ATLANTA, Feb. 8, 2006 (PRIMEZONE) -- John H. Harland Company (NYSE:JH) today reported results for the fourth quarter and full year of 2005.
Consolidated sales for the quarter increased 21.9% year-over-year to $267.0 million, compared to 2004 fourth quarter sales of $219.0 million. Consolidated net income for the fourth quarter decreased 1.2% year-over-year to $20.9 million, compared to $21.1 million for the fourth quarter of 2004. Diluted earnings per share for the quarter were $0.75, unchanged from the same period in 2004. The fourth quarter of 2004 included a pre-tax benefit of $3.0 million related to a change in vacation policy.
For the 12 months ended December 31, 2005, consolidated sales increased 23.1% year-over-year, to $982.9 million, compared with $798.5 million a year earlier. Consolidated net income for the year increased 36.9% year-over-year to $75.5 million, compared to 2004 net income of $55.1 million. Diluted earnings per share for the year increased 37.2% to $2.69, compared to 2004 diluted earnings per share of $1.96.
Results for the 12 months ended December 31, 2004 included a pre-tax impairment charge of $7.9 million, equivalent to $0.17 per share, related to the development of new customer care systems for Harland's Printed Products segment and pre-tax charges of $5.8 million, equivalent to $0.13 per share, related to the reorganization of the company's Printed Products segment.
"Fourth quarter results were in line with our expectations and capped a record year for Harland," said Timothy C. Tuff, chairman and chief executive officer of Harland. "We completed two of the three largest acquisitions in Harland's history, and our revenue now exceeds $1 billion on an annualized basis. We significantly increased our cash flow from operating activities during the year while also investing in new products and services."
During the fourth quarter of 2005, Harland also completed its existing share repurchase authorization. Harland's Board of Directors has authorized the repurchase of an additional three million shares.
Segment Reporting
Harland reports results for three segments: Printed Products, Software and Services and Scantron.
Sales for the quarter from Harland's Printed Products segment increased 22.3% year-over-year to $161.6 million, compared to $132.2 million reported for the same period a year earlier. Segment income from Printed Products decreased 8.6% in the quarter year-over-year to $25.4 million, compared to $27.8 million in 2004, which included $2.9 million of the benefit associated with the previously mentioned change in vacation policy.
"Printed Products rounded out an exceptional year in which sales and check unit volumes reached record levels," said Tuff. "The integration of Liberty continues to go well, and we have established Liberty as our channel of distribution for credit unions."
Software and Services sales for the quarter increased 39.4% year-over-year to $75.4 million, compared to $54.1 million in 2004. Segment income from Software and Services increased 41.5% in the quarter year-over-year to $14.5 million, compared to $10.3 million in 2004.
"Software and Services had a good quarter," said Tuff. "We have continued to invest in new products and in new businesses, and we expect these investments will stimulate organic growth in 2006."
Scantron's sales for the quarter decreased 4.0% year-over-year to $30.0 million, compared to $31.3 million in 2004. Segment income decreased 5.4% in the quarter year-over-year to $8.8 million compared to $9.3 million a year earlier.
"Scantron had a disappointing quarter," said Tuff. "Our traditional products continue to do well. However, while the potential for our newer products remains strong, they are taking longer than expected to gain traction in the market."
The company expects 2006 earnings to be in the range of $2.73 to $2.78 per diluted share. The company expects first-quarter earnings to be in the range of $0.60 to $0.65 per diluted share.
Harland's board of directors declared a quarterly dividend of $0.15 per share, payable February 24, 2006 to shareholders of record as of February 15, 2006.
Harland will hold a conference call February 9, 2006 at 10:00 a.m. EST to discuss the results of the quarter and the outlook for the remainder of the year. Interested parties may listen in by accessing a live webcast in the investor relations section of Harland's Web site at www.harland.net. The live conference call can also be accessed by calling 1-719-457-2679 and using the access code #1482906.
A replay of the conference call will be available in the investor relations section of Harland's Web site (www.harland.net) beginning approximately two hours after the call. The rebroadcast will also be available until February 16, 2006 via telephone by calling 1-719-457-0820 and using the access code #1482906.
The company has posted quarterly segment information dating back to 2003. The segment information can be found in the investor relations section of the company's Web site at www.harland.net under News and Publications.
About Harland
Atlanta-based John H. Harland Company (NYSE:JH) (http://www.harland.net) is a leading provider of software and printed products to the financial and educational markets. Harland Financial Solutions, Inc. (http://www.harlandfinancialsolutions.com), a wholly owned subsidiary, 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 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.
The Company is subject to federal regulations implementing the information security requirements of the Gramm-Leach-Bliley Act and other federal regulations and state laws regarding the privacy and confidentiality of consumer information. These laws and regulations require the Company to develop, implement and maintain a comprehensive information security program designed to protect the security and confidentiality of consumers' nonpublic personal information and to define requirements for notification in the event of improper disclosure. The Company cannot be certain that advances in criminal capabilities, new discoveries in the field of cryptography or other developments will not compromise or breach the technology protecting the networks that utilize consumers' nonpublic personal information.
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 successful implementation of new accounts, the continuing upgrade of our customer care infrastructure and systems used in the Company's manufacturing, sales, marketing, customer service and call center operations, and the successful integration of Liberty Enterprises businesses into Harland.
Several factors outside the Company's control could negatively impact check revenues. These include the continuing expansion of alternative payment systems such as credit cards, debit cards and other forms of electronic commerce or online payment systems. Check revenues may continue to be adversely affected by continued consolidation of financial institutions, competitive check pricing including up-front contract incentive payments, and the impact of governmental laws and regulations. There can be no assurances that the Company will not lose additional customers or that any such loss could be offset by the addition of new customers.
While the Company believes growth opportunities exist in the Software and Services segment, there can be no assurances that the Company will achieve its revenue or earnings growth targets. The Company believes there are many risk factors inherent in its software business, including but not limited to the retention of employee talent and customers. Also, variables exist in the development of new software products, including the timing and costs of the development effort, product performance, functionality, product acceptance, competition, the Company's ability to integrate acquired companies, and general changes in economic conditions or U.S. financial markets.
Several factors outside of the Company's control could affect results in the Scantron segment. These include the rate of adoption of new electronic data collection solutions, and testing and assessment methods, which could negatively impact 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, 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 - 4th Quarter 2005
Condensed Statements of Income (Unaudited)
(in 000's)
Three Months ended
December 31, December 31,
2005 2004 %
-------------------------------------------------------------
Sales $ 267,012 $ 218,957 21.9%
Cost of sales 133,358 105,266 26.7%
Pct of Sales 49.9% 48.1%
---------- ----------
Gross profit 133,654 113,691 17.6%
Pct of Sales 50.1% 51.9%
Selling, general and
administrative expenses 93,956 77,280 21.6%
Pct of Sales 35.2% 35.3%
Asset impairment charges -- 162
Pct of Sales 0.0% 0.1%
(Gain) loss on disposal of
assets 61 154 -60.4%
Pct of Sales 0.0% 0.1%
Amortization of intangibles 4,057 964 320.9%
Pct of Sales 1.5% 0.4%
---------- ----------
Operating Income 35,580 35,131 1.3%
Pct of Sales 13.3% 16.0%
Other Income (Expense):
Interest expense (3,441) (1,035) 232.5%
Pct of Sales -1.3% -0.5%
Other - net 934 500 86.8%
Pct of Sales 0.3% 0.2%
---------- ----------
Income before Income Taxes 33,073 34,596 -4.4%
Pct of Sales 12.4% 15.8%
Income taxes 12,210 13,490 -9.5%
Pct of Sales 4.6% 6.2%
---------- ----------
Net Income $ 20,863 $ 21,106 -1.2%
========== ==========
Pct of Sales 7.8% 9.6%
Effective Tax Rate 36.9% 39.0%
Earnings per Share
Basic $ 0.77 $ 0.78 -1.3%
Diluted $ 0.75 $ 0.75 0.0%
Weighted Average Shares (000)
Basic 27,110 27,061 0.2%
Diluted 27,979 28,001 -0.1%
Shares O/S at end of
period (000) 27,200 27,278 -0.3%
Return on Equity 25.5% 30.7% -5.2 pct pts
Depreciation and
Amortization (000) $ 23,105 $ 18,211 26.9%
Capital Expenditures (000) $ 7,389 $ 8,202 -9.9%
Number of Employees
(includes temporary employees) 5,686 4,854 17.1%
Segment Information
Printed Products
Sales $ 161,607 $ 132,191 22.3%
Depreciation & Amortization $ 17,277 $ 14,309 20.7%
Segment Income $ 25,429 $ 27,822 -8.6%
Software and Services
Sales $ 75,402 $ 54,100 39.4%
Depreciation & Amortization $ 4,795 $ 2,651 80.9%
Segment Income $ 14,516 $ 10,259 41.5%
Scantron
Sales $ 30,044 $ 31,305 -4.0%
Depreciation & Amortization $ 907 $ 1,041 -12.9%
Segment Income $ 8,753 $ 9,256 -5.4%
Corporate and Eliminations
Sales $ (41) $ 1,361 -103.0%
Depreciation & Amortization $ 126 $ 210 -40.0%
Segment Income (Loss) $ (15,625) $ (12,741) 22.6%
Segment income (loss) is defined as income before income taxes.
John H. Harland Company
Financial Highlights - 4th Quarter 2005
Condensed Statements of Income (Unaudited)
(in 000's)
Twelve Months ended
December 31, December 31,
2005 2004 %
--------------------------------------------------------------
Sales $ 982,909 $ 798,487 23.1%
Cost of sales 495,774 405,934 22.1%
Pct of Sales 50.4% 50.8%
---------- ----------
Gross profit 487,135 392,553 24.1%
Pct of Sales 49.6% 49.2%
Selling, general and
administrative expenses 346,304 290,586 19.2%
Pct of Sales 35.2% 36.4%
Asset impairment charges -- 10,329 -100.0%
Pct of Sales 0.0% 1.3%
(Gain) loss on disposal of assets 67 (3,387) -102.0%
Pct of Sales 0.0% -0.4%
Amortization of intangibles 11,590 3,773 207.2%
Pct of Sales 1.2% 0.5%
---------- ----------
Operating Income 129,174 91,252 41.6%
Pct of Sales 13.1% 11.4%
Other Income (Expense):
Interest expense (10,024) (4,117) 143.5%
Pct of Sales -1.0% -0.5%
Other - net 2,197 767 186.4%
Pct of Sales 0.2% 0.1%
---------- ----------
Income before Income Taxes 121,347 87,902 38.0%
Pct of Sales 12.3% 11.0%
Income taxes 45,869 32,787 39.9%
Pct of Sales 4.7% 4.1%
---------- ----------
Net Income $ 75,478 $ 55,115 36.9%
========== ==========
Pct of Sales 7.7% 6.9%
Effective Tax Rate 37.8% 37.3%
Earnings per Share
Basic $ 2.77 $ 2.02 37.1%
Diluted $ 2.69 $ 1.96 37.2%
Weighted Average Shares (000)
Basic 27,224 27,269 -0.2%
Diluted 28,090 28,084 0.0%
Shares O/S at end of
period (000) 27,200 27,278 -0.3%
Return on Equity 25.4% 20.8% 4.6 pct pts
Depreciation and
Amortization (000) $ 87,196 $ 71,779 21.5%
Capital Expenditures (000) $ 23,917 $ 28,943 -17.4%
Number of Employees
(includes temporary employees) 5,686 4,854 17.1%
Segment Information
Printed Products
Sales $ 610,144 $ 488,688 24.9%
Depreciation & Amortization $ 66,446 $ 55,084 20.6%
Segment Income $ 101,890 $ 66,016 54.3%
Software and Services
Sales $ 256,849 $ 193,843 32.5%
Depreciation & Amortization $ 16,522 $ 11,679 41.5%
Segment Income $ 35,835 $ 25,261 41.9%
Scantron
Sales $ 116,513 $ 116,643 -0.1%
Depreciation & Amortization $ 3,686 $ 4,288 -14.0%
Segment Income $ 30,470 $ 32,841 -7.2%
Corporate and Eliminations
Sales $ (597) $ (687) -13.1%
Depreciation & Amortization $ 542 $ 728 -25.5%
Segment Income (Loss) $ (46,848) $ (36,216) 29.4%
Segment income (loss) is defined as income before income taxes.
John H. Harland Company
Financial Highlights - 4th Quarter 2005
Condensed Statements of Cash Flows (Unaudited)
(in 000's)
Twelve Months ended
December 31, December 31,
2005 2004
--------------------------------------------------------------------
Operating Activities:
Net Income $ 75,478 $ 55,115
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 87,196 71,779
Contract payments (25,231) (27,109)
All other 16,314 20,586
--------- ---------
Net cash provided by operating activities 153,757 120,371
--------- ---------
Investing Activities:
Purchases of property, plant and equipment (23,917) (28,943)
Payment for acquisition of businesses,
net of cash acquired (239,756) (30,160)
All other 1,565 8,060
--------- ---------
Net cash (used in) investing activities (262,108) (51,043)
--------- ---------
Financing Activities:
Repurchases of stock (45,052) (45,295)
Credit facility borrowings - net 153,294 (25,758)
All other 1,193 2,414
--------- ---------
Net cash provided by (used in) financing
activities 109,435 (68,639)
--------- ---------
Increase in cash and cash equivalents 1,084 689
Cash and cash equivalents at beginning
of period 9,214 8,525
--------- ---------
Cash and cash equivalents at end of period $ 10,298 $ 9,214
========= =========