July 26, 2019 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission file number: 1-7945

DELUXE CORPORATION

(Exact name of registrant as specified in its charter)



MN			41-0216800
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
3680 Victoria St. N.	Shoreview	MN	55126-2966
(Address of principal executive offices)			(Zip Code)

(651) 483-7111

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	DLX	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

The number of shares outstanding of registrant’s common stock as of July 17, 2019 was 42,931,368.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

DELUXE CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share par value)

(Unaudited)



	June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	66,732		$	59,740
Trade accounts receivable, net of allowances for uncollectible accounts	152,784			173,862
Inventories and supplies	46,097			46,441
Funds held for customers	93,709			100,982
Revenue in excess of billings	30,868			30,458
Other current assets	54,887			38,563
Total current assets	445,077			450,046
Deferred income taxes	5,464			2,886
Long-term investments	44,396			43,773
Property, plant and equipment (net of accumulated depreciation of $374,625 and $367,205, respectively)	91,494			90,342
Operating lease assets	43,972			—
Intangibles (net of accumulated amortization of $587,075 and $535,627, respectively)	325,659			359,965
Goodwill	1,158,813			1,160,626
Assets held for sale	1,350			1,350
Other non-current assets	197,813			196,108
Total assets	$	2,314,038		$	2,305,096

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	95,412		$	106,978
Accrued liabilities	254,222			284,281
Long-term debt due within one year	—			791
Total current liabilities	349,634			392,050
Long-term debt	951,000			911,073
Operating lease liabilities	33,496			—
Deferred income taxes	51,910			46,680
Other non-current liabilities	33,849			39,880
Commitments and contingencies (Notes 13 and 14)
Shareholders' equity:
Common shares $1 par value (authorized: 500,000 shares; outstanding: June 30, 2019 – 42,928; December 31, 2018 – 44,647)	42,928			44,647
Retained earnings	904,748			927,345
Accumulated other comprehensive loss	(53,527		)	(56,579		)
Total shareholders’ equity	894,149			915,413
Total liabilities and shareholders’ equity	$	2,314,038		$	2,305,096

See Condensed Notes to Unaudited Consolidated Financial Statements

DELUXE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share amounts)

(Unaudited)



	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Product revenue	$	347,061		$	359,935		$	697,580		$	723,342
Service revenue	146,925			128,309			295,471			256,816
Total revenue	493,986			488,244			993,051			980,158
Cost of products	(133,798		)	(134,332		)	(265,061		)	(267,703		)
Cost of services	(68,730		)	(55,869		)	(137,090		)	(111,256		)
Total cost of revenue	(202,528		)	(190,201		)	(402,151		)	(378,959		)
Gross profit	291,458			298,043			590,900			601,199
Selling, general and administrative expense	(222,292		)	(209,585		)	(452,469		)	(420,739		)
Restructuring and integration expense	(17,342		)	(5,635		)	(22,834		)	(7,780		)
Asset impairment charges	—			—			—			(2,149		)
Operating income	51,824			82,823			115,597			170,531
Interest expense	(9,239		)	(6,130		)	(18,540		)	(11,708		)
Other income	2,168			2,436			3,934			3,724
Income before income taxes	44,753			79,129			100,991			162,547
Income tax provision	(12,171		)	(18,922		)	(27,219		)	(39,003		)
Net income	$	32,582		$	60,207		$	73,772		$	123,544
Comprehensive income	$	33,744		$	57,272		$	76,824		$	118,838
Basic earnings per share	0.75			1.26			1.68			2.58
Diluted earnings per share	0.75			1.25			1.68			2.56

See Condensed Notes to Unaudited Consolidated Financial Statements

DELUXE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)

(Unaudited)



	Common shares		Common shares par value			Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total
Balance, March 31, 2019	43,638		$	43,638		$	—		$	908,614		$	(54,689	)	$	897,563
Net income	—		—			—			32,582			—			32,582
Cash dividends ($0.30 per share)	—		—			—			(13,296		)	—			(13,296		)
Common shares issued	13		13			76			—			—			89
Common shares repurchased	(718	)	(718		)	(5,026		)	(23,152		)	—			(28,896		)
Other common shares retired	(5	)	(5		)	(196		)	—			—			(201		)
Employee share-based compensation	—		—			5,146			—			—			5,146
Other comprehensive income	—		—			—			—			1,162			1,162
Balance, June 30, 2019	42,928		$	42,928		$	—		$	904,748		$	(53,527	)	$	894,149



	Common shares		Common shares par value			Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total
Balance, December 31, 2018	44,647		$	44,647		$	—		$	927,345		$	(56,579	)	$	915,413
Net income	—		—			—			73,772			—			73,772
Cash dividends ($0.60 per share)	—		—			—			(26,467		)	—			(26,467		)
Common shares issued	99		99			1,938			—			—			2,037
Common shares repurchased	(1,757	)	(1,757		)	(7,504		)	(69,635		)	—			(78,896		)
Other common shares retired	(61	)	(61		)	(2,810		)	—			—			(2,871		)
Employee share-based compensation	—		—			8,376			—			—			8,376
Adoption of Accounting Standards Update No. 2016-02 (Note 2)	—		—			—			(267		)	—			(267		)
Other comprehensive income	—		—			—			—			3,052			3,052
Balance, June 30, 2019	42,928		$	42,928		$	—		$	904,748		$	(53,527	)	$	894,149

See Condensed Notes to Unaudited Consolidated Financial Statements

DELUXE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued)

(in thousands)

(Unaudited)



	Common shares		Common shares par value			Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total
Balance, March 31, 2018	47,841		$	47,841		$	—		$	1,050,064		$	(46,235	)	$	1,051,670
Net income	—		—			—			60,207			—			60,207
Cash dividends ($0.30 per share)	—		—			—			(14,385		)	—			(14,385		)
Common shares issued	241		241			9,220			—			—			9,461
Common shares repurchased	(295	)	(295		)	(502		)	(19,203		)	—			(20,000		)
Other common shares retired	(164	)	(164		)	(11,534		)	—			—			(11,698		)
Employee share-based compensation	—		—			2,816			—			—			2,816
Other comprehensive loss	—		—			—			—			(2,935		)	(2,935		)
Balance, June 30, 2018	47,623		$	47,623		$	—		$	1,076,683		$	(49,170	)	$	1,075,136



	Common shares		Common shares par value			Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Total
Balance, December 31, 2017	47,953		$	47,953		$	—		$	1,004,657		$	(37,597	)	$	1,015,013
Net income	—		—			—			123,544			—			123,544
Cash dividends ($0.60 per share)	—		—			—			(28,804		)	—			(28,804		)
Common shares issued	490		490			16,677			—			—			17,167
Common shares repurchased	(573	)	(573		)	(4,876		)	(34,547		)	—			(39,996		)
Other common shares retired	(247	)	(247		)	(17,579		)	—			—			(17,826		)
Employee share-based compensation	—		—			5,778			—			—			5,778
Adoption of Accounting Standards Update No. 2014-09	—		—			—			4,966			—			4,966
Adoption of Accounting Standards Update No. 2018-02	—		—			—			6,867			(6,867		)	—
Other comprehensive loss	—		—			—			—			(4,706		)	(4,706		)
Balance, June 30, 2018	47,623		$	47,623		$	—		$	1,076,683		$	(49,170	)	$	1,075,136

See Condensed Notes to Unaudited Consolidated Financial Statements

DELUXE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)



	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	73,772		$	123,544
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	8,448			7,823
Amortization of intangibles	56,488			55,694
Operating lease expense	8,782			—
Asset impairment charges	—			2,149
Amortization of prepaid product discounts	11,681			11,124
Deferred income taxes	2,718			(2,747		)
Employee share-based compensation expense	9,224			5,757
Loss (gain) on sales of businesses and customer lists	99			(11,090		)
Other non-cash items, net	7,224			3,547
Changes in assets and liabilities, net of effect of acquisitions:
Trade accounts receivable	18,881			16,670
Inventories and supplies	(836		)	(1,245		)
Other current assets	(11,975		)	(12,435		)
Non-current assets	(2,249		)	(3,400		)
Accounts payable	(12,621		)	2,858
Prepaid product discount payments	(16,182		)	(13,282		)
Other accrued and non-current liabilities	(48,350		)	(38,031		)
Net cash provided by operating activities	105,104			146,936
Cash flows from investing activities:
Purchases of capital assets	(32,344		)	(28,040		)
Payments for acquisitions, net of cash acquired	(1,566		)	(90,205		)
Purchases of customer funds marketable securities	(3,778		)	(3,943		)
Proceeds from customer funds marketable securities	3,778			3,943
Other	1,110			682
Net cash used by investing activities	(32,800		)	(117,563		)
Cash flows from financing activities:
Proceeds from issuing long-term debt	154,000			908,000
Payments on long-term debt	(113,000		)	(851,410		)
Net change in customer funds obligations	(10,677		)	9,287
Proceeds from issuing shares under employee plans	1,637			5,767
Employee taxes paid for shares withheld	(2,872		)	(7,947		)
Payments for common shares repurchased	(78,896		)	(39,996		)
Cash dividends paid to shareholders	(26,253		)	(28,762		)
Other	(1,440		)	(3,921		)
Net cash used by financing activities	(77,501		)	(8,982		)
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents	3,996			(3,907		)
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	(1,201		)	16,484
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of year	145,259			128,819
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period (Note 3)	$	144,058		$	145,303

See Condensed Notes to Unaudited Consolidated Financial Statements

DELUXE CORPORATION

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 1: Consolidated financial statements

The consolidated balance sheet as of June 30, 2019, the consolidated statements of comprehensive income for the quarters and six months ended June 30, 2019 and 2018, the consolidated statements of shareholders’ equity for the quarters and six months ended June 30, 2019 and 2018, and the consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 are unaudited. The consolidated balance sheet as of December 31, 2018 was derived from audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles (GAAP) in the United States of America. In the opinion of management, all adjustments necessary for a fair statement of the consolidated financial statements are included. Adjustments consist only of normal recurring items, except for any discussed in the notes below. Interim results are not necessarily indicative of results for a full year. The consolidated financial statements and notes are presented in accordance with instructions for Form 10-Q and do not contain certain information included in our annual consolidated financial statements and notes. The consolidated financial statements and notes appearing in this report should be read in conjunction with the consolidated audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”).

Amounts within cash flows from operating activities on the consolidated statement of cash flows for the six months ended June 30, 2018 have been modified to conform to the current year presentation. Loss (gain) on sales of businesses and customer lists is now presented separately. In the previous year, this amount was included within other non-cash items, net.

In November 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-18, Restricted Cash. This standard requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. This standard was effective for us on January 1, 2018 and was required to be applied retrospectively. During the quarter ended December 31, 2018, we identified a misstatement in our statement of cash flows presentation under this standard. We concluded that the cash and cash equivalents included in funds held for customers should be included with cash, cash equivalents, restricted cash and restricted cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows, in accordance with ASU No. 2016-18. Additionally, we determined that gross redemptions and purchases of marketable debt securities included in funds held for customers should be presented as cash flows from investing activities in the statements of cash flows. This misstatement affected our consolidated statements of cash flows as presented in our 2018 Quarterly Reports on Form 10-Q.

We assessed the materiality of this misstatement on prior periods' financial statements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 99, Materiality, codified in Accounting Standards Codification (ASC) 250, Presentation of Financial Statements. We concluded that the misstatement was not material to any prior interim period and therefore, amendments of previously filed reports are not required. In accordance with ASC 250, we have corrected the misstatement for all prior periods presented by revising the consolidated financial statements appearing herein. Periods not presented herein will be revised, as applicable, in future filings. The revisions had no impact on total assets, total liabilities, shareholders' equity, net income or net cash provided by operating activities.

The impact of the revisions on our consolidated statement of cash flows for the six months ended June 30, 2018 was as follows:



(in thousands)	Previously reported			Adjustment			Revised
Purchases of customer funds marketable securities	$	—		$	(3,943	)	$	(3,943	)
Proceeds from customer funds marketable securities	—			3,943			3,943
Net cash used by investing activities	(117,563		)	—			(117,563		)
Net change in customer funds obligations	—			9,287			9,287
Net cash used by financing activities	(18,269		)	9,287			(8,982		)
Effect of exchange rate change on cash, cash equivalents, restricted cash and restricted cash equivalents	(1,750		)	(2,157		)	(3,907		)
Net change in cash, cash equivalents, restricted cash and restricted cash equivalents	9,354			7,130			16,484
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of year	59,240			69,579			128,819
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period	$	68,594		$	76,709		$	145,303

DELUXE CORPORATION

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Note 2: New accounting pronouncements

ASU No. 2016-02 – In February 2016, the FASB issued ASU No. 2016-02, Leasing. This standard is intended to increase transparency and comparability among organizations by requiring the recognition of lease right-of-use assets and lease liabilities for virtually all leases and by requiring the disclosure of key information about leasing arrangements. In July 2018, the FASB issued two amendments to this standard: ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which amended narrow aspects of the guidance in ASU No. 2016-02, and ASU No. 2018-11, Targeted Improvements, which provided an optional transition method under which comparative periods presented in financial statements in the period of adoption would not be restated. In March 2019, the FASB issued ASU No. 2019-01, Codification Improvements. This standard addressed areas identified as companies prepared to implement ASU No. 2016-02. We adopted all of these standards on January 1, 2019, using a modified retrospective approach and the optional transition method under ASU No. 2018-11. As such, prior periods have not been restated to reflect the new guidance.

We elected the practical expedient package outlined in ASU No. 2016-02 under which we did not have to reassess whether an arrangement contains a lease, we carried forward our previous classification of leases as either operating or capital leases, and we did not reassess previously recorded initial direct costs. Additionally, we made the following policy elections:


•	we excluded leases with original terms of 12 months or less from lease assets and lease liabilities;


•	we separated nonlease components, such as common area maintenance charges and utilities, from the associated lease component for real estate leases, based on their estimated fair values; and


•	we used the accounting lease term when determining the incremental borrowing rate for leases with renewal

options.

Adoption of the standards had a material impact on our consolidated balance sheet, but did not have a significant impact on our consolidated statement of comprehensive income or our consolidated statement of cash flows. The most significant impact was the recognition of operating lease assets of $50,803, current operating lease liabilities of $13,611 and non-current operating lease liabilities of $37,440 as of January 1, 2019. Our accounting for finance leases remained substantially unchanged.

We determine if an arrangement is a lease at inception by considering whether a contract explicitly or implicitly identifies assets deployed in the arrangement and whether we have obtained substantially all of the economic benefits from the use of the underlying assets and direct how and for what purpose the assets are used during the term of the contract. Operating leases are included in operating lease assets, accrued liabilities and operating lease liabilities on our consolidated balance sheet. Finance leases are included in property, plant and equipment, accrued liabilities and other non-current liabilities on our consolidated balance sheet.

Lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As our lease agreements typically do not provide an implicit rate, we use our incremental borrowing rate based on information available at the lease commencement date in determining the present value of lease payments. Certain of our lease agreements include options to extend or terminate the lease. The lease term takes into account these options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is included in total cost of revenue and in selling, general and administrative (SG&A) expense on the consolidated statement of comprehensive income, and interest on finance leases is included in interest expense on the consolidated statement of comprehensive income. Operating lease expense is recognized on the straight-line basis over the lease term. Information regarding our leases can be found in Note 13.

ASU No. 2016-13 – In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments. This standard introduces new guidance for the accounting for credit losses on instruments within its scope, including trade and loans receivable and available-for-sale debt securities. Subsequently, the FASB issued several amendments to this standard. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of ASU No. 2016-13. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. This standard provides additional

DELUXE CORPORATION

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

guidance on the measurement and presentation of credit losses. In May 2019, the FASB issued ASU No. 2019-05, Targeted Transition Relief, which provides transition guidance to entities that elect the fair value option for eligible instruments. All of these standards are effective for us on January 1, 2020 and require adoption using a modified retrospective approach. We do not expect the application of these standards to have a significant impact on our results of operations or financial position.

ASU No. 2018-13 – In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurements. This standard removes, modifies and adds certain disclosures related to recurring and nonrecurring fair value measurements. During 2018, we adopted the provisions of the standard that remove and modify disclosure requirements. The additional disclosures required under the guidance are effective for us on January 1, 2020 and are required to be applied prospectively to fair value measurements completed on or after the effective date.

ASU No. 2018-15 – In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The accounting for the service element of a hosting arrangement that is a service contract is not affected by the new standard. The guidance is effective for us on January 1, 2020 and may be adopted retrospectively or prospectively to eligible costs incurred on or after the date the guidance is first applied. This new guidance will impact our results of operations and financial position as we currently expense these implementation costs as incurred. As we have not historically tracked these costs, we are not able to quantify the expected impact on our consolidated financial statements. We plan to adopt the standard prospectively.

Note 3: Supplemental balance sheet and cash flow information

Allowance for uncollectible accounts – Changes in the allowance for uncollectible accounts for the six months ended June 30, 2019 and 2018 were as follows:



	Six Months Ended June 30,
(in thousands)	2019			2018
Balance, beginning of year	$	3,639		$	2,884
Bad debt expense	2,549			1,470
Write-offs, net of recoveries	(1,669		)	(1,383		)
Balance, end of period	$	4,519		$	2,971

Inventories and supplies – Inventories and supplies were comprised of the following:



(in thousands)	June 30, 2019		December 31, 2018
Raw materials	$	7,856	$	7,543
Semi-finished goods	7,519		7,273
Finished goods	27,600		27,608
Supplies	3,122		4,017
Inventories and supplies	$	46,097	$	46,441

DELUXE CORPORATION

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

Available-for-sale debt securities – Available-for-sale debt securities included within funds held for customers were comprised of the following:



	June 30, 2019
(in thousands)	Cost		Gross unrealized gains		Gross unrealized losses			Fair value
Funds held for customers:⁽¹⁾
Domestic money market fund	$	14,000	$	—	$	—		$	14,000
Canadian and provincial government securities	8,916		—		(170		)	8,746
Canadian guaranteed investment certificates	7,637		—		—			7,637
Available-for-sale debt securities	$	30,553	$	—	$	(170	)	$	30,383

⁽¹⁾Funds held for customers, as reported on the consolidated balance sheet as of June 30, 2019, also included cash of $63,326.



	December 31, 2018
(in thousands)	Cost		Gross unrealized gains		Gross unrealized losses			Fair value
Funds held for customers:⁽¹⁾
Domestic money market fund	$	16,000	$	—	$	—		$	16,000
Canadian and provincial government securities	8,485		—		(355		)	8,130
Canadian guaranteed investment certificates	7,333		—		—			7,333
Available-for-sale debt securities	$	31,818	$	—	$	(355	)	$	31,463

⁽¹⁾Funds held for customers, as reported on the consolidated balance sheet as of December 31, 2018, also included cash of $69,519.

Expected maturities of available-for-sale debt securities as of June 30, 2019 were as follows:



(in thousands)	Fair value
Due in one year or less	$	24,820
Due in two to five years	3,892
Due in six to ten years	1,671
Available-for-sale debt securities	$	30,383

Further information regarding the fair value of available-for-sale debt securities can be found in Note 7.

Revenue in excess of billings – Revenue in excess of billings was comprised of the following:



(in thousands)	June 30, 2019		December 31, 2018
Conditional right to receive consideration	$	19,781	$	19,705
Unconditional right to receive consideration	11,087		10,753
Revenue in excess of billings	$	30,868	$	30,458

Assets held for sale – Assets held for sale as of June 30, 2019 and December 31, 2018 consisted of 1 small business customer list with a carrying value of $1,350. We are actively marketing this asset, and we expect the selling price will equal or exceed its current carrying value.

During the quarter ended June 30, 2018, we sold the assets of a provider of printed and promotional products, as well as certain small business customer lists. During the six months ended June 30, 2018, we also sold the assets of a small business distributor, as well as additional small business customer lists. We determined that these assets would be better positioned for

DELUXE CORPORATION

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

long-term growth if they were managed by independent distributors. Subsequent to the sales, the assets are owned by independent distributors that are part of our Safeguard^® distributor network. As such, our revenue was not impacted by these sales and the impact to our costs was not significant. These sales resulted in aggregate net gains within SG&A expense of $3,862 for the quarter ended June 30, 2018 and $11,090 for the six months ended June 30, 2018.

Intangibles – Intangibles were comprised of the following:

Form: 10-Q

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