Deluxe Reports First Quarter Results; on Track to Achieve 2001 Earnings Target
Press release from the issuing company
St. Paul, Minn.4/19 - Deluxe Corporation (NYSE: DLX) reported diluted first quarter income from continuing operations today of $.59 per share, up from $.58 diluted per share in the first quarter of 2000. Deluxe’s results in 2001 do not include operations from eFunds Corporation (Nasdaq: EFDS), which was spun-off at year-end 2000.
First quarter performance
Deluxe’s first quarter income from continuing operations was $42.5 million, or $.59 diluted per share, compared with income from continuing operations of $42.0 million or $.58 diluted per share in 2000.
Revenue was $315.8 million in the first quarter, compared to $321.6 million during the same period a year ago. The 1.8 percent decline in revenues was due to a decline in units of 4.0 percent, partially offset by an increase in revenue per unit of 2.3 percent.
Deluxe’s gross margin was 63.1 percent of revenue for the quarter, compared to 64.1 percent in 2000. The decline was the result of an increase in costs per unit in checks sold through financial institutions due primarily to higher delivery costs.
Selling, general and administrative expense (SG&A) decreased to 41.7 percent of revenue from 42.6 percent of revenue. The decrease in 2001 primarily reflects reduced corporate expenses.
2001 off to a good start
"We entered 2001 as a very focused company," said Deluxe Chairman and CEO, Lawrence J. Mosner. "With eFunds spun off, we are positioned to devote our energies to what we have been doing better than anyone else in the industry for 85 years—printing checks. We have adopted a business strategy in which we will continue to develop our e-commerce capabilities to better serve our clients and customers; and we will explore acquisitions that leverage our existing key competencies and are accretive to earnings and cash flow per share."
The Company anticipates diluted earnings per share of approximately $2.45 in 2001, prior to the effect of share repurchases. Second quarter diluted earnings per share in 2001 are expected to be relatively flat with the diluted income from continuing operations of $.59 per share in the second quarter of 2000.
Beginning in 2001, Deluxe will report three distinct business segments: Financial Institution Checks (FI Checks), which sells checks and related products and services through financial institutions; Direct Checks, which sells checks and related products directly to consumers through direct mail and the Internet; and Business Forms, which sells checks, forms and related products to small businesses through both financial institutions and directly to customers via direct mail and the Internet.
FI Checks’ revenue was down 9.3 percent to $186.2 million in the first quarter of 2001, compared to $205.3 million in 2000, due to the effects of competitive pricing pressure and a shift by consumers to the direct channel. Direct Checks’ revenue was up 14.9 percent to $80.1 million, compared to $69.7 million last year, due to price increases, growth in Internet orders and the acquisition of Designer Checks in February 2000. Business Forms’ revenue was up 6.2 percent to $49.5 million in 2001, compared to $46.6 million in 2000, due to increased sales directly to small businesses.
Share repurchase program
On January 29, 2001, Deluxe announced that its board of directors had authorized a 14 million share repurchase program. Through the end of March, two million shares had been repurchased. This resulted in a $.01 increase in first quarter diluted earnings per share as compared to last year.
In addition to its traditional repurchase activities, the company is considering the adoption of a plan to take advantage of the recently issued Rule 10b5-1 under the Securities Exchange Act of 1934. The rule allows a company to repurchase its securities at times when it otherwise might be prevented from doing so under the insider trading laws, provided the repurchases are made pursuant to a plan adopted when the company is not in the possession of material nonpublic information. As a result, companies engaged in repurchase programs may start adopting Rule 10b5-1 Plans to allow for the continued purchasing of shares during their self-imposed trading blackout periods, such as the time periods immediately preceding quarterly earnings releases.
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