Deluxe ends Q4 with decreased debt of $554 million; additional debt retirement possible, says CFO

By Lisa Kerner

Charlotte, N.C., Jan. 22 – Deluxe Corp. had its “fourth outstanding quarter of 2014,” said chief executive officer Lee Schram during the company’s quarterly and full-year earnings conference call on Thursday.

Schram highlighted the 7% year-over-year growth in revenue to about $449 million, as well as the 14% increase in adjusted diluted earnings per share and operating cash flow of $280 million.

Both revenue and EPS exceeded the high end of Deluxe’s guidance, according to the CEO.

“On an annual basis, we delivered our fifth consecutive year of revenue growth and our sixth consecutive year of increasing cash flow from operations,” said Schram.

Cash from operating activities increased by $18.9 million year over year to $280.4 million.

Cash and debt

“For the year, our cash and cash equivalents balance decreased by $59.6 million, and we were drawn on our credit facility $160 million on Dec. 31,” said senior vice president and chief financial officer Terry Peterson on the call.

Total debt at the end of the year was $554 million, down from $641 million at the end of 2013. Cash and cash equivalents totaled $61.5 million at Dec. 31.

“Significant uses of cash in 2014 included $254 million to pay off our 2014 debt maturity, $105 million for acquisitions – the most significant one being Wausau Financial Systems – and $60 million to repurchase common stock,” Peterson said.

Priorities for cash use

According to Peterson, Deluxe expects to use cash for growth, including for organic investment and to fund small to medium-sized acquisitions.

Priorities for uses of capital also include dividend payments and share repurchases “to at least offset dilution.”

The company’s board of directors declared a regular quarterly dividend of $0.30 per common share payable on March 2 to all shareholders of record at the close of business on Feb. 17, according to the earnings news release.

Deluxe did not repurchase any common stock in open market transactions in the fourth quarter.

For the full year, the company repurchased $60.1 million of common stock.

Deluxe will also continue to pay down debt. On Thursday, the company announced plans to redeem all $200 million of its 7% senior notes due 2019 that become callable on March 15. The redemption will be financed through a draw on the credit facility and the issuance of a short-term bank loan, said Peterson.

“We may also consider from time to time retiring additional outstanding debt through open market purchases, privately negotiated transactions or other means,” the CFO said.

“We believe our increasing cash flow, strong balance sheet and flexible capital structure position us well to continue advancing our transformation.”

Deluxe also continues to make progress on its cost-reduction efforts, cutting $60 million during the year, for enterprise-wide savings of $550 million since mid-2006.

Based in Shoreview, Minn., Deluxe provides checks and business services for small businesses and financial institutions.

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