 $ 620 $ 215 $ 425 $ 1,753
======= ======= ====== ====== =======
Year Ended December 31, 1992
Allowance for doubtful accounts $ 1,348 $ 583 $ 332 $ 920 $ 1,343
======= ======= ====== ====== =======
Year Ended December 31, 1991
Allowance for doubtful accounts $ 916 $ 1,002 $ 249 (3) $ 819 $ 1,348
======= ======= ====== ====== =======
Notes:
(1) Represents recovery of previously written-off and credit balance accounts receivable.
(2) Represents write-offs of uncollectible accounts receivable.
(3) Includes $140,000 related to acquisition of subsidiary.
-S3-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands of dollars)
_________________________________________________________________________________________________________
MAXIMUM AVERAGE WEIGHTED
CATEGORY OF AMOUNT AMOUNT AVERAGE
AGGREGATE BALANCE WEIGHTED OUTSTANDING OUTSTANDING INTEREST RATE
SHORT-TERM AT END AVERAGE DURING THE DURING THE DURING THE
_________________________________________________________________________________________________________
Year Ended December 31, 1993
- ----------------------------
Notes Payable (1) $ -0- 3.5% $ 78,000 $ 34,214 3.5%
======== ======== ========
Industrial Revenue Bond (2) $ 4,000 5.1% $ 4,000 $ 4,000 5.1%
======== ======== ========
Year Ended December 31, 1992
- ----------------------------
Notes Payable (1) $ 18,000 3.8% $ 18,000 $ 49 3.8%
======== ======== ========
Industrial Revenue Bond (2) $ 4,000 5.3% $ 4,000 $ 4,000 5.3%
======== ======== ========
Year Ended December 31, 1991
- ----------------------------
Industrial Revenue Bond (2) $ 4,000 7.2% $ 4,000 $ 4,000 7.2%
======== ======== ========
(1) Represents borrowings under an unsecured line of credit for which no compensating balances or
commitment fees are required.
(2) The Industrial Revenue Bond amounts outstanding at December 31, 1993, 1992 and 1991 are payable
upon demand. The Company borrowed the funds on July 12, 1984.
(3) "Average Amount Outstanding During The Period" calculated based on daily outstanding
balances.
(4) "Weighted Average Interest Rate During The Period" calculated based on interest expense
and average amount outstanding during the period.
-S4-
JOHN H. HARLAND COMPANY AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands of dollars)
___________________________________________________________________________
ITEM 1993 1992 1991
___________________________________________________________________________
MAINTENANCE AND REPAIRS........ $ 15,790 $ 12,127 $ 9,785
======== ======== =======
Other items required by this schedule were less than one percent of net
sales or not applicable.
-S5-
EXHIBIT INDEX
(* indicates document is incorporated by reference)
Page Number
Location of
Documents or
Exhibit Incorporation
Desig- by Reference
nation Description (Inclusive)
______ ___________ ___________
3.1 * Amended and Restated Articles of Incorporation. 10
3.2 * By-laws, as amended. Adopted by the Board of
Directors on July 27, 1990. 10
4.1 Indenture, as supplemented and amended, relating
to 6.75% Convertible Subordinated Debentures due
2011 of Scantron Corporation (omitted pursuant to
Item 601(b)(4)(iii) of Regulation S-K; will be
filed upon request). 10
4.2 * Form of Rights Agreement, dated as of June 9,
between the Registrant and Citizens and Trust
Company. 10
4.3 * First Amendment dated June 12, 1992 to Rights
Agreement dated June 9, 1989 between the Company
and NationsBank of Georgia Inc., N.A., successor
to Citizens and Southern Trust Company. 10
4.4 * Second Amendment dated July 24, 1992 to Rights
Agreement dated June 9, 1989 between the Company
and Trust Company Bank, successor to NationsBank
of Georgia Inc., N.A., and to Citizens and
Southern Trust Company. 10
4.5 Note Agreement dated as of December 1, 1993
between the Company and the purchasers listed on
Schedule I of the agreement, for the issuance and
sale of $85,000,000 aggregate principle amount of
6.60% Series A Senior Notes Due December 30,
2008. 10
10.1 Form of Deferred Compensation Agreement between
the Registrant and the following Executive
Officer and Director: Mr. Woodson and the
following Retired Executive Officer and Current
Director: Mr. Lang. 10
10.2 * Form of Monthly Benefit Amendment to Deferred
Compensation Agreement between the Registrant and
following Executive Officer and Director: Mr.
Woodson and the following Retired Executive
Officer and Current Director: Mr. Lang. 10
10.3 * Form of Deferred Compensation Agreement between the
Registrant and the following executive officers:
Messrs. Dollar, Rogers and Rupe. 10
10.4 Form of Deferred Compensation Agreement
between the Registrant and Ms. Weyand,
Executive Officer. 10
10.5 Form of Frozen Benefit Amendment to
Deferred Compensation Agreement between
the Registrant and Ms. Weyand, Executive
Officer. 10
-X1-
EXHIBIT INDEX continued
Page Number
Location of
Documents or
Exhibit Incorporation
Desig- by Reference
nation Description (Inclusive)
______ ___________ ___________
10.6 Form of Amendment to Deferred Compensation
Agreement between the Registrant and the
following Executive Officer Director: Mr.
Woodson and the following Retired Executive
Officer and Current Director: Mr. Lang and the
following Executive Officers: Messrs. Dollar,
Rogers and Rupe and Ms. Weyand. 11
10.7 Form of Non-Compete and Termination Agreement
between the Registrant and the following
Executive Officer and Director: Mr. Woodson, the
following Retired Executive Officer and Current
Director: Mr. Lang and the following Executive
Officers Messrs. Dollar, Rogers and Rupe. 11
10.8 Form of Executive Life Insurance Plan between the
Registrant and the following Executive Officer
and Director: Mr. Woodson, the following Retired
Executive Officer and Current Director: Mr. Lang
and the following Executive Officers: Messrs.
Dollar, Rogers and Rupe and Ms. Weyand. 11
10.9 * The John H. Harland Company Incentive Stock
Option Plan. 11
10.10 Amendment to the John H. Harland Company
Incentive Stock Option Plan. 11
10.11 * John H. Harland Company 1981 Incentive Stock
Option Plan, As Extended. 11
10.12 * Asset Purchase Agreement, dated as of February 7,
1992, by and among the Registrant , Rexham, Inc.
("Rexham") and Interchecks; as partially assigned
to Centralia Holding Corp. ("Centralia") on
February 19, 1992; and as amended on February 12,
1992 by and among the Registrant, Centralia,
Rexham and Interchecks. 11
10.13 * Asset Purchase Agreement, dated as of November
13, 1992, by and among the Registrant, The Rocky
Mountain Bank Note Company and Romo Corp.; and as
amended on November 25, 1992, by and among the
Registrant, The Rocky Mountain Bank Note Company
and Romo Corp. 11
10.14 Term Loan Agreement dated as of October 25, 1993
between the Company and Trust Company Bank for a
$15,000,000 Term Loan due 2003. 11
21.1 Subsidiaries of the Registrant. 11
23.1 Independent Auditors' Consent 11
-X2-