- Diluted EPS of $0.59; adjusted EPS of $0.70 grows 3% vs. prior
year; strong revenue at high end of outlook - Provides improved
2010 outlook; projecting strong EPS and operating cash flow
performance - Declares regular quarterly dividend ST. PAUL, Minn.,
Jan. 28 /PRNewswire-FirstCall/ -- Deluxe Corporation (NYSE:DLX)
reported fourth quarter adjusted diluted earnings per share (EPS)
from continuing operations of $0.70 compared to $0.68 in the prior
year fourth quarter. Adjusted EPS for both periods excludes the
impact of restructuring-related costs, and for 2009, also excludes
the impact of transaction-related costs associated with recent
acquisitions. Adjusted EPS for 2008 also excludes an asset
impairment charge. Operating results were better than expected for
the current period due to favorable shifts in product mix and cost
reduction and containment initiatives. Reported diluted EPS was
$0.59 on net income of $30.5 million in the fourth quarter 2009 and
$0.54 on net income of $27.9 million in the comparable quarter of
2008. The 2009 period included restructuring and related costs of
$7.3 million associated with the planned closure of a call center,
further consolidation in the sales and marketing organization and
other cost reduction initiatives, and $1.4 million of
transaction-related expenses. Results for 2008 included
restructuring and related costs and asset impairment charges of
$6.5 million and a diluted loss per share from discontinued
operations of $0.05. "We delivered a very strong quarter despite
continued challenges in the economic environment," said Lee Schram,
CEO of Deluxe. "Although revenue from holiday-related products was
below our expectation, revenue from checks and forms was
particularly strong later in the quarter helping us deliver the top
end of our revenue outlook while driving strong cash flow and EPS
growth. On the strategic front, we made solid progress during the
quarter integrating our recent acquisitions and we signed a new,
exclusive revenue sharing agreement with BancVue which brings new
deposit products to our financial institution customers." Fourth
Quarter Performance Revenue for the quarter was $340.3 million
compared to $364.9 million during the fourth quarter of 2008. Small
Business Services revenue was $12.7 million lower than the
comparable 2008 quarter driven primarily by continued economic
softness. Financial Services revenue was down $7.4 million from the
2008 quarter and Direct Checks revenue decreased $4.5 million, both
due to lower order volumes. Gross margin was 62.8 percent of
revenue compared to 62.6 percent in 2008. The benefit of our cost
reduction initiatives was partially offset by increased
performance-based compensation expense and material and delivery
rates. Selling, general and administrative (SG&A) expense
decreased $12.2 million in the quarter compared to 2008. Increased
performance-based compensation expense was more than offset by
benefits from cost reduction and containment initiatives. As a
percent of revenue, SG&A decreased to 44.8 percent from 45.1
percent in 2008. Operating income was $55.8 million compared to
$60.4 million in the fourth quarter of 2008 as a result of the
factors previously discussed, as well as increased restructuring
and transaction-related costs in 2009. Operating income was 16.4
percent of revenue compared to 16.6 percent in the prior year.
Reported diluted EPS from continuing operations decreased $0.01 as
lower operating income was partially offset by reduced interest
expense and a lower effective tax rate than in 2008 due to
non-recurring benefits. Fourth Quarter Performance by Business
Segment Small Business Services revenue was $206.0 million versus
$218.7 million in 2008. The decline was due to soft economic
conditions, primarily in the sales of holiday products, checks and
forms. These reductions were partially offset by revenue
contributions from acquisitions and a $2.2 million benefit from the
effect of Canadian exchange rate changes. Operating income in 2009
decreased to $23.6 million from $27.1 million in 2008.
Restructuring and transaction-related costs and asset impairment
charges were $4.1 million higher in 2009. Financial Services
revenue was $94.9 million compared to $102.3 million in 2008. The
decline was primarily due to lower order volumes caused by check
usage declines and a weak economy. The benefit of price increases
implemented in the third quarter of 2009 more than offset the
impact of continued pricing pressure. Operating income in 2009
decreased to $17.8 million from $20.6 million in 2008. Direct
Checks revenue was $39.4 million compared to $43.9 million in 2008.
Fourth quarter order volume was down due to the continued decline
in check usage and a weak economy which is negatively impacting
consumer check writing and our ability to sell additional products
and services. Operating income was $14.4 million, or 36.5 percent
of revenue, compared to $12.7 million or 28.9 percent of revenue in
2008. Restructuring-related costs were $1.3 million lower in 2009
than in 2008. Total Year Cash Flow Performance Cash provided by
operating activities for 2009 totaled $206.4 million, an increase
of $7.9 million compared to 2008. Higher contract acquisition and
severance payments were more than offset by significantly lower
performance-based compensation and interest payments. Business
Outlook The Company stated that for the first quarter of 2010,
revenue is expected to be between $320 and $335 million, and
adjusted and diluted EPS are both expected to be between $0.57 and
$0.64. For the full year, revenue is expected to be between $1.275
and $1.335 billion with the upper end reflecting only a cautious
small improvement in the economy, and adjusted and diluted EPS is
expected to be between $2.35 and $2.65. The Company also stated
that it expects operating cash flow to be between $180 million and
$200 million in 2010 and capital expenditures to be approximately
$40 million. "As we enter 2010, our portfolio is becoming better
positioned to deliver sustainable future revenue growth as
hopefully the broader economy recovers," Schram stated. "This is
driven by a new national financial institution check win and other
opportunities, exciting new deposit product offerings, enhanced
internet capabilities, and our new business services offers. We
will not take our eyes off of cost reductions and process
improvements, but our primary focus is shifting to revenue growth."
Quarterly Dividend The Board of Directors of Deluxe Corporation
declared a regular quarterly dividend of 25 cents per share on all
outstanding shares of the Company. The dividend will be payable on
March 1, 2010 to shareholders of record at the close of business on
February 15, 2010. The Company had 51,189,452 shares outstanding as
of January 25, 2010. Conference Call Information Deluxe will hold
an open-access teleconference call today at 11:00 a.m. EST (10:00
a.m. CST) to review the financial results. All interested persons
may listen to the call by dialing 1-866-761-0748 (access code
73142795). The presentation also will be available via a
simultaneous webcast at http://www.deluxe.com/ in the news and
investors relations section. An audio replay of the call will be
available through midnight on February 11th by calling
1-888-286-8010 (access code 10080199). The presentation will be
archived on Deluxe's Web site. About Deluxe Corporation Deluxe
Corporation is a growth engine for small businesses and financial
institutions. Through its industry-leading businesses and brands,
the Company helps small businesses and financial institutions
attract and retain customers. The Company employs a multi-channel
strategy to provide a suite of life-cycle driven solutions to its
customers. In addition to its personalized printed products, the
Company offers a growing suite of business services, including logo
design, payroll, web design and hosting, business networking and
other web-based services to help small business grow. In the
financial services industry, Deluxe sells check programs and fraud
prevention, customer loyalty and retention programs to help banks
build lasting relationships and grow core deposits. The Company
also sells personalized checks, accessories and other services
directly to consumers. For more information about Deluxe, visit
http://www.deluxe.com/. Forward-Looking Statements Statements made
in this release concerning the Company's or management's
intentions, expectations, or predictions about future results or
events are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements
reflect management's current expectations or beliefs, and are
subject to risks and uncertainties that could cause actual results
or events to vary from stated expectations, which variations could
be material and adverse. Factors that could produce such a
variation include, but are not limited to, the following: the
impact that a further deterioration or prolonged softness in the
economy may have on demand for the Company's products and services;
further declines in the Company's market capitalization which could
trigger additional non-cash asset impairment charges; the inherent
unreliability of earnings, revenue and cash flow predictions due to
numerous factors, many of which are beyond the Company's control;
declining demand for the Company's check and check-related products
and services due to increasing use of alternative payment methods;
intense competition in the check printing business; continued
consolidation of financial institutions and/or additional bank
failures, thereby reducing the number of potential customers and
referral sources and increasing downward pressure on the Company's
revenues and gross margins; risks that the Small Business Services
segment strategies to increase its pace of new customer acquisition
and average annual sales to existing customers, while at the same
time increase its operating margins, are delayed or unsuccessful;
risks that the Company's recent acquisitions do not produce the
anticipated results or revenue synergies; risks that the Company's
cost reduction initiatives will be delayed or unsuccessful;
performance shortfalls by the Company's major suppliers, licensors
or service providers; unanticipated delays, costs and expenses in
the development and marketing of new products and services,
including new e-commerce, customer loyalty, fraud monitoring and
protection and business services, and the failure of such new
products and services to deliver the expected revenues and other
financial targets; and the impact of governmental laws and
regulations. The Company's cash dividends are declared by the Board
of Directors on a current basis, and therefore may be subject to
change. Our forward-looking statements speak only as of the time
made, and we assume no obligation to publicly update any such
statements. Additional information concerning these and other
factors that could cause actual results and events to differ
materially from the Company's current expectations are contained in
the Company's Form 10-K for the year ended December 31, 2008. The
table below is provided to assist in understanding the
comparability of the Company's results of operations for the
quarters ended December 31, 2009 and 2008 and our outlook for 2010.
The Company's management believes that adjusted earnings per share
(EPS) is a useful financial measure because certain items during
2009 and 2008 (asset impairment charges, restructuring and related
costs, net gain on repurchases of debt, and transaction-related
costs) impact the comparability of reported net income. The
presentation below is not intended as an alternative to results
reported in accordance with generally accepted accounting
principles (GAAP) in the United States of America. Instead, the
Company believes that this information is a useful financial
measure to be considered in addition to GAAP performance measures.
Adjusted quarterly EPS reconciles to reported EPS as follows:
Outlook Actual Fourth Qtr. (provided First Qtr. on Oct. Fourth Qtr.
Fourth Qtr. 2010 22, 2009) 2009 2008 ---- ---------- ---- ----
Adjusted EPS from continuing operations $0.57 to $0.64 $0.54 to
$0.64 $0.70 $0.68 Restructuring and related costs - - (0.09) (0.08)
Transaction- related costs - (0.01) (0.02) - --- ----- ----- ---
Reported EPS from continuing operations $0.57 to $0.64 $0.53 to
$0.63 $0.59 $0.60 ============== ============== ===== =====
Adjusted annual EPS reconciles to reported EPS as follows: Outlook
Actual 2010 2009 2008 ---- ---- ---- Adjusted EPS from continuing
operations $2.35 to $2.65 $2.44 $2.51 Asset impairment charges -
(0.40) (0.12) Restructuring and related costs - (0.18) (0.34)
Transaction-related costs - (0.03) - Net gain on repurchases of
debt - 0.11 - Reported EPS from continuing operations $2.35 to
$2.65 $1.94 $2.05 ============== ===== ===== Financial Highlights
DELUXE CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars and shares in millions, except per share amounts)
(Unaudited) Quarter Ended December 31, 2009 2008 ---- ---- Revenue
$340.3 $364.9 Restructuring charges 1.9 0.6% 1.8 0.5% Other cost of
goods sold 124.7 36.6% 134.5 36.9% ----- ----- Gross profit 213.7
62.8% 228.6 62.6% Selling, general and administrative expense 152.4
44.8% 164.6 45.1% Restructuring and asset impairment charges 5.5
1.6% 3.6 1.0% --- --- Operating income 55.8 16.4% 60.4 16.6%
Interest expense (10.7) (3.1%) (12.5) (3.4%) Other income 0.1 - 0.2
0.1% --- --- Income before income taxes 45.2 13.3% 48.1 13.2%
Income tax provision 14.7 4.3% 17.5 4.8% ---- ---- Income from
continuing operations 30.5 9.0% 30.6 8.4% Net loss from
discontinued operations - - (2.7) (0.7%) --- ---- Net income $30.5
9.0% $27.9 7.6% ===== ===== Weighted average Dilutive shares
outstanding 51.0 50.7 Diluted earnings (loss) per share: (1)
Continuing operations $0.59 $0.60 Discontinued operations - (0.05)
Net income 0.59 0.54 Continuing operations: Capital expenditures
$9.3 $9.9 Depreciation and amortization expense 16.8 17.1 Number of
employees- end of period 6,089 7,172 Non-GAAP financial measure -
EBITDA(2) $72.7 $77.7 Non-GAAP financial measure - Adjusted
EBITDA(2) 81.4 84.2 (1) Earnings per share amounts for continuing
operations, discontinued operations and net income are calculated
individually and may not sum due to rounding differences. (2)
Earnings Before Interest, Taxes, Depreciation and Amortization
(EBITDA) and Adjusted EBITDA are not measures of financial
performance under generally accepted accounting principles (GAAP)
in the United States of America. We disclose EBITDA and Adjusted
EBITDA because we believe they are useful in evaluating our
operating performance compared to that of other companies in our
industry, as the calculation eliminates the effects of long-term
financing (i.e., interest expense), income taxes, the accounting
effects of capital investments (i.e., depreciation and
amortization) and in the case of Adjusted EBITDA, certain items
(i.e., asset impairment charges, restructuring and related costs,
and transaction-related costs), which may vary for companies for
reasons unrelated to overall operating performance. In our case,
depreciation and amortization of intangibles, as well as interest
expense, were significantly impacted by the acquisitions of New
England Business Service, Inc. (NEBS) in June 2004 and Hostopia.com
Inc. in August 2008. Additionally, interest expense in previous
years was significantly impacted by borrowings used for our share
repurchase programs, and certain transactions in 2009 and 2008
impacted the comparability of reported net income. We believe that
measures of operating performance which exclude these impacts are
helpful in analyzing our results. We also believe that an
increasing EBITDA and Adjusted EBITDA depict increased ability to
attract financing and an increase in the value of our business. We
do not consider EBITDA and Adjusted EBITDA to be measures of cash
flow, as they do not consider certain cash requirements such as
interest, income taxes or debt service payments. We do not consider
EBITDA or Adjusted EBITDA to be substitutes for operating income or
net income. Instead, we believe that EBITDA and Adjusted EBITDA are
useful performance measures which should be considered in addition
to GAAP performance measures. EBITDA and Adjusted EBITDA are
derived from net income as follows: Quarter Ended Dec. 31, 2009
2008 ---- ---- Adjusted EBITDA $81.4 $84.2 Asset impairment charge
- (0.3) Restructuring and related costs (7.3) (6.2)
Transaction-related costs (1.4) - ---- --- EBITDA 72.7 77.7 Income
tax provision (14.7) (17.5) Interest expense (10.7) (12.5)
Depreciation and amortization expense (16.8) (17.1) Net loss from
discontinued operations - (2.7) ---- ---- Net income $30.5 $27.9
===== ===== DELUXE CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF
INCOME (Dollars and shares in millions, except per share amounts)
(Unaudited) Year Ended December 31, 2009 2008 ---- ---- Revenue
$1,344.2 $1,468.7 Restructuring charges 4.6 0.3% 14.9 1.0% Other
cost of goods sold 500.2 37.2% 551.7 37.6% ----- ----- Gross profit
839.4 62.4% 902.1 61.4% Selling, general and administrative expense
616.5 45.9% 669.6 45.6% Restructuring and Asset impairment charges
32.3 2.4% 23.3 1.6% ---- ---- Operating income 190.6 14.2% 209.2
14.2% Gain on early extinguishment of debt 9.8 0.7% - - Interest
expense (46.3) (3.4%) (50.4) (3.4%) Other income 0.9 0.1% 1.4 0.1%
--- --- Income before income taxes 155.0 11.5% 160.2 10.9% Income
tax provision 55.6 4.1% 54.3 3.7% ---- ---- Income from continuing
operations 99.4 7.4% 105.9 7.2% Net loss from discontinued
operations - - (4.3) (0.3%) --- ---- Net income $99.4 7.4% $101.6
6.9% ===== ====== Weighted average Dilutive shares outstanding 50.9
50.9 Diluted earnings (loss) per share: Continuing operations $1.94
$2.05 Discontinued operations - (0.08) Net income 1.94 1.97
Continuing operations: Capital expenditures $44.3 $31.9
Depreciation and amortization expense 67.8 64.0 Number of
employees- end of period 6,089 7,172 Non-GAAP financial measure -
EBITDA(1) $269.1 $274.6 Non-GAAP financial measure - Adjusted
EBITDA(1) 301.1 314.1 (1) See the discussion of EBITDA and Adjusted
EBITDA on the previous page. EBITDA and Adjusted EBITDA are derived
from net income as follows: Year Ended Dec. 31, 2009 2008 ---- ----
Adjusted EBITDA $301.1 $314.1 Asset impairment charges (24.9) (9.9)
Restructuring and related costs (14.4) (29.6) Transaction-related
costs (2.5) - Gain on early extinguishment of debt 9.8 - --- ---
EBITDA 269.1 274.6 Income tax provision (55.6) (54.3) Interest
expense (46.3) (50.4) Depreciation and amortization expense (67.8)
(64.0) Net loss from discontinued operations - (4.3) --- ---- Net
Income $99.4 $101.6 ===== ====== DELUXE CORPORATION CONSOLIDATED
CONDENSED BALANCE SHEETS (In millions) (Unaudited) December 31,
December 31, 2009 2008 ---- ---- Cash and cash equivalents $12.8
$15.6 Other current assets 146.7 151.5 Property, plant &
equipment-net 121.8 128.1 Intangibles-net 145.9 154.1 Goodwill
658.7 653.0 Other non-current assets 125.3 116.7 ----- ----- Total
assets $1,211.2 $1,219.0 ======== ======== Short-term debt &
current portion of long-term debt $26.0 $79.4 Other current
liabilities 217.0 204.2 Long-term debt 742.8 773.9 Deferred income
taxes 24.8 9.5 Other non-current liabilities 83.4 98.9
Shareholders' equity 117.2 53.1 ----- ---- Total liabilities &
shareholders' equity $1,211.2 $1,219.0 ======== ======== Shares
outstanding 51.2 51.1 DELUXE CORPORATION CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Year Ended
December 31, 2009 2008 ---- ---- Cash provided (used by): Operating
activities: Net income $99.4 $101.6 Depreciation and amortization
of intangibles 67.8 64.0 Asset impairment charges 24.9 9.9 Contract
acquisition payments (29.3) (9.0) Other 43.6 32.0 ---- ---- Total
operating activities 206.4 198.5 ----- ----- Investing activities:
Purchases of capital assets (44.3) (31.9) Payments for acquisitions
(30.8) (104.9) Net purchases of marketable securities (3.7) - Other
(3.0) 1.0 ---- --- Total investing activities (81.8) (135.8) -----
------ Financing activities: Dividends (51.3) (51.4) Share
repurchases (1.3) (21.8) Shares issued under employee plans 2.0 2.8
Net change in debt (74.6) 9.0 Other (3.3) (6.3) ---- ---- Total
financing activities (128.5) (67.7) Effect of exchange rate change
on cash 1.6 (2.0) Net cash (used) provided by discontinued
operations (0.5) 1.0 ---- --- Net change in cash (2.8) (6.0) Cash
and cash equivalents: Beginning of period 15.6 21.6 ---- ---- Cash
and cash equivalents: End of period $12.8 $15.6 ===== ===== DELUXE
CORPORATION SEGMENT INFORMATION (In millions) (Unaudited) Quarter
Ended December 31, 2009 2008 ---- ---- Revenue: Small Business
Services $206.0 $218.7 Financial Services 94.9 102.3 Direct Checks
39.4 43.9 ---- ---- Total $340.3 $364.9 ====== ====== Operating
income: (1) Small Business Services $23.6 $27.1 Financial Services
17.8 20.6 Direct Checks 14.4 12.7 ---- ---- Total $55.8 $60.4 =====
===== Year Ended December 31, 2009 2008 ---- ---- Revenue: Small
Business Services $785.1 $851.1 Financial Services 396.4 430.0
Direct Checks 162.7 187.6 ----- ----- Total $1,344.2 $1,468.7
======== ======== Operating income: (1) Small Business Services
$60.8 $90.1 Financial Services 75.1 65.5 Direct Checks 54.7 53.6
---- ---- Total $190.6 $209.2 ====== ====== The segment information
reported here was calculated utilizing the methodology outlined in
the Notes to Consolidated Financial Statements included in our
Annual Report on Form 10-K for the year ended December 31, 2008.
(1) Operating income includes the following asset impairment
charges, restructuring and related costs and transaction-related
costs: Quarter Ended Dec. 31, Year Ended Dec. 31, 2009 2008 2009
2008 ---- ---- ---- ---- Small Business Services $7.8 $3.7 $39.1
$25.2 Financial Services 0.5 1.1 1.6 11.7 Direct Checks 0.4 1.7 1.1
2.6 --- --- --- --- Total $8.7 $6.5 $41.8 $39.5 ==== ==== =====
===== The table below is provided to assist in understanding the
comparability of the Company's results of operations for the
quarters and years ended December 31, 2009 and 2008. The Company's
management believes that operating income by segment, excluding the
asset impairment charges, restructuring and related costs and
transaction-related costs in each period, is a useful financial
measure because these items impacted the comparability of reported
operating income during 2009 and 2008. The presentation below is
not intended as an alternative to results reported in accordance
with generally accepted accounting principles (GAAP) in the United
States of America. Instead, the Company believes that this
information is a useful financial measure to be considered in
addition to GAAP performance measures. DELUXE CORPORATION SEGMENT
OPERATING INCOME EXCLUDING ASSET IMPAIRMENT CHARGES, RESTRUCTURING
AND RELATED COSTS AND TRANSACTION-RELATED COSTS (In millions)
Quarter Ended December 31, 2009 2008 ---- ---- Adjusted operating
income: (1) Small Business Services $31.4 $30.8 Financial Services
18.3 21.7 Direct Checks 14.8 14.4 ---- ---- Total $64.5 $66.9 =====
===== Year Ended December 31, 2009 2008 ---- ---- Adjusted
operating income: (1) Small Business Services $99.9 $115.3
Financial Services 76.7 77.2 Direct Checks 55.8 56.2 ---- ----
Total $232.4 $248.7 ====== ====== (1) Operating income excluding
asset impairment charges, restructuring and related costs, and
transaction-related costs reconciles to reported operating income
as follows: Quarter Ended Year Ended December 31, December 31, 2009
2008 2009 2008 ---- ---- ---- ---- Adjusted operating income $64.5
$66.9 $232.4 $248.7 Asset impairment charges, restructuring and
transaction-related costs: Small Business Services (7.8) (3.7)
(39.1) (25.2) Financial Services (0.5) (1.1) (1.6) (11.7) Direct
Checks (0.4) (1.7) (1.1) (2.6) ---- ---- ---- ---- Total (8.7)
(6.5) (41.8) (39.5) ---- ---- ----- ----- Reported operating income
$55.8 $60.4 $190.6 $209.2 ===== ===== ====== ====== DATASOURCE:
Deluxe Corporation CONTACT: Jeff Johnson, Treasurer and VP Investor
Relations of Deluxe Corporation, +1-651-787-1068 Web Site:
http://www.deluxe.com/
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