2/2/01 - St. Paul, Minn.— Deluxe Corporation (NYSE: DLX) reported diluted fourth quarter income from continuing operations today of $0.52 per share and diluted full-year income from continuing operations of $2.34 per share. Fourth quarter and full-year income from continuing operations include asset impairment charges incurred in connection with the discontinuation of an e-commerce initiative. Excluding the one-time charges, income from continuing operations was $0.62 per diluted share in the fourth quarter and $2.43 per diluted share for the year.
Diluted earnings per share (EPS) including discontinued operations was $0.46 for the fourth quarter and $2.24 for the full-year. Discontinued operations include the results from operations of eFunds Corporation (Nasdaq: EFDS) and one-time costs incurred in connection with the separation of eFunds from Deluxe. Diluted EPS, excluding one-time costs in both continuing and discontinued operations, was $0.70 for the fourth quarter and $2.68 for the full-year.
Fourth quarter performance
from continuing operations
Deluxe’s fourth quarter income from continuing operations was $37.8 million or $0.52 per diluted share, compared with $63.6 million or $0.86 per diluted share in 1999. Fourth quarter 2000 results include one-time asset impairment charges associated with the discontinuation of PlaidMoon, an e-commerce start-up initiative. Fourth quarter 1999 income includes a gain from the divestiture of a business. Adjusted for one-time items in each year, fourth quarter income from continuing operations was $0.62 per diluted share, compared to $0.71 per diluted share in 1999.
Revenue was $302.8 million in the fourth quarter, compared to $337.2 million during the same period a year ago. This decline was primarily due to the divestiture of a collections business at the end of 1999. Excluding the divestiture, fourth quarter revenues declined 2 percent from 1999. For the quarter, units declined 8 percent while revenue per unit increased 7 percent.
Deluxe’s gross margin was 63.7 percent of revenue for the quarter, compared to 61.3 percent in 1999. Adjusted for divestitures, fourth quarter 1999 gross margin was 64.7 percent. The one percentage point decline was the result of bank consolidations and competitive pricing.
Selling, general and administrative (SG&A) expense increased to 42.9 percent of revenue from 36.8 percent. Adjusted for divestitures, 1999 SG&A expense was 38.3 percent of revenue. The increase in 2000 reflects asset impairment charges and the costs incurred from a discontinued e-commerce initiative, increased spending for e-commerce capabilities in existing businesses, and more customers choosing to order their checks direct rather than through financial institutions.
Full-year performance from continuing operations
Income from continuing operations for year 2000 was $169.4 million or $2.34 per diluted share, compared with income of $204.3 million or $2.65 per diluted share in 1999. Results for 2000 include asset impairment charges incurred in connection with a discontinued e-commerce initiative. Income in 1999 includes a gain from the sale of a business. Adjusted for the one-time items in each year, income was $2.43 per diluted share in 2000, compared to $2.50 per diluted share in 1999.
Revenue was $1,262.7 million compared to 1999 revenue of $1,363.8 million. Revenue for 1999 included $124.1 million from a business that Deluxe divested at year-end. Adjusted for divestitures, Deluxe’s revenue was up approximately 2 percent from the year-earlier period. Revenue per unit increased 6 percent while units declined 4 percent.
Deluxe’s gross margin improved to 64.3 percent of revenue for the year, compared to 59.2 percent in 1999. Adjusted for divestitures, 1999 gross margin was 62.7 percent of revenue. The increase was due to higher revenues per unit and savings realized from plant consolidations.
SG&A expense increased to 42.3 percent of revenue in 2000 from 37.4 percent of revenue in 1999. Adjusted for divestitures, 1999 SG&A expense was 38.8 percent of revenue. The increase reflects asset impairment charges and the costs incurred from a discontinued e-commerce initiative, increased spending for e-commerce capabilities in existing businesses, and more customers choosing to order their checks direct rather than through financial institutions.
Enhancing shareholder value
"As we begin a new era for Deluxe, we will continue to focus on enhancing shareholder value," said Deluxe chairman and CEO Lawrence J. Mosner. "The recent eFunds stock distribution to shareholders and the share repurchase program that we announced earlier this week are evidence of our commitment." On December 29, 2000, Deluxe distributed .5514 share of eFunds Corporation common stock for each share of Deluxe stock owned. On January 29, 2001, Deluxe announced that its board of directors had authorized a 14 million share repurchase program. "In addition, Deluxe expects to maintain its annual $1.48 per share cash dividend," Mosner added.
"2000 was an exciting year of significant accomplishments for Deluxe," Mosner said. "We acquired Designer Checks, strengthened our offerings in the direct-to-the-consumer market, and expanded our presence on the Internet, providing future growth opportunities. Probably the biggest event of last year was the IPO and spin-off of eFunds allowing each business to focus on its customers and maximize value for its shareholders. As rewarding as last year was, we look forward to building on our accomplishments in 2001."
"Deluxe has significant financial strength and is a strong cash-generating business," Mosner continued. "We want to leverage these assets by focusing on our core businesses by strengthening the leadership positions we have in the markets in which we compete. Using share repurchase as a benchmark, we will invest in our existing businesses to add services and expand product offerings that will help us retain and gain market share." Earlier this year, Deluxe introduced a line of Disney® check designs that has already generated excitement and interest.
Deluxe stated that it will continue to develop the e-commerce capabilities of its existing businesses and consider acquisitions that leverage its core competencies and are accretive to earnings and cash flow per share. The Company has indicated that it anticipates diluted earnings per share of $2.45 for 2001, prior to the effect of share repurchases. First quarter diluted earnings per share for 2001 are expected to be relatively flat compared to $0.58 of income from continuing operations per diluted share in the first quarter of 2000.
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