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Deluxe Announces Expansion of Cost Reduction Program

Thursday, September 04, 2008

Press release from the issuing company

ST. PAUL, Minn., Sept. 3 -- Deluxe Corporation announced today that it has completed a previously announced review of its cost structure in response to the impact a weakened U.S. economy continues to have on the business. As a result, the Company plans to close its Greensboro, North Carolina and North Wales, Pennsylvania, manufacturing facilities and its Thorofare, New Jersey, manufacturing facility and call center. In addition, the Company has identified further opportunities to streamline portions of its business unit support and corporate shared services functions. Combined, these actions will reduce the Company's workforce by approximately 570 people on a net basis.

The North Wales and Thorofare closures are expected to be complete in the first quarter of 2009, while the Greensboro facility will play a transitional role and is expected to close later in 2009. The other employee reductions should be complete by the end of the third quarter of 2009.

"These were difficult decisions to make, particularly because of the impact on both our employees and three communities," said Lee Schram, CEO of Deluxe. We truly appreciate our long-standing relationships in each of these communities and the quality service and support employees at these facilities have provided to Deluxe and its customers."

Deluxe will provide eligible employees with transition support services including severance benefits, outplacement assistance and the opportunity to apply for other open positions within Deluxe.

"These actions, while difficult, along with our strategic focus on driving higher growth business services from our recent acquisitions plus enhanced e- commerce capabilities while sustaining our core check businesses, will better position Deluxe to accelerate our transformation in a challenging economic environment," Schram stated.

Business Outlook

The Company reaffirmed its revenue outlook for 2008 with an estimated range of $367 million to $374 million for the third quarter and $1.515 billion to $1.535 billion for the full year. The Company also stated that its previously communicated EPS outlook for 2008 has not changed except that it has been updated to include the impact of the additional cost reduction initiatives, including an estimated $22 million for restructuring and other one-time charges. As a result, the Company now expects diluted EPS for the third quarter to be between $0.29 and $0.33, and for the full year to be between $2.25 and $2.35. Operating cash flow for the full year is still expected to be between $195 million and $205 million.

"It was important for us to respond quickly and aggressively to the recent changes in our small business core products' trends in order to keep our transformation on track," Schram continued. "These changes will permanently lower our fixed cost structure and help us to offset new cost headwinds as we look to grow EPS in 2009 between 5% and 9% excluding the 2008 restructuring charges."

Given the expansion of the cost reduction actions, the Company now expects to deliver $250 million of savings, net of investments, through 2010, with approximately $50 million expected to be realized in 2008, $60 million in 2009 and the remaining $35 million in 2010 which includes the full benefit of plant closures and headcount reductions that will be completed throughout 2009.




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