Business Services provider Deluxe Corp. (DLX), Thursday said its third quarter profit jumped from a year ago, as higher operating income helped offset declines in quarterly revenues. Looking ahead, Deluxe provided earnings forecast for the fourth quarter in line with estimates, while raising full year 2009 forecast from its previous guidance.
For the third quarter, net income of Deluxe jumped to $28.6 million or $0.56 per share from $13.8 million or $0.27 per share in the same quarter a year ago.
Adjusted earnings was $0.60 per share, compared to $0.65 per share in the prior year quarter. Adjusted earnings 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.
Restructuring and transaction-related costs and asset impairment charges of $3.4 million in 2009 were $28.2 million lower than in 2008. The 2008 effective tax rate was significantly lower than in 2009 due to the impact of the restructuring costs and asset impairment charges on the calculation and additional one-time benefits.
Revenue for the quarter dropped to $332.3 million from $362.7 million in the prior-year quarter.
Analysts polled by Thomson Reuters expected earnings of $0.54 per share on revenues of $335.88 million for the quarter. Analysts' estimates typically exclude special items.
Operating income was $54.5 million compared to $30.8 million in the year ago quarter. Operating income was 16.4% of revenue, compared to 8.5% in the prior year. Gross margin was 63.3% of revenue, compared to 58.6% in 2008.
Lee Schram, chief executive officer said, "We are hopeful that the recession's negative impact on our business continues to stabilize as we head into the fourth quarter."
The board declared a regular quarterly dividend of $0.25 per share on all outstanding shares of the Company, payable on December 7, 2009 to shareholders of record at the close of business on November 16, 2009.
For the nine-month period, net income decreased to $68.8 million or $1.34 per share from $73.7 million or $1.42 per share in the year-ago period. Revenues decreased to $1.00 billion from $1.10 billion in the same period a year ago.
Looking ahead to the fourth quarter of 2009, Deluxe said it expects earnings in the range of $0.53 to $0.64 per share, and adjusted earnings to range between $0.54 and $0.64. Revenue for the quarter is expected to be in a rnage of $326 million to $341 million. Street currently expects earnings of $0.62 per share on revenues of $345.99 million for the quarter. For the full year 2009, the company lifted its forecast and now expects earnings in the range of $1.87 to $1.97 per share and adjusted earnings in the range of $2.27 to $2.37 per share. Adjusted earnings forecast excludes an estimated $0.40 per share related to asset impairment charges. Revenue is expected to be between $1.330 billion and $1.345 billion. Analysts' currently expects earnings of $2.28 per share on revenues of $1.35 billion for the year.
Earlier, the company expected earnings in the range of $1.75 to $1.95 per share, and adjusted earnings between $2.15 and $2.35 per share. Revenue forecast was in the range of $1.32 billion to $1.36 billion.
"We are managing our cost structure aggressively, which has allowed us to increase our EPS outlook for the year," Schram said, commenting on the forecast.
Citing weak economic and current lack of directional clarity, the company said it believes that it is prudent to expect 2010 revenue to be down low to mid-single digits as compared to 2009, which is expected to produce adjusted EPS ranging from a low single digit decline to low single digit growth.
"As part of these estimates, we expect to deliver strong double-digit revenue growth in our new business services offerings as we continue to advance our transformation. However, we believe it is important for us to monitor the marketplace over the next three months before providing a more specific outlook for 2010,"Schram added.
DLX is currently trading at $15.82, down $0.67 or 4.06%, on a volume of 0.35 million shares.
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