Deluxe Corporation (
Q4 2011 Earnings Call
January 26, 2011 11:00 am ET
Jeff Johnson – Treasurer and Vice President of Investor Relations
Lee J. Schram – Chief Executive Officer
Terry D. Peterson – Chief Financial Officer and Senior Vice President
Charles Strauzer – CJS Securities
James Clement – Sidoti & Company, LLC
John Kraft – D. A. Davidson & Co.
David Leibowitz – Horizon Kinetics
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Good day, ladies and gentlemen, and welcome to the fourth quarter Deluxe Corporation earnings conference call. My name is [Jenna], and I’ll be your operator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the presentation over to your host for today’s conference, Mr. Jeff Johnson, Treasurer and Vice President of Investor Relations. Please go ahead.
Thank you, [Jenna]. Welcome to Deluxe Corporation’s 2011 fourth quarter earnings call. I’m Jeff Johnson, Deluxe’s Vice President of Investor Relations and Treasurer. Joining me on the call today are Lee Schram, Deluxe’s Chief Executive Officer; and Terry Peterson, Deluxe’s Chief Financial Officer. Lee, Terry, and I will take questions from analysts after the prepared comments. At that time, the operator will instruct you how to ask a question.
In accordance with Regulation FD, this call is open to all interested parties. A replay of the call will be available via telephone in Deluxe's website. I will provide instructions for accessing the replay at the conclusion of our teleconference.
Before I begin, let me make this brief cautionary statement. Comments made today regarding financial estimates and projections, and any other statements addressing Management's intentions and expectations regarding the Company's future performance are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, these comments are subject to risks and uncertainties, which could cause actual results to differ materially from those projected.
Additional information about various factors that could cause actual results to differ from those projected are contained in the news release that we issued this morning, and in the Company's Form 10-K for the year ended December 31, 2010.
In addition, the financial and statistical information that will be reviewed during this call is addressed in greater detail in today's press release, which is posted in the News and Investor Relations section of our website, www.deluxe.com, and was furnished to the SEC on the Form 8-K filed this morning. In particular, any non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the press release.
Now, I'll turn the call over to Lee.
Lee J. Schram
Thank you, Jeff, and good morning, everyone. Deluxe delivered another very strong quarter. We reported revenue and adjusted earnings per share at the high end of our expected ranges. Revenue grew 4% over the prior year quarter driven by Small Business Services revenue growth of 12%, of which 4% came from the PsPrint acquisition. This quarterly growth rate is the strongest we have reported since we acquired NEBS in 2004.
Checks and forms, both performed well against our expectations, and marketing and other services revenues grew 25% over the prior year. Adjusted diluted earnings per share from continuing operations grew 6% over the prior year in spite of a higher than expected tax rate.
We continue to invest in brand awareness to help better position our marketing and other services offerings and drive future revenue growth. We also advanced process improvements and delivered on our $60 million cost reduction commitment while generating a better than expected $235 million in operating cash flow for the year.
In a few minutes, I will discuss more details around our recent progress and next steps, but first, Terry will cover our financial performance.
Terry D. Peterson
Thank you, Lee. Earlier today, we reported diluted earnings per share for the fourth quarter of $0.78, which included restructuring and impairment costs of $0.05 per share. Excluding these costs, adjusted EPS from continuing operations of $0.83 was at the upper end of our previous outlook and 6% higher than the $0.78 reported in the fourth quarter of 2010.
EPS was negatively impacted in the quarter by $0.04 per share due to a higher than expected effective tax rate, which was driven primarily by discrete tax adjustments for a valuation allowance and a state tax settlement, plus an unfavorable shift in income between tax jurisdictions. The restructuring charges are primarily for employee severance and infrastructure consolidations.
Revenue for the quarter came in at $366 million and grew 4% over last year and 3% sequentially from last quarter. All three of our business segments performed well. Small Business Services revenue of $229 million grew 12% versus last year on a reported basis, including PsPrint which added nearly $8 million of revenue in the quarter.
While we continue to operate in a weak economic environment, we delivered growth in marketing and other services, our safeguard distributor and dealer channels, and in checks and forms. SBS revenue also benefited from previous price increases.
Financial Services revenue of $83 million was down 6% versus the fourth quarter of last year. The impact of lower check orders was only partially offset by higher non-check services revenue. Direct checks revenue totaled $55 million, which was down 7% on a year-over-year basis.